A leading global land drilling rig manufacturer – Honghua Group Ltd., is pleased to announce that Honghua Offshore Oil & Gas Equipment (Jiangsu) CO.,Ltd. (“Honghua Offshore”), an indirect wholly-owned subsidiary of Honghua, entered into a legally binding Letter of Award (the “LOA”) on 16 August with Orion Engineering and Management Limited (“Orion”), for the construction of one European-designed semi-submersible drilling rig (the “Rig”).
It is subsequent to the shipbuilding agreement worth over US$200 million on 14 August, with UDIN Engineering Co., Ltd., a korean offshore engineering company. According to the terms and provisions of the LOA, Orion plans to purchase the Rig for a total consideration of approximately US$320 million (excluding owner-furnished equipment), representing 24.5% of the Company’s total revenue as of 31 December 2013.
According to the LOA, the Sales and Purchase Agreement (the “Agreement”) is expected to be executed within 60 days. At the same time, Orion has the option to purchase an additional 3 rig units with the same specificationof the Rig (“Option Units”) from Honghua Offshore under the same conditions each respectively at an interval of six-months. The Rig and Option Units under the LOA will be equipped with the Company’s in-house design and manufacture drilling package. Meanwhile, Orion will contract a subsidiary of Opus Offshore Ltd. (“Opus Offshore”) to supervise the construction of the Rig according to the latest regulations and highest quality standards in place within the international offshore exploration and production sector. This will enable the Company to become a world class supplier in the global offshore drilling market.
Mr. Zhang Mi, Chairman of Honghua commented, “We have always been emphasizing that Honghua must be innovative and develop its self-developed core equipment in offshore engineering sector. Signing the LOA symbolised that the Company has started a new chapter of its manufacturing business, and successfullyentered into the offshore drilling equipment market. We believe that it demonstrates client and the market’s recognition on the Company’s equipment design and construction capability. Meanwhile, the construction of a series of semi-submersible drilling rigs will capitalize on the strengths of the extraordinary capability of Honghai Crane to fully achieve the innovative concept of ‘onshore manufacturing of offshore equipment’, thus reducing contruction cost and production cycle time. The Company will continue to develop the offshore engineering business, continuously deepen the global business distribution, to provide inexhaustible momentum for the sustaining and stable development of the Group’s business.”