Prosafe revealed Thursday it had signed a letter of intent with Axis to acquire the two single purpose companies which control the shipbuilding contracts for the Axis Nova and Axis Vega accommodation vessels, as well as a 25% interest in Dan Swift Singapore.

The deal will also see Prosafe enter into a management contract for Axis’ converted monohull Dan Swift, which will then be marketed under the Prosafe banner and operated and managed as part of the Prosafe fleet.

The $70 million deal will be settled through the issuance of 585.8 million ordinary shares and a subordinated zero coupon convertible bond of Nkr403.4 million ($48.5 million), convertible into more than 1.3 billion shares.

The Axis Nova and Vega are currently under construction at China’s Cosco Qidong Shipyard and Axis has previously entered into addendums to the respective construction contracts which include lay-up and standstill elements without any cost or payment to the yard.

“Having followed the development of the Axis Nova and Axis Vega, which is built next to Prosafe’s own rigs at the same yard, Prosafe believes on first-hand knowledge that the contemplated transaction offers an attractive opportunity to acquire the two high specification, harsh environment semi-submersible new-builds at low risk,” the company said in Thursday’s statement.

“Prosafe considers the contemplated acquisition to be value enhancing from an industrial and financial point of view, and that it has limited risk since the transaction is further based on Axis Nova and Axis Vega coming with cancellation rights and refund bank guarantees of $60 million.”

It added the refund guarantee could be claimed in the event it chooses to not take delivery of the new-builds due to weak market conditions, or otherwise.

Prosafe already has an existing deferred delivery agreement with Cosco Qidong for its Safe Eurus vessel until the fourth quarter of 2019.

This means that, following the completion of the deal with Axis, Prosafe will have three accommodation vessels completed or nearing completion in a preserved, strategic stacking mode with Cosco Quidong

It said it planned to start negotiations with the yard and other parties to find a solution for the delivery, financing and operations of the three units so that it could take delivery on attractive terms once the market recovers.

“The offshore accommodation vessels market is currently in a challenging situation with significant growth in supply combined with a recession in the oil and gas industry,” Prosafe said.

“Prosafe’s strategy is to take a leading role to improve the situation in the market through cost reductions on all levels, fleet renewal, scrapping of older units, conversion of vessels to alternative uses and strategic consolidation.”

Should its deal with Axis go ahead, Prosafe said it planned to scrap additional accommodation vessels in addition to the three already scrapped this year.

Source: Upstream Online