SINGAPORE (Dec 31): Shares in Mermaid Maritime dived 9.9% to 13.6 cents by the mid-day break on Tuesday, after the group announced that associate company Asia Offshore Drilling (AOD) has secured contract extensions for two of its three jack-up drilling rigs.
In a regulatory filing before market open on Tuesday, Mermaid said AOD has entered into a three year contract extension each for jack-up drilling rigs AOD II and AOD III, which are serving a “reputable client” in the Middle East.
The total contract value for the contract extensions amounts to some US$199 million ($268 million).
However, Mermaid says the contract extensions were secured at potential day rates that are “materially lower” than the prevailing day rates for these rigs.
Assuming that the contract extensions had commenced and had been completed within the most recent financial year ended Dec 31, Mermaid says that there would be a “material adverse effect” on the earnings per share of the group.
The announcement comes after shares in Mermaid surged 26.3% higher to close at 15 cents on Monday, with some 103.9 million shares changing hands – making it the most heavily traded counter on the bourse.
The “unusual price movements” had triggered a query by Singapore Exchange Regulation (SGX RegCo) at 4.16pm on Monday.
The market regulator had called for the group to declare if it was aware of any information not previously announced that might explain the unusual trading.
In response to the query, Mermaid revealed at 11.45pm on Monday that its 33.76%-owned AOD has been in negotiations for contract extensions on the two rigs.
However, Mermaid stressed that, as at the close of trading on Monday, the contract extension documents have not yet been finalised and executed
