Sembcorp Marine unit revises delivery dates for two drill ships due to Covid-19

SINGAPORE (THE BUSINESS TIMES) - Jurong Shipyard, a wholly owned unit of Sembcorp Marine, has agreed to revise the delivery dates of two ultra-deepwater drill ships it has contracted to build for Transocean Offshore Deepwater Holdings due to work disruptions caused by the Covid-19 pandemic.

The delivery date of the first vessel, Deepwater Atlas, has been rescheduled to December 2021. The delivery date for the second vessel, Deepwater Titan, has been pushed to May 2022.

The revisions take into account work disruptions arising from the Covid-19 pandemic, Sembcorp Marine said in a Monday (June 7) bourse filing.

The agreements further provide that upon the respective delivery of the vessels, Transocean will make a partial delivery payment, followed by deferred delivery instalment payments of the balance amounts.

Transocean has already paid 35 per cent and 30 per cent of the contract price for Deepwater Atlas and Deepwater Titan, respectively.

For Deepwater Atlas, Transocean will make a US$50 million (S$66 million) payment to Jurong Shipyard upon delivery. The remaining sum of about US$370 million is payable in quarterly instalments, with accrued interest within five years from the delivery date.

All amounts outstanding are secured by a mortgage over the vessel and parent company guarantee issued by Transocean.

Deepwater Atlas is expected to start drilling operations on the Shenandoah project in the US Gulf of Mexico with BOE Exploration and Production in the second half of 2022.

For Deepwater Titan, Transocean will pay Jurong Shipyard 80 per cent of the amount payable upon delivery or about US$350 million. The remainder of about US$90 million will be payable in quarterly instalments, with accrued interest within five years from the delivery date.

All amounts outstanding are secured by a parent company guarantee provided by Transocean. Deepwater Titan is expected to commence drilling operations with Chevron USA in the first quarter of 2023.

Both vessels are the first set of next-generation drill ships with ultra deepwater drilling capability to be constructed in Singapore, said Sembcorp Marine.

"The completion of the amendment agreements is a significant step forward, and underlines the collaborative spirit of all parties and their determination to see two drill ships built to the highest specifications for ultra-deepwater deployment be put into operation," said Mr Wong Weng Sun, president and chief executive of Sembcorp Marine.

"In the face of challenges stemming from the Covid-19 pandemic, Transocean has demonstrated understanding of the situation and confidence in Sembcorp Marine's EPC (engineering, procurement and construction) capabilities to complete the two highly complex drill ship projects," Mr Wong added.

Excluding these two drill ships, Sembcorp Marine has delivered eight drilling rigs to Transocean. The amendment agreements are not expected to have any material impact on the earnings per share of Sembcorp Marine for the year ending December 2021.

Shares of Sembcorp Marine closed flat at S$0.20 on Monday, before the announcement.