Keppel FELS, a wholly-owned subsidiary of Keppel Offshore & Marine Ltd has delivered the jackup rig, Cantarell IV, to Grupo R with a perfect safety record. As part of the deal, Grupo R has entered into a sale and leaseback agreement with FELS Asset Co Pte. Ltd., a wholly-owned subsidiary of Keppel O&M.
FELS Asset will purchase the rig from Grupo R for USD 179 million which is equivalent to the balance contract value of the rig. Cantarell IV will be leased back to Grupo R on a bareboat charter at competitive day rates over five years. IPC, the parent company of Grupo R, will provide a Parent Company Guarantee on Grupo R’s charter payment obligations.
Under the bareboat charter, Grupo R has the right to purchase the rig at pre-agreed prices during the term of the bareboat charter. After the fifth year, FELS Asset may, at its discretion, put the rig to Grupo R at a pre-agreed price.
Cantarell IV will be deployed directly to work in offshore Mexico, under an integrated drilling contract for offshore wells secured by IPC with Pemex, which will commence in early May 2019.
Chris Ong, CEO of Keppel O&M says, “This transaction demonstrates how we are able to leverage the strengths of Keppel O&M to achieve win-win solutions for all stakeholders. Keppel FELS will be able to deliver the rig at full value; Grupo R will be able to lease the rig to begin operations in Mexico; and Keppel O&M will benefit from acquiring a quality rig at attractive commercial terms while generating regular and predictable cash flows from the charter at a good rate of return.”
“As Mexico develops its oil and gas reserves, more high specification rigs such as the KFELS B Class rigs will be needed. We have previously delivered 10 such rigs to Mexico which have delivered robust, efficient and economical performances,” he continues.
Grupo R is well-established as a driller in Mexico, with excellent uptimes and a strong track record of success with difficult wells. The two jackup rigs Keppel FELS delivered to Grupo R in 2016, Cantarell I and Cantarell II, have been drilling for Pemex in Mexico since August 2016 under a 7-year charter.
Jose Ramiro Garza, CEO of Grupo R adds, “We are pleased to be able to partner Keppel to bring this rig to work for Pemex in Mexico. The fields where the rig will operate is expected to produce up to 210,000 bpd of crude and 350 million mmcfd of natural gas by 2020, resulting in more opportunities for the rig to be deployed in future. As a leading rig operator in Mexico, we are well positioned to meet the country’s drilling demands.”
“Our two jackups from Keppel FELS, Cantarell I and II have been achieving exceptional performances ever since they started working for Pemex in Mexico. In the last two years, they recorded uptimes of 99% and have clocked the best drilling times for both a JSO well and Cenozoic well. This is a result of having the right rig design, the choice yard to deliver a quality rig and our unmatched operating expertise. I am confident Cantarell IV will break new records in Mexico as well,” he continues.
Mexico’s current oil production is depleting faster than it is being replenished, and the country is looking to increase its E&P activities. It has stated its intention to boost crude output to reach 2.4 million b/d of oil production by 2024, from 1.8 million b/d today by focusing on upstream investment on shallow water and onshore conventional fields.
The Cantarell IV is a KFELS B Class jackup designed to operate in water depths of up to 400 feet and drill to depths of 30,000 feet. It is equipped with an advanced and fully-automated high capacity rack, pinion jacking system, Self-Positioning Fixation System, and has accommodation with full amenities for 150 persons.
Cantarell IV is the first rig equipped with Keppel’s proprietary RigCare Solution – a suite of digital services to support the rig’s lifecycle needs, significantly increasing uptime and safety while reducing maintenance costs.
The transaction will not have any material impact on the net tangible assets and earnings per share of Keppel Corporation Limited for the financial year ending 31 December 2019.