ARO Drilling, a 50/50 joint venture (JV) between Rowan Cos. Plc (NYSE: RDC) and Saudi Aramco, officially commenced operations on Oct. 17, Houston-based Rowan said in a press release Oct. 19.
As part of the initial startup of ARO Drilling, Rowan and Saudi Aramco contributed equal amounts of cash into the JV. The terms of the transaction weren't disclosed.
Tudor, Pickering, Holt & Co. (TPH) said the firm views the launch of ARO Drilling as a net positive for Rowan.
"This strategic partnership not only cements Rowan’s presence in world’s largest jackup market [with a very important customer], but also should result in nice excess cash flow over the long run," TPH said in a Oct. 19 report.
As part of the JV agreement, Rowan initially sold three of its jackup drilling rigs to ARO Drilling, including the J.P. Bussell which was previously idle. Saudi Aramco also sold ARO one of its jackup drilling rigs.
Following the purchase of these drilling rigs, ARO Drilling distributed excess cash of about $88 million each to Rowan and Saudi Aramco, maintaining each party's 50% ownership interests in the JV, according to Rowan's press release.
Further, Saudi Aramco will sell an additional jackup rig in 2017 and Rowan will sell an additional two jackup rigs once they complete their current contracts in late 2018 to ARO Drilling.
ARO Drilling also now manages the operations of Rowan's seven remaining jackup rigs currently in Saudi Arabia, the release said.
Additionally, Rowan and Saudi Aramco have agreed that ARO Drilling will purchase 20 future newbuild rigs that will be constructed by a Saudi Aramco manufacturing JV and are expected to be delivered between 2021 and 2030. Each newbuild is expected to have a 16-year drilling commitment upon delivery to ARO Drilling.
Tom Burke, Rowan's president and CEO, said in a statement, "We are extremely pleased to announce the launch of ARO Drilling. This is a groundbreaking joint venture that supports Saudi Arabia's Vision 2030, and provides Rowan with an unparalleled long-term growth opportunity throughout the next decade and beyond."
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