Bassoe Rig Analytics weekly rig market round-up (week 6)
In case you missed it, you can access our previous Rig Market Round-Up here.
Rig Contracts
Maersk Drilling has announced in its recent fleet update that it has secured additional 2021 work for its ultra-deepwater semisub Maersk Discoverer and jackup Maersk Resilient. The semisub will be put to work offshore Trinidad and Tobago with BG International, a subsidiary of Shell, for a one-well campaign that will last around 154 days and commencing in September. No contract value was disclosed. Meanwhile, the jackup has been awarded a one-well contract with NAM offshore the UK, covering 125 days and beginning in Q2 2021. The $10.1 million deal also comes with an option for approximately 60 days of drilling and well testing. The $80,500 dayrate excludes integrated services.
Maersk Drilling has secured a contract from Korea National Oil Corporation (KNOC) for the ultra-deepwater drillship Maersk Viking to drill one exploration well in Block 6–1, offshore the Republic of Korea. The contract is expected to commence in June 2021, in direct continuation of the rig's previous work scope, with an estimated duration of 45 days. The contract value is approximately USD 14.5 million, including mobilization and demobilization fees.
Semisub tender-assist rig Sapura Pelaut has been awarded a contract extension with Brunei Shell Petroleum (BSP). The extension covers a firm period of 145 days and will begin in April 2021, in Bruneian waters.
Jackup Enterprise 264 has been secured for a contract with Byron Energy for a drilling campaign in the US Gulf of Mexico. The jackup is currently warm stacked in the US.
Equinor has exercised an option to add one more development well at the Martin Linge field, offshore Norway, to the work scope of jackup Maersk Intrepid. The contract has an estimated duration of 80 days, with work expected to commence in September 2021 in direct continuation of the rig’s current contract. The value of the extension is approximately USD 29.5 million, including integrated services provided, but excluding potential performance bonuses. The contract extension is entered under the Master Framework Agreement between Equinor and Maersk Drilling, in which the parties have committed to collaborate on technology advancements and further initiatives to limit greenhouse gas emissions. Maersk Intrepid in late 2020 produced an initial data point of reducing fuel consumption and CO2 emissions during drilling operations by approximately 25%, compared to the baseline average for the rig, while NOx emissions were reduced by approximately 95%. The contract with Equinor Energy AS contains a performance bonus scheme based on rewarding reduced CO2 and NOx emissions.
It is understood that jackup Noble Roger Lewis will now not undergo a suspension with Saudi Aramco, as was announced by the rig owner late last year. The rig is firmly committed to the operator until March 2021 but it is likely the rig will remain with the operator through 2021 at least.
Market sources indicate that Premier Oil has awarded a contract for the provision of a semisub to drill at its Tuna PSC offshore Indonesia, which is set to begin this year. The undisclosed rig will be put to work for around 120 days.
Market reports indicate that the Northern Offshore, a drilling unit of Shandong Offshore International, has won a contract from Sinogeo’s Smart Oil Investment for drilling services in the Bohai Sea through a tender process. Under the contract, Northern Offshore will provide either its newbuild jackup Energy Engager or recently purchased jackup GSP Magellan to drill three wells at a block operated by CNOOC. The total value of the contract is RMB 164m ($25.4m).
Drilling Activities & Discoveries
Bahamas Petroleum Company (BPC) struck oil at its Perseverance #1 exploration well, although the find was not commercially viable. Drilling has ceased and the well will now be permanently plugged and abandoned. The company currently has Stena IceMAX on contract which will finish the P&A work before the contract finishes.
The Norwegian Petroleum Directorate (NPD) issued a drilling permit to Wintershall Dea for wildcat 6507/4–2 located in PL 211. The exploration well will be drilled by harsh-environment semisub Deepsea Aberdeen following a stay at a shipyard. Wintershall Dea is the operator with an ownership interest of 55%, while the other licencees are Petoro As with 35% interest and Edison Norge holding the remaining 10%.
Equinor has been granted a drilling permit by the NPD for well 7220/7–4 located in PL 532. The wildcat well will be drilled by the harsh-environment semisub Transocean Enabler after the floater has finished drilling development wells on the Johan Castberg field. Equinor holds operatorship and an ownership interest of 50%, while the other licencees are Vaar Energy with 30% and Petoro AS with 20%.
Jackup La Covadonga will drill the Pokche-5DEL well, offshore the state of Tabasco, for Pemex after the CNH approved the drilling campaign. Work is expected to take 175 days, starting on 10 February and will conclude around 5 August 2021.
