Offshore drilling firm ARO Drilling (“ARO”), a 50/50 joint venture between Valaris and Aramco, has secured financing for its first two newbuild jack-up drilling rigs, Kingdom 1 and 2.
According to Valaris, ARO secured 'attractive' financing, by entering 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 Kingdom 1 and 2, 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 start its contract with Aramco in fourth quarter 2023, and Kingdom 2 is expected to be delivered and commence its contract with Aramco in first quarter 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. 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.”
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