Valaris, Aramco JV ARO Drilling secures $359m financing for newbuild jackups

Houston-based offshore drilling contractor, Valaris Limited (NYSE: VAL) confirmed that ARO Drilling, the company’s 50/50 joint venture with oil giant Aramco, has successfully secured financing for its upcoming newbuild jackups, namely Kingdom 1 and 2.

Financing Breakdown and Utilization

The commendable financing, amounting to $359 million, has been extended as a term loan facilitated by a consortium of local banks based in Saudi Arabia. This substantial capital will cater to the residual shipyard purchase expenses for the Kingdom 1 and 2 rigs and will also be channeled for generalized corporate undertakings. Structured with a maturity span of eight years, the loan encapsulates a 16-year amortization trajectory. It’s noteworthy that a balloon payment, constituting half of the loan’s value, is anticipated at the loan’s maturity.

Delivery and Contract Insights

Projected timelines indicate that Kingdom 1 is slated for delivery, following which it will initiate its contract with Aramco in the fourth quarter of 2023. On a similar note, Kingdom 2 is set for its introduction and contract commencement with Aramco in the first quarter of 2024. The day rates for these rigs, spanning their initial eight-year contracts, will be computed using a pricing mechanism aiming for a six-year payback, calculated on an EBITDA foundation. Additionally, these maiden contracts will be succeeded by a subsequent minimum term of eight years, which will undergo re-pricing triennially, contingent on prevailing market pricing standards.

In a statement underscoring the significance of this financing move, ARO Drilling’s Chief Executive Officer, Mohamed Hegazi, articulated, “The delivery and startup of the first two newbuilds will mark an important milestone in the growth story of ARO. I am delighted that we have been able to secure financing for these rigs at attractive terms, demonstrating both the strength of our business and relationship with local lenders in Saudi Arabia.”