Mermaid Signs a Contract For A New Build Tender Rig Worth USD 136 million

Back Oct 24, 2007

Mermaid turns aggressive in offshore oil and gas business after IPO.  Mermaid Kencana Rig 1 Pte. Ltd. ("MKR1"), a new Singapore incorporated subsidiary of Mermaid, will sign an agreement with Kencana HL Sdn. Bhd. ("KNHL"), a wholly owned subsidiary of Kencana Petroleum Berhad ("KNPE"), to build a new build tender rig worth US$ 136 million, which will be delivered in the 4th quarter of 2009.

M.L. Chandchutha Chandratat, Managing Director of Thoresen Thai Agencies Plc ("TTA") and also Chairman of Mermaid Maritime PCL ("MMPCL"), said on October 22, 2007 that MKR1 will enter into an agreement to build a new tender-assisted drilling rig with KNHL. MKR 1  is an indirect newly incorporated subsidiary of MMPCL, of which Mermaid Drilling (Singapore) Pte. Ltd. ("MDS") owns 75% of the equity and Kencana Petroleum Ventures Sdn. Bhd. ("KNPV") owns 25% of the equity, will sign a contract with KNHL in Malaysia. The contract signing ceremony for the new build tender rig will be held today (22 October 2007). 

The new tender-assisted tender rig is expected to be delivered around the 4th quarter of 2009.

The price for the new tender-assisted drilling rig is US$ 136 million, which is equivalent to Baht 4.663 billion using a USD/THB exchange rate of 34.29.  It comprises US$ 91 million for the self-erected tender rig ("SETR") and US$ 45 million for the derrick equipment set ("DES").  MMPCL intends to fund the price through a combination of proceeds raised from MMPCL's recent initial public offering and commercial bank debt.

MKR1 is currently working with major regional clients on a long-term drilling contract and is expected to announce a commitment in the next few months.

"The acquisition is part of MMPCL's commitment to expand the size of its rig fleet to enhance its offshore oil and gas support services and capabilities as well as to achieve greater economies of scale. The new build tender rig will also enhance Mermaid's market position in terms of the modernisation of its fleet. We are delighted to work with the Kencana Petroleum Group on this significant project." M.L. Chandchutha said.

MDS, a wholly owned subsidiary of MMPCL, has agreed with KNPE to form a new subsidiary in Singapore to own the new tender-assisted tender rig. MDS has formed MKR1 with an authorised share capital of US$ 100 and initial issued share capital of US$ 100.  The share capital of MKR1 will subsequently increase over time as instalment payments are made. 

At the time of incorporation of MKR1, MDS is the sole shareholder, holding 100% equity in MKR1.  However, pursuant to a shareholders agreement concluded between MDS and KNPV, its shareholding structure will change to MDS owning 75% equity and KNPV owning 25% equity in MKR1, with all future capital increases to follow in the same proportions. The shareholders' agreement will also be signed on Monday, 22 October 2007.

MKR1 will be the second company partially owned by KNPV. The first company is Kencana Mermaid Drilling Sdn Bhd ("KMD") in Malaysia, which was incorporated on 26 September 2007, to provide services as a licensed marketing company for offshore drilling and drilling-related services in the oil and gas industry in Malaysia.  KMD is also co-owned by MDS and KNPV. 

KNPE, through its wholly owned subsidiary KNHL, is one of seven offshore major fabrication licence holders issued by Petroliam Nasional Berhad ("Petronas"). The KNPE group of companies has become one of the fastest growing integrated engineering and fabrication solutions providers for oil and gas companies in Malaysia.  KNPE is listed on the Malaysia Exchange.