Land drilling rig manufacturer Honghua Group’s indirect wholly-owned subsidiary Honghua Offshore Oil & Gas Equipment, Jiangsu, (Honghua Offshore) entered into a legally binding Letter of Award (LOA) with Orion Engineering and Management (Orion) this August for the construction of one European-designed semi-submersible drilling rig. This follows the USD 200M shipbuilding agreement with UDIN Engineering, 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 USD 320M (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 is expected to be executed within 60 days. At the same time, Orion has the option to purchase three additional rig units with the same specification 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 to supervise the construction of the rig.