Barely half a year after being spun-off as a separate business by Noble Corporation, Paragon Offshore has pounced on Prospector Offshore Drilling, taking control by buying up more than 55% of its stock.
News of the acquisition broke on November 17, with Paragon planning to sweep up remaining shares via a mandatory offer. However, within hours of the announcement, it appears to have gained control of nearly 90% of stock.
On November 24, Paragon called for an extraordinary general meeting of shareholders, based on the fact that it owned 89.99% of its quarry’s shares.
The following day, Paragon’s board put out a statement setting December 17 as the cruncher date.
Paragon is requesting a clear-out at the top of Prospector as follows:
Reduction of the number of directors on the board of directors of the company to five with immediate effect.
Approval of the dismissals of CEO Robert W Rose and colleagues Glen Rødland, Gunnar Hvammen and Tomas Norrby, as directors with immediate effect.
Approval of the appointments of Steven Manz, Andrew Tietz and William Yester as new directors.
Paragon, which was set adrift with the older units of the Noble Corp drilling armada, including some North Sea veterans, is using the acquisition as a means of high-grading and growing its fleet at a moderate cost.
In the initial statement issued on November 17, the Houston-headquartered company said it had bought 52,749,014 shares of Oslo-listed but Luxembourg domiciled Prospector.
The shares were picked up for 14.50 Norwegian kroner (NOK) per share, or $2.13 per share equivalent and equate to 55.8% of total stock.
The total deal is worth around $550million, if one accounts for Prospector’s debt net of cash balances.
Prospector owns and operates two high specification Friede and Goldman JU-2000E jack-ups contracted to Total for use in the Elgin/Franklin fields in the UK Central North Sea. It is thought that both are still in the Cromarty Firth pending mobilisation offshore.
The first unit, Prospector 1, is contracted until September 2016 at a dayrate of $185,000 and the second unit, Prospector 5, is contracted for three years following contract start at a dayrate of $218,000.
Combined, the contracts have backlog of $384million and both have customer options for an additional term (three years and two years, respectively) at the same day-rates.
Prospector has three further JU-2000E jack-ups under construction at the Shanghai Waigaoqiao Shipbuilding (SWS) yard in China, the same yard that delivered Prospector 5.
These three units, Prospector 6, Prospector 7 and Prospector 8, have published delivery dates of this month, September 2015 and March 2016.
However, the day before Paragon pounced, Prospector said No. 6 could be sold and that talks were under way.
The three rigs are being constructed on a non-recourse basis with no parent company guarantees.
The JU-2000E units are heavy-duty, harsh environment jack-ups capable of operating in water depths to 122m (400ft).
Strategy
“The acquisition of the majority of the outstanding shares of Prospector Offshore is a significant step in Paragon‘s long-term strategy to upgrade our fleet,” said Randall D. Stilley, Paragon’s president and CEO.
“The inclusion of Prospector’s existing rigs into Paragon‘s fleet reduces our average rig age, upgrades our technical capabilities, and adds backlog with a key customer in an important operating region where Paragon already has economies of scale.”
Prospector was set up in 2010 and is known to have been struggling due to the late delivery of Prospector 1, which led to penalties imposed by Total, including a reduced dayrate pending deployment. Rig No. 3 was sold to Seadrill Jack-up Holdings. It was also been carrying a considerable debt burden.
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