ARO Drilling, a 50/50 joint venture between Valaris and Saudi Aramco, has secured financing for its first two new-build jack-up rigs, set to work for Saudi Aramco.
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 the Kingdom 1 and Kingdom 2 jack-ups 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 the fourth quarter of 2023, and Kingdom 2 is expected to be delivered and begin its contract with Aramco in the first quarter of 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, Valaris said.
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.
The delivery of the first two, which was scheduled for 2022, slipped to 2023 after the delay in the completion of the new shipyard in Saudi Arabia.
Besides these two, no other orders have been placed since, Westwood recently said, adding that if the remaining 18 rigs are ordered, the question of whether there would be a need for additional newbuilds will be raised.