Sembcorp Marine to bear S$24 mln loss if West Rigel sale goes through

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A Sembcorp employee stands near the turret of Tullow Oil's newly completed Floating Production, Storage and Offloading vessel (FPSO) Prof. John Evans Atta Mills at Sembcorp Marine's Jurong Shipyard in Singapore January 20, 2016

Sembcorp Marine on Tuesday said its unit Jurong Shipyard signed an agreement for the sale of the semi-submersible rig West Rigel to a buyer for US$500 million.

West Rigel was originally contracted by North Atlantic Rigel Ltd (NARL), a subsidiary of North Atlantic Drilling Ltd (NADL) and Seadrill.

Both Seadrill Ltd and NADL have applied for restructuring under Chapter 11 in the United States.

NARL and Jurong Shipyard entered into a standstill agreement in December 2015, and have extended the agreement to July 2018, Sembcorp Marine said.

During the standstill period, NARL was to market the rig for an acceptable drilling contract and Jurong Shipyard for the sale of the rig at an acceptable price.

The rig was to remain at the Jurong Shipyard in Singapore during this period.

In the event that no employment is secured and no alternative transaction is completed when the standstill period concludes, the parties were to form a Joint Asset Holding Company for joint ownership of the rig.

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If the above sale materialises, it will result in a loss of about S$24 million. Had this transaction occurred in the financial year ended December 31, it would have the effect of reducing the company's 2016 earnings per share by S$0.012.

Under the terms of the agreement, the sale is subject to conditions precedent being met by both parties before the delivery of the rig and the payment of the price, the company said in a regulatory filing.

Once the conditions precedent are fulfilled, the buyer will take delivery of the rig but the rig will remain in the company's yard for certain works to be undertaken for reactivation.

Shares in Sembcorp Marine fell 3.6 percent to S$1.87 on the Singapore Exchange.

This article was first published on December 26, 2017