Aban Loyd to complete Sinvest deal by June 29

MUMBAI: Aban Loyd has acquired a 33.76% stake in Norwegian drilling company Sinvest for $446m. The transaction will be completed by 29 June, according to a notice issued to the Oslo Bors, the Norweigian Stock Exchange. Bjarne Skeie, the current chairman of Sinvest, will resign once the transaction is completed.

“We are very happy to become the leading shareholder in Sinvest. We have an optimistic view on the offshore drilling market going forward,” Reji Abraham, chairman of the Aban Group, was quoted as saying in a statement issued to the exchange.

Sinvest has two operational drilling rigs. Both of these are on contract in India with Reliance and Hardy Exploration at a rate of about $200,000/day. Sinvest has six other drilling rigs on order which will be delivered over the next three years. Aban Loyd controls eight drilling rigs on its own and three more via its wholly-owned Singapore subsidiary.

Sinvest is not the only example of the company taking the inorganic route for growth. In February, Aban Loyd acquired a 100% holding in the West Africa Drilling Company, which had a drill-ship on order.

This was also done by Aban Loyd’s Singapore subsidiary. The drilling rig market has heated up in the past year due to increasing petroleum exploration & production activity, an offshoot of high crude oil prices. Daily charter rates have shot up by 3-4 times over the past year, said industry sources. The rig-building yards have full order books and an order placed today won’t be delivered before ’09.

Shipping majors Mercator Lines and GE Shipping have recently placed orders for new building rigs which will be delivered in ’09. The order value was approximately $180m in both the cases.

Five of Sinvest’s under-construction rigs are scheduled to be delivered by ’08. Early deliveries give the company a chance to operate these in a high oil price regime. Contracts can be for periods of 3-5 years and being able to tie up a contract in a high price regime can make a big difference.