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Deepwater rig market tightens; U.S. offshore drilling firms ink contracts exceeding $3.5 billion
U.S.-based Pride International, Transocean, Ensco International and Rowan Cos. have entered into lucrative rig contracts totaling more than $3.5 billion with some individual rig leases surpassing a half-million dollars per day, demonstrating continued market tightness worldwide for premium offshore rigs.
Pride said it was awarded contract extensions from Brazil’s Petrobras for the deepwater, dynamically positioned semi-submersible rigs Pride Rio de Janeiro and Pride Portland. The contract extensions, representing six years per rig, are expected to commence during late 2010 to early 2011, in direct continuation of each rig’s current contract commitment and a scheduled shipyard program to complete a regulatory survey.
Pride’s estimated contract revenues which could be generated from each six-year contract extension are about $768 million, inclusive of a performance bonus opportunity for each rig of up to 15 percent, or roughly $1.5 billion in total revenues. The contract extensions also provide for a cost escalation provision from the signing date through the six-year term.
“The extensions of these ... semi-submersibles through 2016 are further evidence of the continuing need by clients for deepwater rigs, and reflect the long-term nature of the present deepwater drilling cycle,” said Louis A. Raspino, Pride’s president and chief executive officer. “Our company is in an advantageous position to potentially benefit from additional deepwater rig requirements for Petrobras in Brazil, as well as in their international deepwater operations.”
The Pride Rio de Janeiro and Pride Portland have operated offshore Brazil for Petrobras since entering service in 2004. Both units are expected to continue operations offshore Brazil throughout the extension period.
Anadarko extends contract on Deepwater Millennium Transocean said its ultra-deepwater drillship Deepwater Millennium was awarded a three-year contract extension by Anadarko Petroleum Corp., commencing in June 2010. The estimated contract revenue which could be generated over the three-year contract period is around $586 million, Transocean said. The estimated contract revenue represents the maximum amount that can be earned in the firm contract period, excluding revenues for mobilization, demobilization and cost escalations. The Deepwater Millennium entered service in 1999 and is capable of operating in water depths of up to 10,000 feet.
Additionally, Transocean announced that its ultra-deepwater semi-submersible Deepwater Nautilus was awarded a minimum three-year contract extension commencing in December 2008 by a subsidiary of Royal Dutch Shell plc.
Under the terms of the amendment, Shell has the right to elect, by June 30, 2008, to extend the contract by an additional year, to a total of four years. Estimated contract revenues that could be generated over the three-year or four-year extension periods are about $586 million or $759 million. Estimated contract revenues represent the maximum amount of revenues that may be earned in the applicable contract period, excluding revenues for mobilization, demobilization and cost escalations.
The Deepwater Nautilus is one of 39 high-specification floaters in the Transocean fleet, 18 of which are ultra-deepwater floaters. The rig, which entered service in 2000, is capable of operating in water depths of up to 8,000 feet, or greater if a pre-set mooring system is used.
StatoilHydro Canada Ltd., Husky Energy and Petro-Canada announced a rig-sharing agreement for Transocean’s mobile drilling unit Henry Goodrich. Financial terms were not disclosed. The rig will operate offshore Newfoundland, Canada, for a period of two to two and a half years with a planned startup this summer. The Henry Goodrich is currently on a long-term charter with StatoilHydro. The rig-sharing agreement provides the three companies with the necessary drilling capacity for their exploration and production drilling programs.
Exploration milestone for StatoilHydro Canada “This is an important milestone for StatoilHydro Canada in developing the potential of our exploration portfolio in the Grand Banks and becoming an offshore operator in Newfoundland and Labrador,” said Johan Mikkelsen, the head of StatoilHydro’s Canadian offshore business. “Securing additional drilling capacity for the region will open possibilities for all companies to invest in future offshore development.”
