Here's a little history. Looks like Eco has come to Dominion Bridge's rescue - and payment is 51% of the deal.
Friday, May 08, 1998
Davie Rig Deal Slipping Away: Canadian yard needs $100 million bond to save newbuilds
by Erik Means in Oslo
CANADIAN fabrication yard Davie Industries stands to lose its prestigious contract to build two Amethyst-class semi-submersible drilling rigs amid a series of financing problems and design uncertainties.
The yard's only hope of retaining the deal lies with the new owners who took control of Davie this week but time is not on their side.
Rig owner Petrodrill, which has secured charters of between six and eight years from Brazilian state oil company Petrobras for six compact
Amethyst-class semi-subs, this week reached deals with US yard TDI-Halter and Daewoo of South Korea for each to build two rigs with options for one more.
These deals effectively extinguished widespread doubts as to whether the low-cost semis would ever be built. The question now is whether Davie will be allowed to build any of them.
Petrodrill -- a joint venture comprising Rio-based contractor Maritima, rig owner Pride International of Houston and Dutch company Workships -- placed orders for the first two rigs with Davie last summer and rounded out its six-semisub series with this week's contracts.
However, sources reveal that the optional rigs at TDI and Daewoo are intended as replacements for the Davie semis. The Quebec yard's deal stands to be cancelled mid-May unless it is able to secure a $100 million performance bond that until now has proven a stumbling block.
Petrodrill's Holland-based director Derek Leach said he was "covering all the bases" with the TDI-Halter and Daewoo options, which expire early in June. "It would be very nice if Davie could [complete the rigs] but this can only go on for so long," Leach said.
Davie, which wigned its contract last summer, has yet to begin cutting steel and is way behind schedule. The yard says it has performed extensive engineering, including significant design changes, but the concept has yet to be certified by classification society Lloyd's.
Davie's design manager Allan Benison said: "We are still negotiating the design with Petrodrill because, as it is, the design will not work. They have a big weight problem ... and that affects stability."
Some observers were surprised by a $54 million contract signed last week with Maritime Hydraulics for conventional drilling packages on each of the six rigs. Petrodrill had been expected to choose lightweight packages in order to keep deckload weight to a minimum.
Davie knows its back is against the wall. Benison went so far as to say that, if the deal is cancelled, Davie will still profit by selling the design package to TDI and Daewoo for $2.5 million per rig.
The yard has not given up hope yet, however, and hopes it has found a white knight in the form of Deere Park Capital Management, which this week acquired a controlling stake in Montreal-based Dominion Bridge, the yard's financially-troubled owner.
"That can change matters," Maritima drilling director Hamilton Padilha said. "They have until mid-May. If they can come up with [the performance bond] then we have a deal.
The contracts with TDI and Daewoo carry price tags of about $85 million per unit, although Padilha confirms the overall cost per rig, including drilling facilities and related interest costs during construction, will be around $170 million. Petrodrill is in the midst of a massive $1 billion bond arranged by Morgan Stanley to finance the rig building.
The first two Amethyst units are now slated for delivery in the second half of 1999, having slipped from the original target of fourth-quarter 1998.
Average rates on the first two Petrobras charters are said to be a mere $95,000 a day, although observers say the price is likely to rise because water depth specifications were increased from 1200 metres to 1500 metres.
-- "Upstream", from Vol.3, Week 18, 01 May 1998.
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