Atwood Oceanics agrees to delay delivery of ultra-deepwater drillships
HOUSTON -- Atwood Oceanics Inc. announced today that it has agreed with Daewoo Shipbuilding & Marine Engineering Co. (DSME) to delay the requirement to take delivery of Atwood's two newbuild ultra-deepwater drillships, the Atwood Admiral and the Atwood Archer, by two years to September 30, 2019 and June 30, 2020, respectively.
In connection with the delay, Atwood will make a payment of $125 million for the Atwood Archer on or before December 15, 2016, as well as a payment of $15 million on the earlier of June 30, 2018 or the delivery date. In respect of the Atwood Admiral, Atwood will make a payment of $10 million on the earlier of September 30, 2017 or the delivery date. DSME will extend all remaining milestone payments, which include $83.9 million plus fees and interest for the Atwood Admiral and $165.0 million, plus fees and interest for the Atwood Archer, until December 30, 2022. The Company's obligation to pay the remaining milestone payments will be evidenced by a promissory note executed by Alpha Admiral Company or Alpha Archer Company, each a subsidiary of the Company, on the date their respective drillship is delivered, with the note accruing interest at a rate of 5% per annum and being secured by a first preferred ship mortgage on the corresponding drillship. The Company has agreed not to terminate the construction contracts except in accordance with the terms of the supplemental agreements. The Company retains the option to take earlier delivery of each drillship, subject to a 45-day notice period to DSME, without affecting the final milestone payment date.
Rob Saltiel, president and CEO, commented, "The restructuring of payment and delivery schedules for the Atwood Admiral and Atwood Archer is an important step in our capital structure management, enhancing liquidity and improving capital commitment timing. The two-year extensions on the delivery dates greatly improve our confidence that we will secure suitable drilling services contracts on both rigs prior to taking delivery. We now have the opportunity to earn revenues on these rigs that will cover some or all of the final payments to the shipyard.
"We appreciate the flexibility that DSME has provided to Atwood Oceanics in response to this severe industry downturn."
Mark Smith, senior V.P. and CFO, added, "Our liquidity position is enhanced by approximately $250 million from June 30, 2018 until final payments are made to DSME on December 30, 2022. This lengthened time for making final milestone payments represents a staggering of our debt maturities. Following the December 15, 2016 payment, all interest expenses on the outstanding amounts due to DSME will be accrued and paid at the time of the final milestone payment, improving our free cash flows through 2022."
Atwood Oceanics, Inc. is a leading offshore drilling contractor engaged in the drilling and completion of exploratory and developmental wells for the global oil and gas industry. The Company currently owns 10 mobile offshore drilling units and is constructing two ultra-deepwater drillships. The Company was founded in 1968 and is headquartered in Houston, Texas. Atwood Oceanics, Inc. common stock is traded on the New York Stock Exchange under the symbol "ATW."
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