Transocean Ltd. inks agreement to delay delivery, defer payments of newbuild, ultra-deepwater drillships

Source: press release, 7 June 2021

Transocean specialises in technically demanding environments, specifically ultra-deepwater and harsh environments (photo: Transocean)
Transocean specialises in technically demanding environments, specifically ultra-deepwater and harsh environments (photo: Transocean)

Transocean Ltd. has announced that it has agreed with Sembcorp Marine’s subsidiary, Jurong Shipyard Pte Ltd (JSPL), on the delayed delivery of the ultra-deepwater drillships Deepwater Atlas and Deepwater Titan. As part of the agreement, JSPL has agreed to accept deferred payment for both rigs.

The Deepwater Atlas and Deepwater Titan are the world’s first eighth generation ultra-deepwater drillships and only rigs to feature a 3,000,000-pound hook-load. These drillships are the most capable and highest specification rigs in the world and will include the first 20,000 psi well control system. In addition to their state-of-the-art drilling capabilities, these rigs are also designed and equipped to optimise fuel consumption, reduce emissions, and thus minimise the associated carbon footprint of each offshore project.

Deepwater Atlas: Delivery of the drillship is now expected to be in December 2021. Upon delivery, Transocean will make a USD 50 million payment to JSPL; the balance of payments owed to the shipyard, or approximately USD 370 million, will be payable during a 5-year period following delivery pursuant to a secured financing arrangement with the shipyard.

Transocean also has agreed with BOE Exploration & Production LLC (Beacon) that drilling operations on the Shenandoah project in the U.S. Gulf of Mexico are expected to commence during the third quarter of 2022. Transocean expects Beacon to commence drilling on its Shenandoah project utilising the Deepwater Atlas following a final investment decision from Beacon and its partners. That decision is expected to be made on or before July 31, 2021.

Deepwater Titan: Delivery of the drillship is now expected to be in May 2022. Upon delivery, Transocean will pay JSPL 80% of amounts owed, or approximately USD 350 million. Twenty percent (20%) of amounts owed, or approximately USD 90 million will be deferred and payable over a 5-year period following delivery pursuant to a deferred payment arrangement with the shipyard.

Transocean also has agreed with Chevron U.S.A., Inc. (Chevron) that commercial operations of the Deepwater Titan are expected to commence in the first quarter of 2023. Transocean’s contract with Chevron maintains its duration and estimated backlog of USD 830 million, excluding mobilisation and reimbursables.

Payments under each arrangement will be made in accordance with the respective payment schedules over the terms of each arrangement. Principal balances will carry an interest rate of 4.5% per annum.

“These agreements clearly represent a monumental achievement for Transocean. As the result, we will take delivery of the two highest specification ultra-deepwater drillships in the world, and the only two assets capable of drilling and completing 20,000 psi wells. Notably, as a critical element of these agreements, we will receive shipyard financing, which materially improves our year-end 2022 liquidity by over USD 450 million, thus extending our runway and providing us with additional investment flexibility as the industry recovers,” says Jeremy Thigpen, President and CEO.

Thigpen concludes, “On behalf of Transocean, I sincerely thank JSPL, Chevron, and Beacon Offshore for their significant contributions to this process. I would especially like to thank our customers, as these agreements clearly demonstrate the trust that they have in Transocean’s track record of successfully introducing revolutionary new technologies to the industry, and the confidence that they have in our ability to consistently deliver safe, reliable and efficient drilling operations across our global fleet. We are extremely excited about these initial campaigns for the Deepwater Atlas and Deepwater Titan, and we are excited about the expanding list of 20,000 psi opportunities requiring the extraordinary capabilities of these rigs.”