Seadrill Partners to acquire ultra-deepwater drillship, offers 10.4M units


Seadrill Partners (SDLP) agrees to acquire the West Auriga ultra-deepwater drillship from Seadrill (SDRL) for ~$797M.

The drillship is expected to carry out operations in the Gulf of Mexico until the end of its contract in Oct. 2020 at a dayrate of $565K/day.

SDLP will recommend an increase in cash distributions of $0.13-$0.15/unit, which would take effect in the June 2014 quarter.

SDLP plans a public offering of 10.4M common units to fund the transaction; SDRL has committed to purchase at least $50M worth of the units at the public offering price.

SDRL +0.9%, SDLP -2.4% AH.

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  • Trader909
    , contributor
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    Important to note the $797MM referenced above is the implicit equity value of the rig on a 100% basis ($1,240MM gross value less $443MM debt). SDRL is monetizing a partial stake (49%) in the rig, which is being acquired at a total enterprise value of $1.24 Billion on a 100% basis vs. the $600+MM it cost SDRL to build the rig, which was delivered in Q1 of 2013 (not a bad return, especially given that SDRL retains a 49% economic stake in the rig and 100% commercial control through its GP interest in SDLP). Seadrill Partners is acquiring a 51% equity interest for $407MM, ergo the announced ~$300+MM SDLP equity raise and the $100MM inter-company note. SDRL will purchase $50MM of the SDLP unit offering, resulting in net cash proceeds to SDRL of ~$250MM now and another $103MM in one year at maturity of the inter-company note. Further, the acquisition will be accretive to SDLP distributions per unit evidenced by the recommendation to the Board to increase SDLP's distributions by an additional $0.14 per unit per annum. SDRL currently holds ~38MM SDLP units, and therefore, SDRL will receive an additional ~$5MM per annum in distributions on its existing units, plus another ~$3.5MM per year in total distributions on the ~1.6MM new units it is buying in the new SDLP offering (total ~$8.5MM in additional annual cash flow back to SDRL). But more important to note is that the $0.035 per quarter increase in SDLP's DPU brings SDRL to the brink of tripping the IDR high-splits (most likely one more acquisition should do it), after which, the total cash distributions SDRL receives from SDLP (inclusive of IDRs) will accelerate exponentially from the current ~$90MM per annum run-rate basis (post-transaction). Stakeholder interests are aligned given SDRL's ~60% limited partner interest in SDLP post-transaction.
    11 Mar 2014, 05:57 PM Reply Like
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