Sete Brasil Finally Ready for Driller Auction

By Claudio Paschoa
Friday, April 26, 2019

In late January 2019 Sete Brasil launched a public announcement for the sale of the drillships Arpoador and Guarapari and the semi-submersibles Urca and Frade. However, the auction ended up being postponed. All four are being built locally at the Jurong and Brasfels shipyards, respectively, and will have their charter contracts maintained with Petrobras. The choice of the winner will be made based on the highest price. A judicial report determined the base value of US$554 million referring to the portion pertaining to Sete Brasil of the four drillers and interested parties should quote two units per shipyard. Estimates were that the total price will be around US$1.25 billion, including the portion to be paid to Sete Brasil and the investments required to complete the construction of the four units. However, the auctions rules stated that if the offers submitted did not reach the base value, the auction could still be carried out, contingent to the price being approved by the creditors.

Now in late April, Sete Brasil had finally convened the auction for the two semi-submersible platforms under construction at the BrasFELS yard in Rio de Janeiro, and two drillships under construction by Sembmarine, at its Jurong Aracruz shipyard in the state of Espirito Santo. A proposal was presented by Magni Partners, owned by the chairman of Borr Drilling, Tor Olav Troim, for all four drillers. Since its foundation in 2016, Borr Drilling has expanded rapidly in the equipment market through the purchase of distressed assets, including new construction ordered from Keppel.

Keppel corporation is also bidding for two drillers, even though these two are being built at the BrasFels shipyard in Brazil, which is owned by Keppel Corp. Reportedly asked why he is bidding for the platforms built in-house, Loh Chin Hua, CEO of Keppel explained that – “The offer reflects our confidence in the Brazilian market, and the platforms come with a 10-year long-term charter at a day rate of US$299,000, is an opportunity and shows our confidence” - If Magni Parnters wins the auction, the executive added, Keppel plans to discuss with the company the cost of completing the platforms.

Sete Brasil had ordered six semi-submersible drilling rigs to Keppel, but the payments stopped being made in November 2014 and the construction work halted in February of the following year. In July 2014, Keppel reported that the first three semi-submersible drilling rigs were 90%, 63% and 36% completed, respectively. Keppel received US$1.3 billion from Sete Brasil before payments stopped in November 2014. Now it is settled that the dispute over the acquisition of the four Sete Brasil drillers will be between the Keppel Fels shipyard and Magni Partners, the only groups that formalized an interest by the 27th of March deadline.

Sete Brasil also had seven deepwater drillships ordered from Sembmarine, which also stopped in November 2014. Four of the seven units were between 50% and 90% completed. Rig and drillship orders accounted for a substantial part of orders for Keppel and Sembmarine valued at US$4.9 billion and US$4.8 billion, respectively. The sale of the four drillers is essential for the judicial recovery process of Sete Brasil and although even back in January there was urgency to negotiate the units, sources in the market forecast that the deadline would be extended, which it was. The complexity of the operation is acknowledged by market specialists and the small preparation period has always been an obstacle for suppliers to complete the proposals ever since the first public announcement was launched. According to the original auction rules, the date of delivery of the units will be the sole responsibility of the companies winning the auction and they must negotiate directly with the Jurong and Brasfels shipyards.

The Urca and Arpoador semi-submersibles are the most advanced with 89.96% and 84.76% of the construction performed, while Guarapari has a conclusion of 74.21% and Frade 69.09%. Sete Brasil´s debt revolves around R $ 20 billion and only 10% of this amount should be paid with the negotiation. Sete Brasil and Alvarez & Marsal Advogados, advisers on the sale of the rigs, will have 15 days to evaluate the proposals and disclose the result. The offer may be paid in installments, provided that the last installment is paid before delivery of the unit.

Categories: Drilling Industry News South America Rigs

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