Deepwater innovation funded
Exploration for oil and gas is taking industry players to the harshest frontiers of our globe, including deep sea waters, where pioneering technologies are allowing new fields to be brought into production. At the forefront of this challenge are companies like Sevan Drilling, an international drilling contractor specialised in the ultra deepwater segment.
Established in 2006, Sevan is focused on building state-of-the-art ultra deepwater drilling rigs based on its innovative cylindrically shaped design. The Oslo-listed company currently has two operational rigs off the coast of Brazil and one being mobilised to the Gulf of Mexico where it will start working shortly. In 2014, it is expected to add a fourth drilling rig to its fleet following the completion of its construction at a shipyard in China.
As a relative newcomer to the industry, Sevan invested heavily to develop its first two rigs, which it did through the financing that it arranged while it was still a start up company with a new technology and without a track record. ING was one of the first banks that recognised the ingenuity of Sevan’s technology. It established a relationship with the company in 2008 and then went on to arrange project financing facilities in 2011 and coordinated the financial restructuring of its debt in early 2013.
In June 2013, Sevan was acquired by a leading offshore drilling company Seadrill. ING leveraged its intimate knowledge of the company and the business to assist Seadrill in putting together an enhanced underwritten financing package on the back of a full financial guarantee and a funding commitment. Due to the size of the transaction (USD 1.75bn), it was a considerable undertaking that was achieved in less than three months during the quiet summer holiday period.
ING acted as the sole underwriter, sole book running MLA, commercial tranche and ECA coordinator and successfully syndicated the facility, which was oversubscribed by more than 50%. It deployed its personnel in Beijing, Hong Kong and Singapore who assisted the core Amsterdam team in the distribution of the loan to a wide range of banks, which resulted in substantial new bank liquidity from China and Brazil for the parent.
The end solution effectively addressed all of Sevan’s needs and those of the new owner, by enhancing Sevan’s capital structure while at the same time funding the doubling of its balance sheet. As the syndicate comprised 18 banks from four continents, the transaction also attracted a sizeable number of new banks to both Seadrill and Sevan.
The resulting capital structure optimisation and funding has helped to significantly reduce the financial risk of the company, thereby increasing its appeal in the investor community and enabling it to focus on its core business of building and operating state-of-the-art ultra deepwater drilling rigs under the patronage of Seadrill.