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Anadarko to invest $1.85B to secure rigs Long-term contracts over six years will secure drilling rigs in tight deepwater market; includes share of new $312M rig Ray Tyson Petroleum News Contributing Writer
Anadarko Petroleum, not wanting to be left out of an ever-tightening deepwater rig market, has committed $1.85 billion to various long-term rig contracts over the next six years, including a hefty time share of a new $312 million deepwater semi-submersible rig to be commissioned by contract driller Ensco International.
Nearly two-thirds of total rig time under the contracts will go to delineate and develop existing discoveries, with the remaining one-third set aside for “high potential exploration” in the Gulf of Mexico, West Africa, Georgia and Gabon, Anadarko said Sept. 26.
“A review of our worldwide deepwater drilling inventory, along with the tightening deepwater rig market, led us to lock in the equipment and services we need to execute upon our strategy,” said James Hackett, Anadarko’s president and chief executive officer.
Industry observers believe that day rates for fifth-generation, high-specification deepwater drilling rigs in the Gulf of Mexico will surpass $400,000 next year, well above the current $200,000-plus daily average, as companies attempt to secure rig contracts in a tightening deepwater market supported by lofty oil and gas prices. In fact, some analysts are modeling day rates of $500,000-$600,000 to as high $1 million per day.
Moreover, the loss of drilling rigs to hurricanes Rita and Katrina, along with six jack-ups expected to leave the Gulf for more lucrative markets abroad, likely will put even more upward pressure on day rates in the Gulf. Four-year lease for deepwater semi-submersible Anadarko, along with fellow offshore explorers Kerr-McGee and Dominion Exploration & Production, signed a four-year time-share agreement under which Ensco will build the deepwater semi-submersible rig with a target delivery date of mid-2008. Anadarko committed to 50 percent of the rig time at a cost of $200 million. Dominion and Kerr-McGee each committed 25 percent.
Separately, Anadarko signed a three-year contract to secure the Belford Dolphin drillship at a cost of $459 million. The vessel is expected to be released to Anadarko in mid-2007.
In addition, multi-year contracts valued at about $1.19 billion are being concluded to extend Anadarko’s existing contracts and to secure incremental rigs, Anadarko said, noting Anadarko currently has two deepwater rigs under contract. Anadarko has multiple Gulf projects Anadarko’s current deepwater Gulf development projects include K2, K2 North and Genghis Khan in the Green Canyon area. All are satellites of Anadarko’s first deepwater Gulf discovery and development, Marco Polo.
Company development projects also include seven natural gas fields in the ultra-deep waters of the Eastern Gulf. The project, expected to come on line in 2007, is part of a multi-company effort known as “Independence Hub,” a central production facility that will take gas from numerous discoveries in the Eastern Gulf area.
Anadarko also has working interests in several non-operated exploration wells currently in progress in the Gulf, including the announced Knotty Head commercial discovery, which needs to be delineated and developed, the company said.
In addition to existing discoveries and planned developments, Anadarko said it has “multiple additional prospects” to explore throughout deepwater Gulf.
“The company’s expanded rig position could provide leverage into additional opportunities, if further tightening of the deepwater rig market materializes.” Anadarko said. Ensco 8500 enhanced version of 7500 Meanwhile, the new Ensco deepwater semi-submersible rig to be shared by exploration and production independents Anadarko, Kerr-McGee and Dominion actually will be built for Ensco by Keppel FELS Ltd. of Singapore, Ensco said, adding that the rig will be named Ensco 8500.
Ensco 8500, an enhanced version of the company’s first deepwater semi-submersible rig, Ensco 7500, will be capable of drilling in water depths up to 8,500 feet and can be upgraded to operate in 10,000 feet of water, the company said. Enhancements to the new rig include a 2 million pound quad derrick, offline pipe handling capability, increased drilling capacity and greater variable deck load.
“Ensco 8500 is expected to provide a cost-effective deepwater water drilling solution to a consortium of important oil company customers, while expanding Ensco’s deepwater capability,” said Carl Thorne, Ensco’s chairman and chief executive officer.
Ensco said its new rig should cost about $312 million, roughly $73 million less than the $385 million the drilling company expects to generate in contract revenues over four years from Anadarko, Kerr-McGee and Dominion. About $20 million is due on delivery of the rig during the second quarter of 2008, Ensco said.
Under terms of the agreement with the three producers, Ensco is to be reimbursed for rig mobilization and other start-up costs, and day rates are to be adjusted for future variances in operating costs.
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