MOL Norge has completed drilling of an exploration well targeting the Eidsvoll prospect using jackup Maersk Integrator in the southern North Sea. The well, drilled in PL 617, is classed as dry. The rig will next move to the Norwegian Tambar field to drill production wells for Aker BP.
Wintershall Dea has completed its top hole drilling campaign at the Nova field in the Norwegian North Sea two weeks ahead of schedule. The drilling campaign was carried out by Seadril harsh-environment semisub West Mira.
The NPD has granted Equinor a drilling permit for wildcat well 34/6–5S located in PL 554. The exploration well will be drilled by the harsh-environment semisub West Hercules after the rig has finished drilling the wildcat well 31/2–22S in PL 90. Equinor is the operator of PL 554 with an ownership interest of 40%, wile Aker BP and Var Energy holds 30% each.
Rig Demand
OKEA’s farm-in to PL 938 has been approved by the Ministry of Petroleum and Energy and the licence was granted a one-year extension of the deadline to drill the Calypso exploration well, which is now scheduled for 2022. Neptune Energy is the operator of the block.
Petrofac has been awarded a well-management contract by PTTEP to plug and abandon two wells in the Vulcan Basin, off north western Australia. Petrofac will tender for a semisub for the campaign and will also undertake detailed planning and management of operations and sub-contracted services.
Market sources indicate that multiple companies are looking for rigs in the US Gulf of Mexico for drilling commencing in the summer months. It is believed that Talos, Beacon and Kosmos are all looking to take on a drillship each for their respective US GoM drilling campaigns.
Pemex will develop the EK-Balam field after the company's budget and work plan for 2021 was approved by the Comision Nacional de Hidrocarburos (CNH). The Mexican NOC will invest USD 804 million in the Ek-Balam field which is located in shallow water in the Gulf of Mexico, offshore the state of Campeche. The company proposes the drilling of 9 wells, the completion of 11, the completion of 3 major and 5 minor repairs, the construction of 9 pipelines and the Balam-TA2 platform. The estimated recoverable resources are 31.92 million bbls of oil and 7.45 billion cubic feet of gas.
Mexican NOC, Pemex, plans to drill and plug 7 wells in the Itta field, offshore the state of Tabasco. The oil company plans to invest USD 399 million, which includes drilling and plugging of 7 wells, 18 major and minor repairs and the construction of infrastructure. Pemex seeks to recover a total of 30.66 million bbls of oil and 48.50 billion cubic feet of gas over the course of 12 years.
Lukoil plans to drill the Yoti Oeaste-1EXP well offshore the state of Tabasco. CNH recently approved Lukoil's 2021 exploration activities which included the exploration well, which is located in Block A12.
Market information indicates that a couple of oil companies are looking to take on drillships for operations offshore Mexico. Both BHP Billiton and Murphy Oil are believed to be looking for a drillship each for their upcoming drilling campaigns.
Market sources indicate that Eni is now on the look out for a floating rig to undertake drilling of its Milma-1 exploration well in Block 11B, offshore Kenya, during 2022.
It is understood that Qatar Petroleum has now received responses to its tender for a pair of jackups to undertake five-year drilling campaigns and is now evaluating bids. The first rig is expected to begin work in mid-2021 and the second in early 2022, however sources indicate that these start dates may slip.
Japanese oil company Cosmo was awarded exploration concession for Block 4, offshore Abu Dhabi, by ADNOC. The Japanese oil company will hold a 100% stake in the block's exploration phase and will invest up to $145 million towards exploration and appraisal drilling, including a participation fee.
DNO says it is still planning to drill its Gomez exploration well, located in the Norwegian southern North Sea, this year. The well has a pre-drill estimate of 26–80mmboe in prospective resources and is located close to existing infrastructure at the Tor and Ekofisk fields. It is understood that the company is looking for a jackup for the campaign. Additionally, the operator is also moving towards a concept selection for its Brasse field development offshore Norway, which will require drilling of three production wells and a tie-back to either the Brage or Oseberg platforms.
Shell continues plans to drill a wildcat this year targeting the Edinburgh prospect, located on the UK/Norway border. The well has a pre-drill estimate of 100–675mmboe in prospective resources. A jackup is required for the drill.
Providence Resources PLC has received government approval to undertake a seabed and shallow geophysical survey and an environmental baseline and habitat assessment survey at the K-Site location, in the Barryroe field located in the North Celtic Sea. The survey must be completed to enable Providence Resources apply for any potential further works on the K site location of the Barryroe field. Further regulatory approvals are required before any commencement of drilling could take place at Barryroe. Last year, Providence and Landsowne agreed to a 50% farm-out to SpotOn Energy to fund, develop and produce the Barryroe field. SpotOn assumed operatorship from Exola, a subsidiary of Providence Resources.
