Valaris seals funds for two Saudi JV jackup newbuilds

New York-listed offshore driller Valaris and its partner Saudi Aramco have secured financing for the first two newbuild jackup rigs.

ARO Drilling, an equal joint venture between Valaris and Aramco, has entered into a $359m term loan with a syndicate of local Saudi Arabian banks to finance the deliveries of rigs named Kingdom 1 and 2.

Valaris said the proceeds will be used to pay the remaining shipyard purchase price and for general corporate purposes. 

The loan matures in eight years and has a 16-year amortisation profile with a 50% balloon payment due at maturity.

The Kingdom 1 rig should deliver and begin its contract with Aramco in the fourth quarter of 2023, while Kingdom 2 should join the fleet in the first quarter of 2024, also for a contract with Aramco.

Day rates for the initial eight-year contracts will be determined using a pricing mechanism that targets a six-year payback for construction costs. A minimum additional eight-year term will follow these initial contracts, re-priced every three years, based on a market pricing mechanism.

ARO owns and operates 15 rigs in its fleet. The company has set a goal to acquire up to 20 newbuild jackups over the next 10 years to meet Aramco’s offshore drilling requirements in the Kingdom.

“The delivery and startup of the first two newbuilds will mark an important milestone in the growth story of ARO, said Mohamed Hegazi, chief executive of ARO, adding: “I am delighted that we have been able to secure financing for these rigs at attractive terms, demonstrating both the strength of our business and relationship with local lenders in Saudi Arabia.”