Esgian Rig Analytics Market Roundup (Week 7)

In case you missed it, you can access our previous Rig Market Roundup here.

Contracts 

Borr Drilling has been awarded a new contract and two extensions for its premium jackup drilling rigs Ran, Gerd, and Natt. This has increased the company’s firm backlog by approximately 625 days, excluding unexercised optional periods. The 400-ft jackup Ran has secured a contract with Fieldwood Energy for work in Mexico. This contract will cover a firm scope of two wells with an estimated duration of 50 days, and one optional well with an estimated duration of 75 days. The firm work has an estimated contract value of $7.5 million, excluding mobilisation and demobilisation. The contract is expected to start in June 2023, in direct continuation of the rig’s ongoing contract with Wintershall, and is expected to keep the rig contracted until Q4 2023 when it will start its subsequent contract in Latin America, as previously announced in January 2023. The 400-ft Gerd rig had certain priced and unpriced options exercised by Addax, extending the contract by a total period of ten months. This extension is expected to maintain the rig contracted until the end of January 2024 and has an estimated contract value of $40 million. No further options are available under this contract. Lastly, the 400-ft Natt jackup had three well options exercised by Eni, extending the contract by an estimated period of 270 days. This extension is expected to maintain the rig contracted until Q1 2024 and has an estimated contract value of $22.7 million.

Well-Safe Solutions and Apache Corporation have signed a multi-year framework agreement to decommission wells in the North Sea, as part of the decommissioning specialist’s Plug and Abandonment (P&A) Club offering. The deal provides Apache with access to specialist decommissioning assets the 1,200-ft Well-Safe Defender and the 1,500-ft Well-Safe Guardian to P&A its well stock. The Well-Safe Defender, formerly the WilPhoenix, is currently in the Cromarty Firth preparing for a campaign with Spirit Energy and the Well-Safe Guardian is working for Repsol Sinopec. Separate to the frame agreement signed by both companies, Apache has secured a slot for Well-Safe Solutions to plug and abandon subsea wells in the UK Continental Shelf. This work will begin in 2024 as part of a continuous campaign. In December 2022, the Well-Safe Protector mobilised for Ithaca Energy following an extensive well P&A refit. Once complete, it will move directly to its next scope for Neptune Energy later in 2023 after securing this contract in September 2022.

Eni has contracted Vantage Drilling’s 375-ft jackup Topaz Driller to drill offshore Morocco at the Tarfaya Offshore Shallow area, with work beginning in the second quarter of 2023. Vantage Drilling put the day rate for the one-well contract at $125,000, with work running from around mid-Q2 2023 to mid-Q3 2023. Topaz Driller is currently working under a bareboat charter with ADES for Petrobel offshore Egypt. This term is expected to end in early April 2023 after which the rig will undergo contract preparations and mobilize to Morocco.

APA Corporation company Apache Beryl I Limited has informed Diamond Offshore that it will exercise its option to terminate the drilling contract for the 3,000-ft semisubmersible Ocean Patriot, which is currently working offshore the United Kingdom. The rig will continue to work under the contract until at least July 2023. Upon cancellation, Apache is obligated to pay Diamond an early termination fee of $12.4 million. Diamond will market the rig for new projects. Diamond Offshore had previously expected the contract, which was extended in 2021, to conclude in September 2024.

Drilling Activity and Discoveries

IOG plc has sanctioned the Blythe H2 well and prioritised it ahead of Southwark A1 in the UK North Sea drilling programme. IOG says that the H2 well has a lower risk profile, lower cost, and can be brought into production quicker than A1. Subject to the usual regulatory approvals, H2 is expected to spud in March and take approximately three months to drill, complete and hook up. The well will be drilled using the 400-ft Noble Hans Deul (to be renamed Shelf Drilling Perseverance) jackup rig. Following failed remediation work, the Southwark A2 well has now been suspended and a full review of operations and results has started. Southwark A1, which was suspended in October 2022 following fluid losses in the top hole section, is being re-entered to safely suspend the well ahead of the rig moving to Blythe. On receipt of the usual regulatory approvals, which are being expedited, the rig will move to the Blythe platform to drill H2. IOG is also working on optimisation of plans for the Kelham North/Central and Goddard appraisal wells, which would each cost an estimated £8 million net to IOG under the existing rig contract.

Noble’s 12,000-ft drillship Noble Gerry de Souza has begun work at the TotalEnergies-operated OML 130 offshore Nigeria. Noble Corp. confirmed that the rig had secured a nine-month contract in January 2023. OML 130 contains the Egina, Egina South, Akpo and Preowei fields. The Akpo field started production in 2009, followed by Egina in 2019. Africa Oil, which holds an interest in the block, stated that the rig would carry out infill drilling at the Egina field. Africa Oil said that up to nine development wells were planned at Egina and Akpo along with two exploration/ appraisal wells. Engineering work has been carried out for the development of Preowei.

Indian state oil and gas company ONGC has reported a natural gas discovery at exploration well MBS171HAA-1 on OALP block MB-OSHP-2017/1 in the Mumbai Offshore (SW) area. The company stated that the discovery at a depth of around 3,800 m (12,467 ft) is the deepest recorded presence of a commercial pool in the sector thus far. As of this month, ONGC has declared three offshore discoveries at its operated acreage in fiscal year 2022-2023.

