On This Wednesday, 27, Bids Were Submitted For The Acquisition Of Units In The Sale Operation Of The Four Rigs From Sete Brasil – Arpoador, Guarapari, Urca And Frade

Founded in 2010 to meet the demand for drillships from Petrobras in the pre-salt, Sete Brasil signed charter contracts with Petrobras for the construction of 28 drillships. Most of the equipment has not even begun to be built. The approval of the company’s recovery plan is contingent upon the sale of the units.

The sale operation of the four drillships from Sete Brasil began with many reservations and prices below the minimum value of US$ 554 million. The expectation is that at least the Norwegian companies Seadrill and Borr Drilling, which are considered favorites, will present proposals. Seadrill has a strong interest in strengthening its asset portfolio in Brazil, which currently is limited to only two contracts: one with Petrobras, which expires this year, and another with Equinor, while Borr Drilling currently has no contract in Brazil and aims to secure its entry into the country.

Transocean and Ensco also evaluated the business opportunity. Another possible candidate is Odfjell, which also has no contract in Brazil, a company that, like Seadrill, was scheduled to participate in the original Sete Brasil project as the operator of part of the units.

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The Brazilian companies Ocyan, Diamond Offshore, and Petroserv decided not to compete for the purchase of the units, as did QGOG Constellation, which a few weeks ago was approached by Borr Drilling about a potential partnership related to the business, but the Brazilian company was not interested, as at the moment the group is focused on securing contracts for its own units, although there is no restriction on potential participation in the future.

The opening of the prices presented this Wednesday, the 27th, will be held today in the hearing room of the 3rd Business Court of Rio de Janeiro, where the judicial recovery process of Sete Brasil is being processed. The creditors of Sete Brasil will be present.

Sete Brasil and Alvarez & Marsal Lawyers, the firm advising the company on the sale of the drillships, will have 15 days to evaluate the proposals and announce the results. The offer may be settled in installments, provided that the last payment is made before the unit is delivered. If the proposals received fall below the minimum price of US$ 554 million, as stipulated in the tender, the creditors will have to deliberate whether or not to accept the offered amount.

Sete Brasil’s debt amounts to around US$ 5 billion, and the projection is that only 10% of that amount will be repaid. The group’s creditor list involves 22 companies – 12 shareholders (BTG Pactual, Luce, EIG Global Energy Partners, Lakeshore, Previ, Petros, Funcef, Valia, and FI-FGTS, Santander, Bradesco, and Petrobras), five creditor banks, and five shipyards.

The minimum value stipulated in the tender is exclusively intended for the payment of Sete Brasil. In addition to the amount allocated for the acquisition of the units, there are also investments that will need to be made to ensure the completion of the drillship construction. Market estimates project a total price around US$ 1.25 billion, an amount that will cover Sete Brasil’s share.

The acquisition of the units guarantees the buyer a contract with Petrobras for ten years, with a daily fee of US$ 299,000, a value significantly above the contractual values currently being practiced. The operation involves two drillships (Arpoador and Guarapari) and two semisubmersibles (Urca and Frade), under construction at the Jurong and Brasfels shipyards, respectively.

One risk factor in the business is that Sete Brasil is undergoing a judicial recovery process and has had its name involved in the corruption scandals of Operation Car Wash; another factor is that Petrobras may cancel the charter contract for the units after one year of operation, should poor performance of the equipment or the operating company be proven.

As Sete Brasil is expected to conclude negotiations by the end of April, the market predicts that the first two units will only be completed in 2020, even though the tender stipulates that the first drillship will be completed in 2019 and the others in subsequent years.

The Brazilian state-owned company Petrobras agrees with the terms for the Búzios unit, while another intends to close a contract for a floater in Mero-2 CLICK HERE TO READ THE FULL ARTICLE!