Valaris Limited (“Valaris” or the “Company”) announced today that ARO Drilling (“ARO”), its 50/50 joint venture with Aramco, has secured attractive financing for its first two newbuild jackups, Kingdom 1 and 2.
ARO has entered into a $359 million term loan with a syndicate of local Saudi Arabian banks to finance the deliveries. The proceeds will be used to pay the remaining shipyard purchase price for Kingdom 1 and 2, and for general corporate purposes. The loan matures in eight years and has a 16-year amortization profile with a 50% balloon payment due at maturity.
Kingdom 1 is expected to be delivered and commence its contract with Aramco in fourth quarter 2023, and Kingdom 2 is expected to be delivered and commence its contract with Aramco in first quarter 2024.
Day rates for the initial eight-year contracts will be determined using a pricing mechanism that targets a six-year payback for construction costs on an EBITDA basis. These initial contracts will be followed by a minimum additional eight-year term, re-priced every three years, based on a market pricing mechanism.
ARO Drilling Chief Executive Officer Mohamed Hegazi said, “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.”
ARO Drilling agreed in 2018 to supply Aramco with 20 new jack-ups over a ten-year period. International Maritime Industries (IMI), a joint venture between Saudi Aramco, Lamprell, Bahri and Hyundai Heavy Industries, is in charge of building the rigs, while a new design was developed in collaboration with GustoMSC and Lamprell.