Subsea 7 has acquired parts of EMAS Chiyoda Subsea (ECS), following the firm's fall into Chapter 11 bankruptcy proceedings in the US.
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The Lewek Constellation. |
Subsea 7 will acquire for less than US$100 million (inlcuding a contribution to a debtor credit facility) certain ECS businesses, the firm's Ingleside spoolbase and other assets, including about 850 people based in Houston, Singapore and Saudi Arabia.
"In a challenging business environment our differentiated offering and strong capital discipline has enabled us to pursue this opportunity. This targeted investment enables Subsea 7 to accelerate its strategy to provide a market leading service in the Middle East," said Subsea 7 CEO Jean Cahuzac.
Chiyoda, which previously held 35% stake in ECS, said with the restructuring plan, ECS will be wholly owned by Subsea 7. ECS was formed in April 2016, following a Memorandum of Understanding signed between Japan's Chiyoda and Singapore's Ezra creating the then-50:50 joint venture company.
Subsea 7 will take over a long-term agreement (LTA) and three current projects in Saudi Arabia, in consortium with L&T Hydrocarbon Engineering (L&T).
These are:
Hasbah, in consortium with L&T, offshore Saudi Arabia
Four decks, in consortium with L&T, offshore Saudi Arabia
17 cranes, in consortium with L&T, offshore Saudi Arabia
The LTA enables the consortium with L&T to be invited to tender for future projects in Saudi Arabia. In total, the acquisition will add $850 million in order backlog, including the three LTA project and two further projects:
OCTP, offshore Ghana
TVEX, US Gulf of Mexico
The total order backlog comprises about $300 million due for execution in 2017, US$450 million in 2018 and $100 million in 2019 and beyond.
Subsea 7 has also secured a multi-year bareboat charter for the pipelay vessel Lewek Champion for activities in the Middle East, and a short-term charter for the pipelay vessel Lewek Constellation to complete work in hand in other geographies.
ECS announced in February that it would seek bankruptcy protection. With the filing, ECS received a commitment on an up to $90 million financing facility from Chiyoda and Subsea 7. Subject to bankruptcy court approval, the financing will be made available to support ECS's continuing business operations, minimise disruption to its worldwide projects and make necessary operational changes.
In February, the company said, of its bankruptcy filing: "The restructuring will provide ECS with an opportunity to focus on strengthening its financial and operational systems, enhancing the company’s efforts to weather the current challenges... While ECS has an order book of over US$1 billion, the commencement dates of many of these projects remain in flux, affecting utilization levels and negatively impacting financial performance. To address these challenges, ECS has commenced a process to restructure its balance sheet and position the company for the future."
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