Statoil said there exist only a few drilling units suitable for Newfoundland waters and few of these are available. Combining the work programs of three operators in the region provides sufficient work scope to secure the drilling unit for the region, the company added. The Henry Goodrich is owned and operated by Transocean Offshore Deepwater Drilling Inc.
Transocean, the world’s largest offshore driller, said it also was awarded a 689-day contract by a consortium headed by Marathon International Petroleum Indonesia Ltd, a wholly owned subsidiary of Marathon Oil Corp., for the ultra-deepwater drillship GSF Explorer to drill a series of exploration wells in a deepwater province in Indonesia.
This contract is expected to commence in the fourth quarter of 2009 following the completion of existing contractual commitments in Angola and mobilization to the Makassar Strait, a deepwater province receiving renewed interest as a result of recent leasing activity. The estimated contract revenue which could be generated over the 689-day contract period is about $351 million, Transocean said, adding that the estimated contract represents the “maximum amount” of revenues that could be earned in the firm contract period, excluding revenues for mobilization and demobilization. The GSF Explorer, constructed in 1972 and upgraded in 1998, is capable of working in water depths up to 7,800 feet.
Ensco’s 8503 rig to fetch roughly $510,000 per day Ensco said it entered into a letter of intent with an unidentified customer for a drilling contract for the Ensco 8503, an ultra-deepwater semi-submersible rig currently under construction. The contract will be for a two-year term, with an option for the customer to extend the contract “at mutually agreed rates and term,” Ensco said, adding that the aggregate day rate revenue for the two-year term is expected to be about $372 million. However, the company added, the base operating rate of $510,000 per day “will be subject to adjustment for variances in operating costs from current levels. The letter of intent is subject to negotiation and execution of a definitive drilling contract.”
Ensco 8503 is the company’s fourth ultra-deepwater semi-submersible rig in the Ensco 8500 Series currently under construction, and will increase the company’s deepwater fleet to five rigs inclusive of the Ensco 7500 deepwater semi-submersible rig that has been in service since 2000. All four of the 8500 series rigs are under construction by the Keppel FELS Ltd. shipyard in Singapore, with deliveries expected in the third quarter of 2008 for Ensco 8500, the first quarter of 2009 for Ensco 8501, late in the fourth quarter of 2009 for Ensco 8502 and in the third quarter of 2010 for Ensco 8503. All of the 8500 Series rigs are now committed to customers for term work commencing upon delivery, the company said. The rigs will be capable of drilling in up to 8,500 feet of water, and can be upgraded to 10,000 feet water-depth capability, if required, Ensco said.
The Ensco 8500 Series ultra-deepwater semi-submersibles are enhanced versions of Ensco 7500, and are based upon an Ensco proprietary design. Enhancements include a 2 million pound quad derrick, offline pipe handling capability, increased drilling capacity, greater variable deck load and improved automatic station keeping ability. With these features, the 8500 Series rigs will be especially well suited for deepwater development drilling, the company said.
Rowan returns to Middle East after 25-year absence Rowan said its Tarzan Class jack-up Bob Keller was awarded a term drilling contract for work offshore Saudi Arabia. The contract provides for a three-year term, over which the company expects total revenues of around $201 million, and contains an option for a fourth year.
Meanwhile, the Bob Keller recently concluded work in the Gulf of Mexico and is en route to the Middle East, Rowan said, adding that the rig is expected to begin drilling operations during the second quarter of 2008.
“Just two years ago, we re-entered the Middle East market after a 25-year absence,” Danny McNease, Rowan’s chief executive officer, said. He added: “This commitment expands our presence to nine jack-up rigs in the area, and is further testament to the high performance of our drilling equipment and personnel throughout the world. Our Tarzan Class rigs, in particular, have demonstrated drilling capabilities that are well suited to this environment, and all three of these rigs will soon be working offshore Saudi Arabia. We are confident that the Middle East market will require more quality drilling equipment in the future.”
—Ray Tyson
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