Dallas, Texas 07/02/2015 (Financialstrend) – Offshore drilling rigs and services provider Paragon Offshore PLC (NYSE:PGN) has announced that it has entered into a “sale-leaseback agreement” with Sinoenergy Corporation. The deal is said to be worth $300 million. The HOUSTON, TX based firm has signed the deal as per which it will sell its two heavy duty rigs to the British Virgin Islands registered private investment company. The heavy duty rigs are of a jack up variety and are designed to work in extremely harsh and demanding environmental conditions. The deal envisions the units to be leased back by Paragon Offshore PLC (NYSE:PGN) after a five year period. The funds generated through this unique restructuring exercise would be used by the President, Chief Executive Officer Randall D. Stilley lead company to retire debt ahead of schedule and increase its operational liquidity.
Paragon Offshore PLC (NYSE:PGN) has disclosed that post the accounting of expenses and legal fees, it would be able to bring on to its account books, close to $292 million hard cash. The move has been seen as a positive development by the oil and gas analysts’ community. They have opined that the cash generated from this disinvestment exercise could be better used by the management team elsewhere rather than let it be stuck in the unprofitable deep sea drilling services in the prevailing low price oil market.
The deal has been priced in a manner which takes in to account the unfavourable conditions that exist for deep sea drilling and exploration activities over the midterm. The per day charge of the two rigs indicate these market dynamics better One rig is expected to be hired at a day rate of $71,000 per day till November of 2016. After that it almost gets halved to $42000 per day. The second drill rig is being hired at $71000 till February 2018. After that it will be rented out at a cost of $42,000 per day.
