SFL Corporation announced that the Company has entered into an amendment to its existing charter agreement with subsidiaries of Seadrill for the harsh environment semi-submersible rig West Hercules.
Under the amendment agreement with Seadrill, the West Hercules is contracted to be employed with an oil major into the second half of 2022 (the “charter period”), prior to being redelivered to SFL in Norway.
Pursuant to the amendment agreement, SFL has agreed to receive bareboat hire of (i) approximately $64,700 per day until Seadrill emerges from Chapter 11 and its plan is confirmed by the court (the “Emergence Date”), and (ii) following the Emergence Date, approximately $60,000 per day while the rig is employed under a contract and generating revenues for Seadrill and approximately $40,000 in all other scenarios, including when the rig is idle or undergoing mobilization or demobilization. Pursuant to the amendment agreement, Seadrill has agreed to fund the mobilization and demobilization of the rig, which is expected to occur during the charter period. Seadrill is expected to seek bankruptcy court approval of the amendment agreement on or before September 2, 2021, which is a condition precedent to the effectiveness to the amendment agreement.
Each of SFL’s financing banks has agreed to consent to the amendment agreement, and SFL’s limited corporate guarantee of the outstanding debt of the rig owning subsidiary remains unchanged at $83 million.
Separately, on July 24, 2021, Seadrill announced that it had entered into a plan support agreement (the “PSA”) with certain of its senior secured lenders holding approximately 57.8% of its senior secured loans. The PSA includes a milestone for bankruptcy court approval of the plan by November 5, 2021.
While no assurances can be provided with regards to the outcome of Seadrill’s Chapter 11 process, the amendment agreement, or the PSA, SFL continues to have constructive dialogue with Seadrill, including in respect of the West Linus, which is on a sub-charter to an oil major in the North Sea until the end of 2028.
