Trinidad Drilling Ltd. (Trinidad) is pleased to announce that it has entered into a joint venture arrangement with a wholly-owned subsidiary of Halliburton Company (Halliburton) to provide and operate drilling rigs for Halliburton's international integrated projects.
The joint venture is expected to concentrate initially on the Kingdom of Saudi Arabia and Mexico, with future growth opportunities in other international markets. Under this arrangement, the joint venture will have a right of first look to provide drilling rigs for all of Halliburton's managed onshore projects outside of Canada and the United States. Additionally, the joint venture will have a right of first look at Trinidad's onshore contract drilling opportunities outside of Canada and the United States.
Trinidad will be the majority shareholder in the joint venture with 60% ownership, and Halliburton will have 40% ownership, with each party contributing future capital in these respective proportions. The joint venture will conduct business under the name Trinidad Drilling International (TDI).
"We see this agreement as a significant milestone for Trinidad in international markets" said Lyle Whitmarsh, Trinidad's Chief Executive Officer. "By aligning ourselves with a major oilfield services company, such as Halliburton, we are able to open the doors to a new level of international growth. Trinidad will benefit from Halliburton's international operating experience and infrastructure and will gain access to the integrated project management market. In return, we can provide Halliburton with high-performance drilling services and strong operating performance that will enhance their ability to win future integrated projects."
Halliburton currently has integrated projects in over 20 countries, and expects that number to increase as more operators adopt this model for their drilling operations. "We are very excited to be partnering with a top tier drilling company such as Trinidad for the benefit of our customers on our integrated projects" said Paul Koeller, Halliburton's Vice President for Consulting & Project Management. "The integration of Trinidad's high-performance drilling services with Halliburton's leading edge technology, coupled with Trinidad's manufacturing capabilities, will provide a new level of drilling integration not seen in integrated project management".
The joint venture has an indefinite term; although, either party may exit after five years, or earlier under certain circumstances. The joint venture arrangement includes non-competition provisions and Trinidad and Halliburton will provide certain services to the joint venture.
Affiliates of Trinidad and Halliburton have signed an agreement to provide four rigs for work in the Kingdom of Saudi Arabia for three years, with a one year optional extension. This agreement will be assigned to the joint venture. The rigs for these initial contracts will include three upgraded rigs from Trinidad's US fleet and one new build rig. The funds for this capital program will be provided by the joint venture partners in line with their ownership levels. TDI estimates that the capital cost of the upgrades and the new build will be approximately $120 million (net impact to Trinidad of $72 million).
With respect to Trinidad's $72 million commitment, approximately $35 million to $40 million is anticipated to be spent in 2013, with the remainder in 2014. The rigs will be built and upgraded at Trinidad's in-house facilities and TDI expects that the rigs will be completed and operating by mid-2014. Including these changes, Trinidad expects its 2013 capital program will be $175 million. Trinidad expects to fund its portion of the program from funds from operations.