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Vol. 17, No. 33 Week of August 12, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

Parker rig resolution?

Contractor says two new rigs soon could start drilling for BP on North Slope

Wesley Loy

For Petroleum News

BP and Parker Drilling appear to have come to an understanding with regard to a pair of new rigs that arrived on Alaska’s North Slope in August 2011 but never went to work.

In January, Parker disclosed that BP was holding the Houston-based company in default under a drilling contract for failure to supply “operationally ready” rigs by Dec. 31, 2011. Parker disagreed that a default had occurred.

In an Aug. 2 investor conference call, Parker’s chief executive, Bobby Parker, said one of his priorities was getting the Alaska rigs “completed and working.”

“We are making good progress on this. One rig is scheduled to begin acceptance testing today,” Parker said. “Once accepted by BP, it will move to its first location and begin operations. That could be before year end. The second rig is scheduled to begin testing shortly after the first rig has gone through the process. Our people on the North Slope have never been busier working to complete the rigs and their training for rig operations. They’ve made great progress since earlier this year, and I want to thank them for their perseverance, their dedicated work and their safety performance.”

BP says deal reached

Dawn Patience, spokeswoman for BP Exploration (Alaska) Inc., provided Petroleum News a brief statement on Aug. 8.

“BP has reached an agreement with Parker on the two rigs and we are working to incorporate the rigs into our existing fleet,” the statement said.

Parker is trying to re-enter the Alaska market after an absence of several years. But the re-entry hasn’t been easy.

In addition to the issues with rigs 272 and 273, it encountered serious problems with a giant, extended-reach drilling rig built for BP’s proposed Liberty offshore oil development. BP in June suspended the project, citing the need for “substantial modifications” to the rig as a key factor in the decision.

A BP Alaska spokesman said in August 2011 that the Parker-owned 272 and 273 rigs were part of the oil company’s effort to modernize its North Slope drilling fleet. BP operates giant Prudhoe Bay and several other oil fields on the Slope.

Parker refers to the Alaska rigs as Arctic Alaska Drilling Units, or AADUs.

In a Jan. 17 press release, Parker touted the rigs as “a new class of drilling rig that incorporates some of the most advanced features available in the global land rig market, including a safety-engineered, state-of-the-art equipment package; a highly automated drilling system; zero-discharge capabilities; and a modular design allowing the entire rig to transport itself in three, fully enclosed mobile units.”

But the main purpose of the press release was to announce that completion of the rigs had been delayed to allow the company to modify them to “meet their design and functional requirements.”

The press release referred to the rigs as “prototype drilling rigs.”

Liberty rig remarks

Kirk Brassfield, Parker’s chief financial officer, said during the conference call: “We expect there will be some months ahead in which we will have little or no revenues from these rigs.”

Revenues will be generated only after BP accepts each rig, and the rigs move on location and begin operations, Brassfield said.

That’ll be toward year’s end or in early 2013, he said.

“We currently estimate our overall capital cost for the ... rigs will be approximately $400 million, including capitalized interest,” Brassfield said.

In the January press release, Parker had estimated the cost of the two rigs at completion would be $385 million, including capitalized interest.

Brassfield also touched briefly on the subject of the Liberty rig built for BP, and BP’s decision to suspend that project.

“While we had hoped we would be in line to operate that rig once it was ready for drilling, BP’s announcement does not impact any of our current activity, nor does it affect the expectations for our AADU rig deployment,” he said.

As for Parker’s fortunes overall, CEO Parker said “we expect reduced levels of revenues and earnings until markets strengthen and our initiatives in Alaska and internationally begin to take effect.”

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