Is North Atlantic Drilling Ltd. (NYSE: NADL) Drilling Again?


North Atlantic Drilling Ltd. (NYSE: NADL) and Jurong Shipyard have agreed to revise their previous standstill agreement relating to the West Rigel drilling rig. But much hasn’t changed in the refreshed agreement except extension of the standstill period for several more months.

According to North Atlantic Drilling Ltd. (NYSE: NADL), the amended version of the earlier agreement extends the standstill period by three more months until September 2, 2016.

The companies agreed that they will continue working on the plans they agreed earlier during the standstill period. As such, NADL will continue to seek acceptable drilling contracts for the rig. On its part, Jurong will continue to seek acceptable price at which to sell the semi-submersible West Rigel rig.

In the intervening period, NADL and Jurong have both agreed that the rig will be seated at Jurong Shipyard. What you can see from the terms of the amended agreement is that it allows both parties more time to explore commercial opportunities for the rig to see what best they can get from the asset.

What happens next?

If the additional three months elapse without either party succeeding in the line it is pursuing, they will form a joint asset holding company through which they will own the rig. The agreement spells out that if it comes to forming a joint asset holding company, North Atlantic Drilling Ltd. (NYSE: NADL) will own 23% of that company while Jurong will own 77% of the company.

What’s the cash situation like at North Atlantic Drilling Ltd. (NYSE: NADL)?

North Atlantic Drilling Ltd. (NYSE: NADL) finished 1Q2016 with cash and equivalents of $87.4 million, a decrease from $150.9 million in the previous quarter.

The company generated consolidated revenue of $151.6 million in the latest quarter compared to $150.4 million in the prior quarter. The uptick in topline number was attributed to the return of West Phoenix to drilling after a period of operation idling.

On the bottom-line, North Atlantic Drilling Ltd. (NYSE: NADL) logged EPS loss of $0.41 in the latest quarter.


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