ARO Drilling launches operations

ARO Drilling, the 50:50 joint venture created last year by Rowan Companies and Saudi Aramco, started operations on 17 October.

The joint venture will support Saudi Arabia's Vision 2030, through which it seeks to modernize its economy and society, and provide Rowan with an unparalleled long-term growth opportunity throughout the next decade and beyond, said Tom Burke, Rowan president and chief executive officer, in a 19 October press statement.

As part of the initial startup of ARO Drilling, Rowan and Saudi Aramco contributed equal amounts of cash - $25 million each in 2017 - into the joint venture. Following these contributions, Rowan sold three of its jackup drilling rigs to ARO Drilling, including the J.P. Bussell, which was previously idle, and Saudi Aramco sold one of its jackup drilling rigs to ARO Drilling.

ARO Drilling then distributed excess cash of approximately $88 million to each of Rowan and Saudi Aramco, maintaining each party's 50% ownership interests in the joint venture. Evercore-ISI analysts estimate this cash distribution increases the company's investment in the unconsolidated subsidiary to $113 million on the balance sheet.

As part of the agreement, Saudi Aramco will sell an additional jackup rig in 2017 to ARO Drilling and Rowan will sell an additional two jackup rigs to ARO Drilling once they complete their current contracts in late 2018.

ARO Drilling will now manage the operations of Rowan's seven remaining jackup rigs in Saudi Arabia. Rowan and Saudi Aramco have agreed that ARO Drilling will purchase 20 future newbuild rigs that will be constructed by a Saudi Aramco manufacturing joint venture and are expected to be delivered between 2021 and 2030. Each newbuild is expected to have a 16-year drilling commitment upon delivery to ARO Drilling.

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Saudi Aramco, Rowan create new rig firm