Offshore contract driller Ocean Rig UDW (NSDQ: ORIG) has followed SeaDrill (NYSE: SDRL) and Transocean’s (NYSE: RIG) lead and filed an initial registration statement for an MLP that will own rigs that operate under longer-term contracts.
This strategy gives the parent company the option of monetizing some of its assets at higher valuations while maintaining control over their management.
Accordingly, much of Ocean Rig Partners LP’s (NSDQ: ORLP) future upside depends on drop-down transactions from its sponsor and when its fleet’s existing contracts expire.
The prospective publicly traded partnership’s initial asset base comprises three seventh-generation drillships housed in an operating company in which Ocean Rig Partners will own an as of yet unspecified interest.
Note that the maximum average day-rate earned by the Ocean Rig Skyros will tumble to $200,000 from the fourth quarter of 2014 to the third quarter of 2015.
In Ocean Rig UDW’s third-quarter earnings call, management indicated that the timing of the MLP’s IPO “will depend on prevailing market conditions.”
We would expect this transaction to occur once the Ocean Rig Skyros has switched to its bareboat charter with its sponsor to limit the diminution of cash flow when its day-rate falls by more than half.
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Elliott and Roger on Jul. 27, 2017
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