Vantage acquires Dragonquest drillship for a hefty sum

Vantage Drilling Co., an offshore drilling contractor has signed a contract with Valencia Drilling Corp. to buy the latter’s drill ship, Dragonquest.  Under this contract, Vantage essentially acquires Valencia’s interests and obligations specified in the Dragonquest construction project agreement.  Initial purchase price is pegged at $164M but Vantage is expected to shell out more cash to cover other unpaid obligations which will eventually shoot up its overall investment in the project by up to $800M.

The drill ship was built by Daewoo Shipbuilding and Marine Engineering Company, Ltd. and while Daewoo has finished construction, there are still unpaid obligations (i.e., final billing, cost of equipment, spare parts, and other project-related expenditures) that Vantage will now shoulder per agreement with Valencia.  Valencia also requested Vantage to shoulder some $5M worth of expenses which the former may incur during the closing transaction.

F2 Capital of the Cayman Islands and Valencia’s parent company is an affiliate of the F3 Capital.  Hsin-Chi Su meanwhile is the owner of F3 Capital.  The transaction between Vantage and Valencia was reviewed by FBR Capital Markets which issued a fairness opinion.  This opinion was later presented to the Board of Directors’ audit team.

As soon as Dragonquest is turned over to Vantage by April of this year, the drill ship will be positioned in the Gulf of Mexico in compliance with a contract with Petrobas, a state-run Brazilian oil explorer that has reaped a string of exploration successes partly due to its investment strategies.  Paul A. Bragg, Chairman and Chief Executive Officer of Vantage informed that Beginning in the third quarter of 2012, we expect the Dragonquest to generate $140 to $150 million of EBITDA per year or approximately $1.2 billion over the life of this contract.

“We have managed the project since its inception in 2008, so we have the highest confidence in the quality and capabilities of the asset we are buying.”  These pronouncements suggest that it could get into similar projects that may involve more oil investment in the future.

While the drill ship is capable of handling drilling operations in waters as deep as 10,000 feet, its total vertical capacity allows it to effectively drill farther down to 40,000 feet.  Moreover, the size of the ship’s deck load is 781 by 137 feet and can freely accommodate up to 20,000 tons of weight.

By Chris Termeer