Hamilton, Bermuda, February 18, 2014 - We refer to Seadrill Limited's
("Seadrill") third quarter earnings report on November 25, 2013, which announced
a Heads of Agreement between Pemex Exploracion y Produccion ("Pemex"), Mexico's
national oil company and Seadrill. Seadrill is pleased to announce that the
final drilling contracts for the jack-up drilling units West Oberon, West
Intrepid, West Defender and West Courageous are now executed.
The fifth contract for the recently acquired jack-up drilling unit, Prospector
3, renamed West Titania, is being processed for approval by Pemex and
finalization is expected to take place second quarter 2014.
Each contract is for a firm term of approximately 6 years and total revenue
potential from the five contracts exceeds US$1.8 billion.
Additionally, Seadrill is pleased to announce the establishment of SeaMex Ltd.
(SeaMex), a 50/50 Joint Venture with an investment fund controlled by Fintech
Advisory Inc. ("Fintech"). Fintech is a private investment manager founded in
1989 that has a strong investment record and operation in Latin American
countries. SeaMex has been formed for the purpose of owning and managing the
jack-up drilling units working for Pemex as well as to develop and pursue
further opportunities in Mexico and other Latin American countries. The gross
proceeds for the sale of 50% of the five rigs to our partner is expected to be
around US$488 million and will result in a gain recordable in the first half of
Per Wullf, Seadrill CEO commented, "This opportunity to expand our relationship
with Pemex was partly developed on the back of Seadrill's successful operations
with our ultra-deepwater semi-submersible West Pegasus in Mexico.
The long term nature of these contracts and the establishment of SeaMex, will
create economies of scale in the region. Seadrill sees recent developments in
Mexico such as new petroleum legislation, Pemex' expansion plans and recent
Finally, they completed this transaction that they announced earlier. That will help take up some of the idle rigs.
It is too bad about having to do it as a joint venture though. We don't get $1.8b in revenue, but $900m. We cannot consolidate the earnings because we don't own over half. I don't think that Fintech brings anything to the table but access, but it is very expensive access -- $900m now; unknown revenue down the road for these rigs after these contracts expire; and any more rigs that they drop down into this JV later.
Yes, but you are overlooking the fact that the partner is paying SDRL 488 million up front, and is taking the responsibility of operating the rigs and any liability therein. So, really SDRL isn't giving up 900 mil at all, not even half of that. More like getting a large chunk up front that they can use to fund the building of more ships or allocate in other ways to make even more money. Not a bad deal at all!
From tonight's Bloomberg article:
Seadrill completed four shallow-water jack-up contracts and a fifth will be processed by the second quarter, the company based in Bermuda said today in a statement. Each contract has a 6-year term and total revenue potential from the five deals is valued at more than $1.8 billion, it said.
Seadrill’s contracts with Pemex, as the Mexico City-based company is known, follow legislation approved last year to open Mexico’s energy industry to foreign investment for the first time since 1938. By allowing foreign companies to operate in shale and deepwater fields, Mexico’s oil production is forecast to increase to 4 million barrels a day by 2025 from current output of 2.5 million barrels.
“Seadrill sees recent developments in Mexico such as new petroleum legislation, Pemex’s expansion plans and recent large deepwater discoveries as supportive to the great opportunity to expand business within the country,” the company said in the statement
This is the "foot in the door" of a potential huge market for SDRL