Mermaid

Mermaid: Could see positive sentiments, after associate, AOD raised US$80m in gross proceeds from a private placement, with Mermaid allocated US$15m in the private placement (33.75% stake), while Seadrill, has been allocated US$54m of new shares, also giving it equal ownership of 33.75%. Proceeds from placement used to exercise AOD’s first of two jack-up options with KepCorp. In addition, Seadrill will be responsible for construction supervision, project magt of all AOD rigs…..

CIMB note that this is an ambitious move by Mermaid into jack-ups and view the exercise of the option favorably given demand for new high-spec jack-ups. In addition, the options are in-the-money (strike price of US$184m vs. current newbuild price of US$190m), while enabling Mermaid to capitalising on Seadrill’s platform….

Recall that Seadrill is one of the leading drilling Co’s globally, with a versatile fleet of 46 drillers. Participation would enhance AOD’s chances of securing drilling contracts for jack-ups under construction. CIMB has Neutral Call on grp with $0.41 TP, preferring a more conservative stance on grp, and await more concrete evidence of a turnaround in subsea as well as drilling contracts for jack-ups.