North Atlantic Drilling Ltd (NADL) is set to acquire a sizeable chunk of Rosneft’s onshore drilling fleet in Russia under a deal that will see the Russian state-owned giant gain a substantial ownership stake in the harsh-environment rig subsidiary of John Fredriksen-owned Seadrill.
NADL will get its hands on around 150 land rigs and has also been awarded by Rosneft new five-year charter contracts for all the units into the bargain, giving the company a dominant foothold in the Russian onshore drilling scene.
Rosneft will receive as consideration a stake of about 30% in NADL based on a price of $9.25 per share, with the balance to be paid to NADL in cash, in line with a strategic pact agreed by the pair earlier this year. No value was given for the transaction.
However, Seadrill, owned by shipping and offshore tycoon Fredriksen, will retain a controlling stake of more than 50% in NADL, the latter said in a statement.
Oslo and New York-listed Seadrill currently owns 70% of the company.
Rosnet will though will be allowed to install two of its representatives on NADL’s seven-member board on closing of the transaction, which is expected to close in the fourth quarter although it can be cancelled within a 77-day period.
"We are very pleased with the execution of this important transaction and welcome Rosneft as an equity partner and to our board of directors,” NADL chief executive Alf Ragnar Lovdal said.
The transaction will result in the expansion of NADL beyond its core harsh-environment rig business, with the company’s current nine-rig fleet comprising five semi-submersibles, three jack-ups and a drillship.
It is the latest to be signed under the eight-year co-operation agreement inked between Rosneft, Seadrill and NADL in May this year that Seadrill said would open the door for onshore opportunities in Russia for the harsh-environmnent drilling subsidiary while also giving it “contracts for multiple offshore assets”.
The contracts include five-year stints for the drillships West Navigator and West Rigel (a newbuild), semi-submersible West Alpha, as well as two newbuild CJ-54 class rigs. Rosneft will also get a Gusto class jack-up rig for 2.5 years.
Oslo-listed Northern Offshore, also part of Fredriksen’s business empire, also secured a 2.5-year contract with Rosneft for its jack-up Energy Endeavour.
However, such deals have generated controversy amid tough Western sanctions imposed on Russia over its intervention in Ukraine that ban exports of technology for oil and gas exploitation in deep-water, Arctic and shale plays, including drilling rigs.
The recent offshore rig deal was signed by NADL and Rosneft just before the latest sanctions from the US and European Union, which only apply to new contracts, took effect on 31 July.
NADL’s semisub West Alpha is meanwhile currently drilling a first Arctic exploration well in Russia’s Kara Sea for ExxonMobil under the US supermajor’s earlier signed pact with Rosneft.