Oil rig construction firm Lamprell (LAM) has finalised its joint venture with the world’s largest oil company Saudi Aramco through a subsidiary, sparking a share price rally of 9.1% to 110.2p.

The joint venture is also with The National Shipping Company of Saudi Arabia (Bahri) and Hyundai Heavy Industries.

It’s an exciting deal. The pair will develop what will be called 'Maritime Yard', a fitted-out site aimed at building, maintaining and repairing offshore drilling rigs and vessels. It is expected to be the largest of its type anywhere around the Arabian Gulf once it is fully operational, whcih is anticipated for 2022. .

Lamprell can also expand its global reach and gain access to further revenue-generating opportunities thanks to the agreement.

Cenkos Securities analyst Ashley Kelty says: ‘This deal will give Lamprell a foothold in a key new yard in the Middle East, and the relationship with Aramco should lead to further work on other projects.’

Saudi Aramco’s parent company, Saudi Arabian Oil Company, will purchase at least 20 jack up drilling rigs, as well as offshore support vessels under its master offtake agreement.

The project is estimated to cost approximately $5.2bn, of which $3.5bn will be funded by Saudi Arabia’s government, while the remaining $1.7bn will be funded by the joint venture.

Lamprell will invest up to $140m and hold a 20% stake in the joint venture, while Saudi Aramco will stump up to $350.7m for a majority holding of 50.1%.

Bahri and Hyundai Heavy Industries will invest up to $139.3m and $70m for a 19.9% and 10% stake in the joint venture, respectively.

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Issue Date: 31 May 2017