Keppel delivers jackup rig to Grupo R on sale and leaseback deal

Keppel FELS, a wholly owned subsidiary of Keppel Offshore & Marine Ltd (Keppel O&M) has delivered the Cantarell IV jackup rig to Grupo R with a perfect safety record. As part of the deal, Grupo R has entered into a sale and leaseback agreement with FELS Asset Co Pte Ltd (FELS Asset), a wholly owned subsidiary of Keppel O&M.

FELS Asset will purchase the rig from Grupo R for $179 million, which is equivalent to the balance contract value of the rig. The Cantarell IV will be leased back to Grupo R on a bareboat charter at competitive dayrates over five years. IPC, the parent company of Grupo R, will provide a parent company guarantee on Grupo R’s charter payment obligations.

Under the bareboat charter, Grupo R has the right to purchase the rig at pre-agreed prices during the term of the bareboat charter. After the fifth year, FELS Asset may, at its discretion, put the rig to Grupo R at a pre-agreed price.

The Cantarell IV will be deployed directly to work in offshore Mexico, under an integrated drilling contract for offshore wells secured by IPC with Pemex, which will commence in early May 2019.

“This transaction demonstrates how we are able to leverage the strengths of Keppel O&M to achieve win-win solutions for all stakeholders,” Chris Ong, CEO of Keppel O&M said. “Keppel FELS will be able to deliver the rig at full value; Grupo R will be able to lease the rig to begin operations in Mexico; and Keppel O&M will benefit from acquiring a quality rig at attractive commercial terms while generating regular and predictable cash flows from the charter at a good rate of return.”

“As Mexico develops its oil and gas reserves, more high-specification rigs such as the KFELS B Class rigs will be needed,” Mr Ong added. “We have previously delivered 10 such rigs to Mexico, which have delivered robust, efficient and economical performances.”

The two jackup rigs Keppel FELS delivered to Grupo R in 2016, the Cantarell I and the Cantarell II, have been drilling for Pemex in Mexico since August 2016 under a seven year charter.

“We are pleased to be able to partner Keppel to bring this rig to work for Pemex in Mexico,” Jose Ramiro Garza, CEO of Grupo R, said. “The fields where the rig will operate is expected to produce up to 210,000 BPD of crude and 350 million mmcfd of natural gas by 2020, resulting in more opportunities for the rig to be deployed in the future. As a leading rig operator in Mexico, we are well positioned to meet the country’s drilling demands.”

“Our two jackups from Keppel FELS, the Cantarell I and the Cantarell II, have been achieving exceptional performances ever since they started working for Pemex in Mexico,” Mr Garza added. “In the last two years, they recorded uptimes of 99% and have clocked the best drilling times for both a JSO well and Cenozoic well. This is a result of having the right rig design, the choice yard to deliver a quality rig and our unmatched operating expertise. I am confident the Cantarell IV will break new records in Mexico as well.”

Mexico’s current oil production is depleting faster than it is being replenished, and the country is looking to increase its E&P activities. It has stated its intention to boost crude output to reach 2.4 million BPD of oil production by 2024 by focusing on upstream investment on shallow water and onshore conventional fields.

The Cantarell IV is a KFELS B Class jackup designed to operate in water depths of up to 400 ft and drill to depths of 30,000 ft. It is equipped with an advanced and fully automated high-capacity rack, pinion jacking system, self-positioning fixation system, and also has accommodations with full amenities for 150 persons.

RigCare

The Cantarell IV is the first rig equipped with Keppel’s proprietary RigCare Solution – a suite of digital services to support the rig’s lifecycle needs, significantly increasing uptime and safety while reducing maintenance costs.

RigCare features include the use of:

• Industrial Internet of Things (IIOT) to enhance automation and mobile operations;
• Smart sensors to drive towards condition-based class surveys in a joint development project (JDP) with Classification society ABS to lower down time and reduce maintenance costs;
• Digital Twin-based analytics to predict machine failure and enhance overall efficiency and robustness with real-time data; and
• Real-time optimization of the rig’s operations.

The abovementioned transaction will not have any material impact on the net tangible assets and earnings per share of Keppel Corporation Limited for the financial year ending 31 December 2019.