Borr Drilling scoops Paragon rig fleet

Tor Olav Troim-backed owner adds 32 units in $232.5m deal.

Tor Olav Troim's Borr Drilling has expanded its rig fleet again with a $232.5m deal for Paragon Offshore.

It has agreed a deal to buy all the outstanding shares in the company and has received commitments to sell from holders of 67.9% of Paragon.

Paragon has a fleet of 32 drilling units, including two modern units of the leading JU-2000E design, the Prospector 1 and Prospector 5 built in 2013 and 2014, currently located in the North Sea.

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"These rigs in particular will complement Borr's fleet and further consolidate its leading position in the premium jack-up segment," it said.

The deal provides a solid base for growth in the recovering North Sea rig market, it added.

The portfolio also includes a semi-submersible MSS1 scheduled to go on a long-term contract for TAQA in the North Sea starting in March.

Prospector 1 and five of Paragon's older jack-ups are currently working in the North Sea, India and Middle-East, with four additional jack-ups under contract or committed, including Prospector 5.

In addition, there are 21 older uncontracted jack-ups stacked in different locations. Paragon has a strong operational track record, including average uptime over the last three years of 99.15%.

Buying to scrap?

"We are acquiring an experienced organisation, solid management systems, and quality assets at attractive prices. By integrating a very capable operating platform, Borr will be qualified based on the historical track record to tender, win contracts and operate in most jurisdictions", said CEO Simon Johnson.

But it is not likely Borr will be using the older units.

Chairman Troim added: "As almost 50% of the global rig fleet is more than 30 years old, responsible owners should take steps to rationalise their fleets and consolidate the fragmented market.

"Borr wants to be at the forefront of this initiative. Borr will, as communicated, focus on operating modern, high-spec assets. In view of this strategy the board will evaluate the future of the uncontracted older jack-ups which are part of the Paragon fleet.

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"Based on the anticipated high reactivation cost, safety standards and drilling efficiency it is likely that most of these units will not be marketed for new drilling contracts."

Following the deal, Borr will own 24 premium jack-ups built after 2000, and be the world's largest premium jack-up rig operator.

Borr called the transaction a major step forward. Paragon has approximately $180m in cash and $215m of liabilities, with a revenue backlog of $204m.

The acquisition will be financed through cash and a share issue or debt instruments. Borr currently has authorisation to issue 46.7m shares.

Start-up Borr also announced an $88m loss for 2017, due to having negligible revenue. It was formed in August 2016.

Fleet tops $3.5bn

VesselsValue estimates the combined fleet as worth $3.57bn.

Paragon has 30 owned ships units worth $94.68m, with two more chartered in. Borr's 26 owned rigs are worth $3.47bn.

Charlie Hockless, VesselsValue's head of offshore, said: "The acquisition of Paragon by Borr drilling was certainly unexpected.

"Borr made it clear during 2017 that they were aiming to become the premium jack-up supplier; we did not expect them to start 2018 by purchasing a fleet of scrapping candidates."

But he said the reported $204m backlog from Paragon "seems attractive, and the rigs will certainly have some residual scrap value."

"In my opinion though, the true value of the deal is what Paragon will bring Borr – an experienced drilling organisation which will cement Borr’s market position going forward."