Seadrill Buys Petromena Bond Stake, $165 mln

Wojciech Moskwa, Reuters

Oslo-listed offshore oil services company Seadrill has bought the majority of rig-backed bonds issued by fellow oilfield driller PetroMENA  and said on Monday that it may assist the group with financing.

Through a general bid on March 27, Seadrill said it invested 1.1 billion crowns ($164.5 million) to get 80.2 percent of PetroMENA's nominal value 2 billion bond, which is secured by two deepwater rigs under construction at a Singapore shipyard. Shares in Seadrill were off 3.7 percent at 65.20 crowns at 0917 GMT, lagging a 2.4 fall on Oslo's benchmark index .OSEBX. PetroMENA shares, rocked in past months by fears the group would default its debts, surged 48.1 percent to 0.77 crowns.

Seadrill said it viewed its investment in the bond as "an attractive low risk investment in assets where Seadrill has strong industrial expertise and knowledge", but analysts said the deal increased the group's overall risk and weakened shares.

"This raises their risk profile and also signals they may be too aggressive," said Nordea analyst Ingolf Gillesdal, adding that the market had little appetite for "hedge fund-like moves" at the moment, even if backed by strong industrial logic.

Seadrill has in the last year taken delivery of two rigs of similar design from the same Jurong shipyard and has two more units under construction there for delivery in 2010 and 2011.

"The investment in the bond loan will, based on the price paid for the bonds, provide a direct yield of 14.2 percent and a yield to maturity of 26.2 percent," Bermuda-based Seadrill, run by shipping magnate Jon Fredriksen, said in a statement.

"If a situation should arise where Petromena is not in the position to finance the rigs or repay the amounts due to the bondholders in accordance with the existing loan agreements, Seadrill might be prepared to assist the projects with senior financing and operational expertise," Seadrill added.

Seadrill said its exposure values the rigs at less then $400 million each, which Danske Bank analyst Henrik Eriksen said was well below their market value of $600-700 million.

"The move into PetroMENA (bonds) is well within Seadrill's strategy and also a sign that drilling bonds and equity market valuations are low relative to market fundamentals, which create good opportunities for accretive deals," Eriksen said.

Even though the steep fall in oil prices has hit the oilfield services market in past quarters, Seadrill remains upbeat on the specialised deep-water drilling segment as companies move further offshore to tap new oil and gas deposits.

Separately, Seadrill said it was in the final stages of refinancing a $600 million bridge loan due in May 2010. It said it had already gained a guarantee for $420 million of the loan.

"This signals that banks are comfortable with Seadrill's contracts and operators," Nordea's Gillesdal said.

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