• Delivery of West Mira in December 2018 and began mobilizing for its initial contract in Norway
• Successfully secured a senior secured term loan of $200 million for West Mira delivery payment
• Wintershall Norge AS exercised two front end options for West Mira
• Extended option to purchase Cobalt Explorer until end of March 2019
• Scott McReaken appointed new Chief Executive Officer with effect from December 3, 2018
• Secured drilling contract for West Bollsta with Lundin Norway AS with expected commencement in early Q2 2020, adding backlog of approximately $ 200 million
• Wintershall Norge AS exercised third front end option for West Mira bringing expected commencement forward to early Q4 2019
• Board appointed Gunnar Eliassen as Director and Audit Committee Chair in February 2019
• The Company’s activities since incorporation in March 2017 have consisted principally of acquiring drilling units currently under construction and raising capital
• The Company does not currently have any drilling units in operation and the operating results in the fourth quarter of 2018 and year ended December 31, 2018 consisted of interest income and administrative expenses
• The harsh environment semi-submersible drilling rig, West Mira, was delivered in early December 2018 and began mobilizing towards Norway
• West Mira will commence its first drilling program with Wintershall Norge AS (“Wintershall”) after completing final operations preparations and acceptance testing throughout the summer of 2019
• Since the contract was awarded from Wintershall, three front options have been exercised bringing the expected commencement date forward to the beginning of Q4 2019
• The contract includes one remaining front option which would potentially bring the commencement forward further to mid Q3 2019 and it includes six additional options
• Should all follow on options be exercised West Mira is expected to be contracted to Wintershall until Q1 2022
• West Mira delivery was funded through a term loan facility (“TLF”) of $200 million with a three year tenor and margin of 350bps+libor
• The full loan amount was drawn and has a nine month amortization grace period followed by ten quarterly instalments of $5 million and a balloon payment of $150 million
• The second harsh environment semi-submersible, West Bollsta, is expected to be delivered in Q2 2019 and has secured a ten well contract with Lundin Norway AS (“Lundin”) for work in the Luno II field and the Rolvsnes discovery
• Contract value is estimated to approximately $ 200 million excluding potential performance bonus and any additional services
• Contract commencement is expected in early Q2 2020 after mobilization and final operations preparations are completed
• Six of the wells are subject to Lundin’s fulfilment of certain conditions customary to finalizing the drilling program in Norway, which is part of their longer term growth and strategy to remain a significant operator in the North Sea market
• The Company is estimating revenue backlog of more than $300 million, excluding potential performance bonuses, and if all options are exercised both rigs would have employment well into 2022
• The next steps for the West Bollsta are to finalize the delivery plan and secure a prudent financing structure for the delivery and mobilization
• The Company continues to evaluate all alternatives available and is confident in reaching a solution by delivery
• In November 2018, the Company agreed with Daewoo Shipbuilding & Marine Engineering to extend the option agreement for Cobalt Explorer through the end of March 2019
• A down payment of $12 million was made which will be applied against the first instalment of $105 million should the option be exercised
• The Cobalt Explorer is a modern high spec 7th generation drillship with the agreed total purchase price at $350 million ($325 million + $25 million for the second BOP) and has a flexible delivery schedule into 2021
• Effective February 27, 2019 the Board appointed Gunnar Eliassen as Director and Audit Committee Chair
• Mr Eliassen served as the Chief Executive Officer for the Company since inception to December 2018
• He brings continuity of leadership and knowledge to the Board, as he continues in his Seatankers roles
• Mr Eliassen also serves as a Director of Golden Close Maritime Corp. Ltd. and as a Director of Quintana Energy Services Inc
• The outlook for offshore drilling remains relatively unchanged and will continue on its recovery
• There has been a rise in enquiries from E&P companies with more interest in opportunistic exploration drilling and increases in the scope of tenders
• The market continues to tighten through scrapping older units reducing the oversupply (approximately 121 floaters scrapped since 2014) coupled with multiple consolidations creating less competitors and less aggressive bidding
• Contracting activity is indicating a clear bifurcation between older units and a preference for modern high spec rigs
• Certain legacy rigs are able to secure plug and abandonment work and short term campaigns, while the modern rigs are securing exploration and complex development projects with greater returns
• This is most pronounced in the harsh environment market where Tier 1 rigs are near full utilization with significantly improved contract economics, while almost half of the rigs 35 years or older remain idle
• With continued increase in utilization of 7th generation drillships, the Company is expecting a similar strengthening in contract economics for this asset class in the next 12 months
• The Company takes comfort in this outlook with its new modern high spec fleet being more preferred by customers, its harsh environment rigs being fully contracted and having flexibility in delivery for its two ultra deepwater drillships
• The Company is well positioned to deliver shareholder value as the recovery continues and will continue to evaluate opportunistic growth in line with its strategy
