Houston-based Paragon Offshore entered into a US$300 million sale-leaseback agreement with SinoEnergy for two heavy-duty harsh environment jackup rigs.
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Propsector 1. From Paragon. |
According to the terms of the agreement, Paragon subsidiary Prospector Offshore Drilling will sell the Prospector 1 and Prospector 5 jackups to subsidiaries of SinoEnergy, and immediately enter into a five-year bareboat rental charter for the assets. Paragon expects net proceeds of approximately $292 million from the deal.
The two high-specification Friede and Goldman JU-2000E jackups are both under contract with French major Total for use in the UK North Sea.
The bareboat charter fee for Prospector 1, which is under firm contract until mid-September 2016, is $71,000 per day through November 2016. After the expiration of the contract, the fee will drop 40% to $42,000 per day for the remainder of the charter.
Prospector 5’s bareboat charter fee that is under a firm contract until mid-November 2017 is $71,000 per day through February 2018. After, the fee will be reduced to $42,000 per day, also representing a 40% decrease.
The combined implied cost of borrowing is approximately 7.5%, including fees and expenses. The lease financing is non-recourse to Paragon. The facilities are expected to fund by early in 3Q 2015. Funding is subject to customary conditions for a transaction of this nature, the company said.
"We are extremely pleased to have secured this financing on the two Prospector rigs at what we consider to be an attractive rate in this environment," said Randall D. Stilley, Paragon president and CEO. "As a result of this financing initiative, we have increased financial flexibility and are evaluating options for the use of the proceeds, whether it be to retain the cash in order to increase our liquidity or to further strengthen the balance sheet through debt reduction."
Paragon purchased 55.8% of Prospector Offshore Drilling in November 2014, with intentions to take over the company. Paragon launched a mandatory tender offer for the remaining outstanding shares in the firm within a month’s time, and requested that Prospector elect three new Paragon designated directors to the Prospector board.
Prospector was established by former Noble Drilling executive Robert Rose in 2010.
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