CGX Energy plans to commence drilling of its Kawa-1 exploration well in the Corentyne block, offshore Guyana, during the second half of this year. Well design is completed and procurement of long-lead items and recruitment of key technical staff are in advanced stages. The well will be drilled in a water depth of approximately 1,100 feet targeting the Santonian level and therefore will require a floating rig for the drill.
Rig Mobilization
Diamond Offshore semisub Ocean Onyx is now mobilizing offshore Australia to start its new six well plus options campaign with Beach Energy.
Jackup PV Drilling VI is mobilizing to block 114 to start drilling for operator ENI offshore Central Vietnam. The jackup is expected to start the drilling program in mid-February.
Harsh-environment semisub COSLInnovator is expected to commence mobilization offshore Norway imminently to begin its new exploration campaign with Chrysaor. The rig will work in PL 973 where it will target the Jerv and Ilder prospects.
Oil Price
Oil prices continued its rally early in the week with Brent futures reaching above $60 on Monday, which were boosted by supply cuts among key producers and hopes for further US economic stimulus measures to boost demand. However, this rally was halted later in the week after Opec cut its demand forecast and the IEA stated that the market was still over-supplied.
Energy Transition
Market reports indicate that SinoOcean has entered into an agreement with Power Construction Corporation of China to bareboat charter two jackup rigs and three AHTS ships for offshore wind farm installation. The two jackup rigs will be converted into wind turbine installation platforms and will operate in Yangjiang, Guangdong.
The Bureau of Ocean Energy Management (BOEM) announced it has cancelled the public comment period on the Draft Environmental Impact Statement (EIS) for the proposed Cook Inlet OCS Oil & Gas Lease Sale 258, off Alaska’s southcentral coast. Due to cancellation of the public comment period, the virtual meetings previously scheduled for February are also canceled. On Jan. 27, 2021, President Biden issued Executive Order 14008, titled „Tackling the Climate Crisis at Home and Abroad“.“ Among other things, this order directs federal agencies to “pause new oil and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review and reconsideration of Federal oil and gas permitting and leasing practices.”
Rig Technology and Upgrades
Transocean announced the successful deployment of HaloGuard℠, „the offshore drilling industry’s first safety system that integrates a wearable locating device with drill floor equipment and machine stoppage controls“. The HaloGuard℠ system combines a wearable alarm and a real time location transmitter together with a machine vision system that is designed to track the position of personnel on the drill floor and key drill floor equipment while operating. When a crew member comes within a certain proximity of moving equipment, he or she is notified by an alarm through the wearable device. In the event the crew member remains in close proximity of the moving equipment, the system will stop the equipment from moving until the crew member returns to a safer, more distant position. By enabling machines with the technology to track, sense and, if needed, stop operations, HaloGuard℠ provides an advanced layer of individual protection on the drill floor.
Odfjell Drilling's Harsh-environment Deepsea Aberdeen has received an Acknowledgement of Compliance (AoC) from the Norwegian Petroleum Safety Authority. The ultra-deepwater Semisub is currently contracted to Wintershall Dea on a 4-well drilling campaign with options to extend thereafter.
Financial News
Northern Ocean Ltd (NOL) announces that it has reached an agreement in principle with Seadrill to settle outstanding balances. Upon concluding the settlement, NOL is expected to be well positioned to continue operations on its two high specification harsh environment drilling rigs in the North Sea. The settlement payments will be completed in two parts. Firstly, NOL will make certain quarterly installment payments with the final payment due December 31, 2021. Total payments by December 2021 are expected to be approximately USD 45 million, including management fee and other adjustments. Secondly, Seadrill will retain the net earnings generated under the West Bollsta contract from commencement October 6 2020 and up until March 1, 2021, including payments for client rebills and modifications. After March 1, 2021, NOL is expected to retain the net earnings from the West Bollsta contract and an operating structure similar to the West Mira is expected to be implemented, which includes consolidation of the West Bollsta drilling operations in NOL group reporting.
For the fourth quarter of 2020, Maersk Drilling reported revenue of USD 286 million, compared with USD 226 million in the prior year's quarter. The company recorded revenue backlog of USD 1.3 billion at 31 December 2020, compared to USD 1.5 billion at 30 September 2020. The driller reports that its average day rate increased from USD 197,000 in Q3 2020 to USD 238,000 in Q4 2020. In 2020, Maersk Drilling EBITDA before special items amounted to USD 289 million.
