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Norway’s Odfjell Drilling to Expand Fleet as Offshore Rig Market Recovers

Norway’s Odfjell Drilling to Expand Fleet as Offshore Rig Market Recovers
Offshore rig firm Odfjell Drilling plans to expand its floating rig fleet to between six and 10 from four now, it said on Friday, the latest sign of recovery in the energy industry.

After cuts in exploration spending following an oil price plunge that began in 2014, energy firms are now hiring rigs as crude prices have recovered some ground.

Odfjell raised $175 million via a new share issue on Thursday to help buy semi-submersible Stena Midmax Rig from Samsung Heavy Industries for $505 million. The new issue sent the Norwegian firm’s shares down 10 percent.

Akastor, an investment company controlled by Norwegian billionaire Kjell Inge Roekke, also plans to invest $75 million to help finance the acquisition.

“Financially it’s a very attractive deal, which should give us a return of 12 to 20 percent over the next six years,” Akastor Chief Financial Officer Leif Borge told Reuters, adding that his firm wanted closer ties with Odfjell.

In total, Odfjell plans to raise $618 million, including $325 million in secured bank debt, to pay for the rig, upgrades, project supervision and working capital.

Odfjell told investors it was talking with yards for pricing potential newbuilds for further fleet expansion to compete with companies such as Transocean or Seadrill.

Odfjell operates four modern harsh-environment floating rigs, working in the North Sea under long-term contracts with BP , Statoil and Aker BP.

The North Sea has seen the biggest increase in demand for harsh-environment floating rigs, with utilisation rates rising to more than 90 percent in 2018, Odfjell’s presentation to investors showed.

Historically, utilisation rates at 85 percent or above were needed for drillers to demand higher prices from oil companies.

To finance its new rig, Odfjell issued 38 million new shares on Thursday at 36 Norwegian crowns ($4.61). The company also said it planned to offer 4.3 million shares at the same price to other shareholders to reach the initial target of 1.56 billion crowns.

The stock was trading at 35.55 crowns at 1305 GMT.

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