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Wednesday, September 20, 2017

Mermaid Terminates Newbuild Drilling Rigs Contract

January 1, 2017

Image: Mermaid Maritime

Image: Mermaid Maritime

 Mermaid Maritime and China Merchants Industry Holdings (CMIH) have mutually agreed to cancel the construction contract  for the construction of tender assist drilling rigs to be named ‘MTR-3’ and ‘MTR-4’  respectively.

All pre-paid installments and associated costs were already recorded as asset-impairments in Mermaid’s 2015 Financial Statements. No further payments are due to the Builder.
 The contract price for each of the Rigs (which is inclusive of rig equipment spares) was USD 149 Million). This is equivalent to USD 298 Million for both Rigs. 
The Owners had made a pre-paid installment of US$ 44 Million for both Rigs pursuant to the Construction Contracts. The balance of the contract price which would have been due and payable to the Builder upon delivery of both Rigs pursuant to the Construction Contracts is US$ 254 Million. 
In light of the challenging global oil and gas market situation that has, among other things, created a contraction in demand for drilling rigs, depressed asset values and charter rates, and making securing new contracts more challenging, the Owners shall not be taking delivery of the Rigs from the Builder by the Delivery Date. 
The Owners had also not received any genuine interest from third party buyers for the Rigs to date. 
Accordingly, the Construction Contracts have therefore been terminated by mutual agreement between the respective Owners and the Builder.
In a move to mitigate financial exposure, the Company had already recorded an asset impairment on the entire Pre-Paid Sum and associated costs related to the Rigs in its 2015 Financial Statements. 
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