Atwood delays two drillships with DSME

Atwood Oceanics is to delay delivery of two new ultra-deepwater drillships being built by two years.

The drillships are being built at by Daewoo Shipbuilding & Marine Engineering (DSME). Atwood agreed with DSME to take delivery of the two drillships, the Atwood Admiral and the Atwood Archer, to 30 September 2019 and 30 June  2020, respectively. The delays, Atwood said, are due to the severe industry downturn.

Atwood will make a payment of US$125 million for the Atwood Archer on or before 15 December 2016, as well as a payment of $15 million on the earlier of 30 June 2018 or the delivery date.  In respect of the Atwood Admiral, Atwood will make a payment of $10 million on the earlier of 30 September 2017 or the delivery date.  

DSME will extend all remaining milestone payments, which include $83.9 million plus fees and interest for the Atwood Admiral and $165.0 million plus fees and interest for the Atwood Archer, until 30 December 2022. 

Atwood has agreed not to terminate the construction contracts except in accordance with the terms of the supplemental agreements. The company retains the option to take earlier delivery of each drillship, subject to a 45-day notice period to DSME, without affecting the final milestone payment date. 

"The restructuring of payment and delivery schedules for the Atwood Admiral and Atwood Archer is an important step in our capital structure management, enhancing liquidity and improving capital commitment timing,” Rob Saltiel, Atwood president and CEO said. “The two-year extensions on the delivery dates greatly improve our confidence that we will secure suitable drilling services contracts on both rigs prior to taking delivery. We now have the opportunity to earn revenues on these rigs that will cover some or all of the final payments to the shipyard. We appreciate the flexibility that DSME has provided to Atwood Oceanics in response to this severe industry downturn."

"Our liquidity position is enhanced by approximately $250 million from 30 June 2018 until final payments are made to DSME on 30 December 2022.  This lengthened time for making final milestone payments represents a staggering of our debt maturities,” Mark Smith, Atwood senior VP and CFO said. “Following the 15 December 2016 payment, all interest expenses on the outstanding amounts due to DSME will be accrued and paid at the time of the final milestone payment, improving our free cash flows through 2022."

Image of Atwood offices, from Atwood.