Alberta-based Trinidad Drilling Ltd has received a five-year contract to build two Trinidad Drilling International (TDI) joint venture rigs in Kuwait, which will begin operating by Q2 2019
The contract has five-year, take-or-pay terms with an optional one-year extension, at the discretion of the customer. TDI will be reimbursed by the customer for the cost of relocating the two rigs from Mexico. The rigs will undergo capital upgrades of approximately US$22mn per rig (Trinidad's 60 per cent portion), largely related to new well control equipment and mud systems.
Trinidad expects to fund the additional upgrade capital from cash in the TDI joint venture, as well as reinvested proceeds from the previously disclosed sale of TDI's three Saudi Arabian rigs. On 31 March 2018, TDI had approximately US$50mn of cash on hand, of which Trinidad's 60 per cent share is US$30mn.
“Kuwait drills some of the most technical wells in the world and our high-quality rigs provided us with a significant competitive advantage in winning this contract,” said Brent Conway, president and CEO of Trinidad. “Under the contract, we expect to deliver value for Trinidad's shareholders with improved international contract visibility, a strong return on capital and long-term, stable revenue.”
In 2018, Trinidad expects to fund its existing capital program through cash flow generated from operations, the proceeds from the expected sale of unused facilities, and cash from the recent sale of its Saudi Arabian rigs, which TDI anticipates distributing to its joint venture owners. Excess cash flow may be used to repay debt outstanding on the company's credit facility.