On Wednesday the Board of Seadrill Limited announced that Chapter 11 cases have been filed in the Southern District of Texas in respect of Seadrill and some of its consolidated subsidiaries. As part of the Chapter 11 cases, Seadrill filed‚ first day motions that, when granted, will enable day-to-day operations of the Seadrill Group to continue as usual. Specifically‘, Seadrill has requested the authority to pay key trade creditors and employee wages and benefits without change or interruption and expects it will pay all suppliers and vendors in full under normal terms for goods and services provided during the Chapter 11 cases. At the point of filing, Seadrill has approximately $650 million in cash and does not require debtor-in-possession financing. The Chapter 11 cases are opened to facilitate a balance sheet restructuring which will enable Seadrill to continue to operate its modern fleet of drilling units. It is expected that this will lead to significant equitization of debt which is likely to result in minimal or no recovery for current shareholders.
Subsequently on Thursday, Seadrill announced that Seadrill New Finance Limited, a subsidiary of the Company incorporated in Bermuda in 2018 and issuer of the 12.0% senior secured notes due 2025, has entered into a forbearance agreement with certain holders of the Notes. Pursuant to the forbearance agreement, the consenting creditors have agreed not to exercise any enforcement rights with respect to the Issuer and any subsidiary of the Issuer which is an obligor under the Notes to, or otherwise take actions in respect of, certain events of default that may arise under the Notes as a result of, among other things, the Issuer not making the semi-annual 4% cash interest payment due to the senior secured noteholders on 15 January 2021 in respect of their Notes and the filing of Chapter 11 cases in the Southern District of Texas by the Company and certain of its consolidated subsidiaries (excluding the Issuer and its consolidated subsidiaries), until and including the earlier of 24 February 2021 and any termination of the forbearance agreement.
Seadrill announced that Chapter 11 cases have been filed in the Southern District of Texas in respect of Seadrill's wholly-owned subsidiaries Seadrill GCC Operations Ltd, Asia Offshore Drilling Limited, Asia Offshore Rig 1 Limited, Asia Offshore Rig 2 Limited and Asia Offshore Rig 3 Limited (jointly, the "AOD Companies“). The Chapter 11 cases were filed as a protective measure to support Seadrill’s broader comprehensive financial restructuring and will in no way affect the safe and efficient operation of the AOD offshore drilling units. The Company will request authority to pay its key trade creditors and employee wages and benefits without change or interruption and expects it will pay all suppliers and vendors in full under normal terms for goods and services provided during the Chapter 11 cases. As a consequence of the Chapter 11 filings, the forbearance agreement announced by the Company on 3 February 2021 in respect of nine out of the group's twelve senior secured credit facility agreements has terminated.
For the fourth quarter of 2020, Awilco Drilling reported contract revenues of USD 8.6 million, compared with USD 10.6 million in the previous quarter; adjusted EBITDA of USD 2.6 million loss (USD 1.7 million positive in Q3 2020) and a net loss of USD 141.1 million, compared with USD 1.0 million loss in the prior quarter. Net loss includes de-recognition of assets totaling USD 110.8 million and impairments of USD 25 million. Revenue efficiency was 54.1% during the quarter (100% in Q3). Operational up time was 81.8% during the quarter (100% in Q3). Contract backlog at the end of Q4 was approximately USD 15.0 million (USD 15.2 million Q3). In the fourth quarter, Awilco Drilling made an impairment charge of USD 25 million, due to the continued cold stack status of the WilHunter and lack of visibility of future contracting opportunities for the WilPhoenix. The company reports that it may need additional funding for the ongoing arbitration process for the cancelled newbuild semisubs, SPS for semisub WilPhoenix and other working capital requirements.
Other Industry News
Vantage Holdings International (“VHI”), a subsidiary of Vantage Drilling International, has entered into a Framework Agreement with Seadrill Partners pursuant to which certain subsidiaries of VHI have entered and will enter into management and marketing agreements with certain subsidiaries of Seadrill Partners (the “Seadrill Entities”). Under the management and marketing agreements, the VHI Entities will provide marketing and operations management services in respect of certain of the Seadrill Entities’ deepwater floaters. These agreements are subject to the approval of the U.S. Bankruptcy Court for the Southern District of Texas. Seadrill Partners owns 4 deepwater drillships and 4 deepwater semisubs.
Egyptian General Petroleum Corporation (EGPC) and Egyptian Natural Gas Holding Company (EGAS) will launch an exploration tender in February 2021. The tender will be located in offshore blocks in the Mediterranean and the Nile Delta.
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Data: Bassoe Analytics, Image attribution: Maersk Drillling
