Shelf eyes ‘opportunistic’ buys

'Opportunistic buys': Shelf Drilling CEO David Mullen

Shelf Drilling is keeping an eye out for “opportunistic” rig purchases, but the London-listing hopeful has no plans to order newbuilds any time soon.

The United Arab Emirates-based jack-up specialist, which on Thursday confirmed it is to push for an initial public offering (IPO) in the UK capital, is also in discussions with compatriot National Drilling Company (NDC) for work and is eyeing growth in all its existing markets.

Shelf is aiming for a floatation of at least $500 million when it hits the London Stock Exchange in July. About half of this will be used to pay down a portion of its $350 million term loan, with the other half to come from principle shareholders selling down their stakes.

Chief executive David Mullen told Upstream: “Whilst we have a very low overall leverage – our net leverage is about 1.5 times the 12-month adjusted editda ... but our debt structure is quite expensive.”

Although leading shareholders will sell down some stock, Mullen said they would still continue to own between 70% and 75% of the company post-IPO. The charge on the LSE is being led by Morgan Stanley and Goldman Sachs, with the ticker SHLF lined up.

Shelf could plough some of the expected raised cash into asset purchases, Mullen saying: “We are looking opportunistically at acquiring existing rigs where there may be a strategic rationale to sell them.”

Mullen added, however, that the company is not considering purchasing whole fleets, as it did when it was set up in 2012 by a trio of private equity players - Champ Private Equity, Lime Rock and Harlan - to take over 38 shallow-water rigs from Transocean.

“We are not going to order rigs on speculation, and we are not going to buy assets if we don’t have a home (charter) for it – a home that is going to generate the returns that you see from us today,” Mullen said.

Shelf recently ordered two LeTourneau Super 116E-design jack-ups at Sharjah-based Lamprell for more than $370 million after sealing charter contracts with US supermajor Chevron worth $562 million for the rigs to work off Thailand for five years each.

Mullen described Chevron Thailand as “by far and away the most efficient exploration and production (E&P) drilling company there is out there, which on average “drills and completes wells in five days”.

The chief executive continued: “Our goal is to be able to save about 20% on that five days (with our two newbuilds), which is already best-in-class. So, I see that as a catalyst for other opportunities with other big E&P operators and the national oil companies.”

Saudi Aramco is already a significant customer, Mullen saying Shelf is the second-largest provider of offshore drilling services to Aramco.

“I see the UAE as a huge market and we are in discussion with NDC on a big opportunity there,” Mullen said, without elaborating.

“I see Qatar as having a lot of potential to grow – maybe not this year but certainly (in years ahead). Qatar Petroleum is looking to increase quite significantly its liquid oil production, and some time in the future they will lift the moratorium on gas drilling.”

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