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Providing coverage of Alaska and northern Canada's oil and gas industry
July 2007

Vol. 12, No. 30 Week of July 29, 2007

Transocean, Pride to build drillships for $1.3B

Ray Tyson

For Petroleum News

Contract drilling companies Transocean and Pride International separately have ordered new, state-of-the-art deepwater drillships at a combined cost of $1.32 billion, confirming that the exploration and production industry which drillers serve remains alive and well.

Transocean, the world’s largest offshore drilling company, which would get a whole lot bigger with the proposed $18 billion acquisition of rival GlobalSantaFe, said that a subsidiary of BP Plc awarded a subsidiary of Transocean a drilling contract for an enhanced Enterprise-class design new-build drillship with modified specifications for expected operations offshore Angola for which BP is the operator. The new drillship is expected to be owned and operated by a joint venture which is 65 percent owned by Transocean and 35 percent owned by an Angolan partner.

The five-year drilling contract is expected to begin during the third quarter of 2010, following shipyard construction, sea trials, mobilization to Angola and customer acceptance. The term of the drilling contract may be extended to seven years at BP’s election on or before March 31, 2008. Construction of Transocean’s latest dynamically positioned, double-hull drillship is scheduled to take place at the Daewoo Shipbuilding and Marine Engineering Co. Ltd. yard in Okpo, South Korea, where three of Transocean’s previously announced enhanced Enterprise-class drillships are currently being constructed.

The estimated total capital expenditure for Transocean’s fourth drillship, including customer-reimbursed equipment, is about $640 million, excluding capitalized interest, Transocean said. The rig will also feature expanded completions capabilities. It will have a variable deckload of 20,000 metric tons and the capability of drilling in up to 7,500 feet of water depth, upgradeable to 12,000 feet of water depth and 40,000 feet of total drilling depth with additional equipment. The new rig will feature Transocean’s patented dual-activity drilling technology, allowing for parallel drilling operations designed to save time and money in deepwater well construction, compared with conventional rigs.

Pride drillship to be built by Samsung

Pride said it also plans to build an advanced-capability, dual activity drillship for use in ultra-deepwater locations around the world. Like Transocean’s rig, Pride’s new drillship will be capable of drilling in water depths of up to 12,000 feet, with a total vertical drilling depth of up to 40,000 feet. The rig, to be constructed by Samsung Heavy Industries Co., Ltd. on a fixed- price basis, is expected to be delivered from the shipyard in the third quarter of 2010, following construction, commissioning and system integrated testing, Pride said.

The expected fixed-price project cost of the rig, including commissioning and system integrated testing, is about $680 million, excluding capitalized interest, Pride said, adding that the company expects to finance the cost of the rig through available cash and borrowing against its revolving credit facility.

“Customer requirements for deepwater drilling capacity continue to expand, as successful results in exploration drilling lead to prolonged field development programs around the world, placing deepwater assets in short supply beyond the end of the decade,” said Louis A. Raspino, Pride’s president and chief executive officer.

As a result of activity levels, it has become “increasingly difficult” to match shipyard delivery dates with customer requirements, Raspino said, noting that Pride’s commitment to build the drillship was initially driven by a need to protect the delivery date necessary to meet a specific customer requirement.

“While we have not reached an agreement with that customer, we do believe it is important to proceed given the long-term market outlook and attractive delivery date,” he added.

Pride’s new drillship, to be named at a later date, is based on a Samsung proprietary hull design measuring 750 feet long, 140 feet wide and offering a variable deck load of 20,000 metric tons. The rig will feature dynamic positioning station-keeping with DPS-3 certification.

In addition, the rig will have the hardware to drill two wells at a time, designed to save customers time during the well construction process. The rig also would expand drilling fluids capacity, a 1,000 ton top drive and living quarters for up to 200 personnel. The drillship would be constructed at the Samsung shipyard in Geoje, South Korea, and would be initially equipped for drilling in water depths up to 8,000 feet.

On a related subject, Pride obtained a license from Transocean to use the dual-activity technology on its new drillship. In the agreement, Transocean granted Pride a worldwide and non-exclusive license to use Transocean’s dual activity drilling methods and structures.

In return, Pride agreed to pay Transocean $10 million for the first dual activity rig that Pride builds in a patented country, plus a 5 percent royalty on day-rate revenue generated by that rig in any patented country. The Pride subsidiary agreed to pay the Transocean subsidiary an additional $15 million for each subsequent dual activity rig that Pride builds in any patented country, plus a 5 percent royalty on day-rate revenue generated by those rigs in any patented country. Under terms of the agreement, Pride may credit $5 million of each $15 million payment toward the applicable 5 percent royalty payment.

Transocean developed its dual activity drilling design in 1996 as part of a project to more efficiently construct wells in deepwater through the use of two complete drilling systems, allowing for parallel drilling operations to be conducted on a single well that saves operators both time and money, compared with conventional rigs, Transocean said.






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