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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 24, 1998
R&B FALCON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-13729 76-0544217
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
901 Threadneedle, Houston, TX 77079
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (281) 496-5000
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Item 5. Other Events
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In 1997, R&B Falcon entered into (i) a drilling contract with Mobil
Exploration & Producing U.S. Inc. and Phillips Petroleum Company,
pursuant to which R&B Falcon was to provide a dynamically positioned
drillship (the Peregrine VI) for a term of three years at an operating
dayrate of approximately $164,000, and (ii) a drilling contract with
Texaco Overseas Petroleum, pursuant to which R&B Falcon was to provide a
dynamically positioned drillship (the Peregrine VIII) for a term of three
years at an operating dayrate of approximately $169,000. These drillships
were to be built by conversion of oil/bulk/ore carriers owned by R&B
Falcon. R&B Falcon entered into contracts with Lisnave, Estaleiros
Navais, S.A., a shipyard in Portugal ("Lisnave"), for the conversion of
the carriers and the installation thereon of drilling equipment to be
purchased by R&B Falcon.
Due to delays in the construction progress on both drillships, the
drilling contract on the Peregrine VIII was terminated on September 24,
1998, and the drilling contract on the Peregrine VI will by its terms
terminate on January 1, 1999. Both terminations are without prejudice to
any rights of the parties existing as of the date of the termination. R&B
Falcon believes that based on the obligations of the parties under the
contracts, provisions of the contracts that preclude recovery of indirect
or consequential damages, and projected rig availability in the offshore
drilling industry, R&B Falcon will not have any material liability under
these drilling contracts as a result of the termination thereof. The
contracts with Lisnave for construction of the Peregrine VI and the
Peregrine VIII have been cancelled.
As a result of the termination of the Peregrine VI and Peregrine
VIII projects, R&B Falcon expects to write off approximately $86 million
in related costs during the third quarter of 1998. These costs include
shipyard costs (for services performed and in settlement of contract
cancellation), R&B Falcon personnel and contractor costs, engineering
costs, freight, capitalized interest, and write down of the vessels that
were purchased for conversion.
R&B Falcon has entered into a contract with Samsung Heavy Industries
Co. Ltd. ("Samsung") to construct a drillship (the Deepwater IV), which
drillship will be similar to the Deepwater Pathfinder (which was
delivered by Samsung to R&B Falcon in September 1998) and the Deepwater
Frontier and the Deepwater Millenium, which are currently under
construction by Samsung for R&B Falcon. The expected cost of Deepwater IV
is $290 million (including capitalized interest) and delivery is
scheduled for the third quarter of 2000. R&B Falcon does not yet have a
contract for the use of this drillship following its delivery.
In September 1998, R&B Falcon and Vastar Resources, Inc. ("Vastar")
executed a letter of intent for a drilling contract pursuant to which R&B
Falcon will construct and provide a semisubmersible drilling rig for a
term of three years (with five one-year options in favor of Vastar), at
an operating dayrate of approximately $200,000. The letter of intent is
subject to the execution of a mutually agreeable drilling contract. The
cost of construction of the rig is estimated at $310 million (including
capitalized interest), with contract commencement estimated to be in the
fourth quarter of 2000.
Navis ASA, a Norwegian public company, is constructing a dynamically
positioned drillship (the Navis Explorer I) that will be capable of
drilling in 10,000 feet of water. The Navis Explorer I is being
constructed at Samsung at an estimated cost of $280 million, with a
scheduled delivery in the second quarter of 2000. In September 1998, R&B
Falcon and Navis entered into an agreement pursuant to which RBF will
make a capital contribution to Navis of $50 million, of which
approximately two-thirds will be in the form of equipment and equipment
purchase orders and one-third will be cash, and in exchange therefor will
acquire stock in Navis at the rate of NOK11 per share. It is expected
that R&B Falcon will own approximately 38% of the outstanding stock of
Navis following such contributions and the completion of an equity
offering currently underway by Navis. Most of the equipment and equipment
purchase orders that will be contributed by R&B Falcon was acquired by
R&B Falcon in connection with the Peregrine VI and Peregrine VIII
projects and is no longer required for such projects in light of their
cancellation. Navis and R&B Falcon have also agreed to enter into a
management agreement pursuant to which R&B Falcon will manage the Navis
Explorer I following its delivery. The transaction with Navis is subject
to the parties (i) identifying R&B Falcon equipment and purchase orders
that are suitable for use with the Navis Explorer I and agreeing to the
current fair market value thereof and (ii) negotiating and executing the
management agreement.
In connection with the Peregrine VI and Peregrine VIII projects and
a third drillship project, R&B Falcon has purchased or committed to
purchase drilling equipment with an aggregate cost of approximately $285
million. This equipment constitutes all of the material drilling
equipment necessary to outfit two deepwater drillships (although a
substantial portion of such equipment can be used on semisubmersible
rigs). R&B Falcon expects to use approximately half of this equipment to
outfit Deepwater IV, and approximately $30 million as a portion of its
contribution to Navis. The balance of the equipment is expected to be
maintained by R&B Falcon as spares for its deepwater fleet, although it
could be used to outfit a new deepwater rig in the event R&B Falcon
determines to undertake the construction thereof.
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
R&B FALCON CORPORATION
By /s/R. F. Fulton
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R. F. Fulton
Executive Vice President
Dated: October 16, 1998