Equinor has delineated its gas discovery made in the North Sea offshore Norway in 2009, establishing the appraisal well as dry with traces of hydrocarbons. The 16/2-5 discovery, located in production licence 265, was proven in 2009 in reservoir rocks presumably from the Jurassic/Triassic. Before well 16/2-23 S was drilled, the resource estimate for the discovery was between 1 and 2.9 billion Sm3 of recoverable gas. Equinor has now concluded the drilling of appraisal well 16/2-23 S, located about 7.5 kilometres east of the Edvard Grieg field and 10 kilometres west of the Johan Sverdrup field in the North Sea. The objective of the well was to delineate the 16/2-5 discovery and to prove additional volumes of petroleum in a graben structure from the Jurassic/Triassic with better reservoir properties, in the southern part of the Utsira High. More here…

Demand

The Norwegian government has approved Equinor’s plan for the development and operation of the Halten Øst (East) project, which is neighbouring the Åsgard field in the Norwegian Sea. Equinor, as the operator of the project, made a decision to invest about NOK 9 billion (about $891.8 million) in the development and submitted the plan to the authorities in May 2022. The area consists of six gas and condensate discoveries and option on another three prospects. Recoverable reserves in Halten East are estimated at almost 16 million Sm3 of oil equivalent, or around 100 million barrels of oil equivalent, 60 percent of which is gas piped via Kårstø to Europe. It is a subsea development consisting of five subsea templates that will be tied back to the existing infrastructure on the Åsgard field. The project is planned to be executed in two phases. In the first phase of the development, six wells will be drilled in the period 2024-2025, whereas phase two is planned to be developed in 2029. Production start from the two first wells is scheduled for 2025. Subsequently, the wells will be put on stream as they are completed.

Petronas has launched the MBR 2023, offering 10 exploration blocks and 2 clusters of discovered resource opportunities (DRO). More than 50 oil and gas operators have participated and the bid round will be open until deadline submission on 15 September 2023. The exploration blocks are located in the producing Malay, Sabah, Sarawak and Penyu basin, and cover various geological play with sizeable prospects, providing opportunities for investors looking for ‘Advantage Energy’ – low cost, low carbon energy. Also, the two clusters Chenang DRO and Bambazon DRO, offshore Sabah, are being offered, which are shallow water clusters located close to existing producing hubs. Petronas also signed Production Sharing Contracts (PSCs) for nine exploration blocks offered under the MBR 2022, and the winners included Petronas Carigali Sdn Bhd (PCSB), E&P Malaysia Venture (EPMV), Skye UMDP Exploration, PTTEP, Petroleum Sarawak EP (PSEP), INPEX Malaysia, Longboat Energy, Topaz Number One, Sarawak Shell and SMJ. The nine exploration PSCs are expected to see an investment of ~RM 1.7 billion in exploration drilling capital, particularly in the deepwater areas and the underexplored formations. The awards have also reduced the number of Malaysia’s open blocks by about a third.

ADNOC Drilling has increased its capex over the two-year period ending in 2024 to $2.0-2.5 billion. Previously, the company had issued capex guidance for 2021-2023 at $2.5-3.0 billion. By year-end 2022, a total of $1.5 billion had been spent. The updated guidance of $2.0-2.5 billion by the end of 2024 adds up to a net increase of $1 billion above the original guidance. Full year 2022 capex was $942 million. The capex forecast for 2023 is $1.3-1.75 billion. During 2022, ADNOC Drilling added nine land rigs and seven jackups to its fleet. Of the seven jackups five have been integrated into operation. The drilling contractor noted it expects to make further rig acquisitions in fiscal year 2023, although it did not specify the breakdown between onshore and offshore rigs. The rig count guidance provided in ADNOC Drilling’s initial public offering indicated a target of 127 rigs by the end of 2030. Now the target is a peak owned rig count of 142 by the end of 2024.

Rig Sales

Semisub SS Pantanal received a high bid of $15.08 million at the auction held on 9 February 2023, according to Zhejiang Shipping Exchange. The buyer’s details have not yet been released. Bidding started at $8 million. The rig was offered on an as-is, where-is basis from its location in Indonesia.

Mobilisation/Rig Moves

Noble Corporation’s 492-ft jackup rig Noble Innovator (ex-Maersk Innovator) has arrived in Aberdeen, becoming the largest ever vessel to visit the Port of Aberdeen. The Noble Innovator arrived at the port on Saturday, 11 February 2023 for its special periodic survey (SPS), which rigs must undergo every five years. The rig will stay there for a 60 – 90 day period of maintenance by Noble Corporation. Once the maintenance is completed, it will go on a contract with BP for decommissioning work in the central North Sea, which was announced in December 2022. The contract is expected to start in May 2023 and has a firm duration of one year and also includes a one-year option. The rig’s previous contract was with Harbour Energy.

Borr Drilling is preparing one jackup rig for the beginning of operations in the Middle East in Q3 2023 and activating another one for a similar timeframe. The 400-ft Frigg rig is currently being prepared for work with Saudi Aramco in the Middle East, where it will start operations in Q3 of this year as Arabia III. The contract has a five-year duration with option to extend. Borr is also activating its warm stacked 400-ft rig Hild to be ready to start operations in a similar timeframe. The rig has been warm stacked in Singapore since 2020 when it was built. The activation of this jackup would result in all 22 delivered rigs in Borr’s fleet being contracted and active.

Other News

Talos has completed its acquisition of EnVen Energy. Talos CEO Timothy Duncan noted that the added scale and cash flow generation ability will allow the combined company to be even more competitive in its carbon capture and sequestration business. Stockholder approval for the transaction was received on 8 February.

Galp has signed an agreement to sell its upstream assets in Angola to Sociedade Petrolífera Angolana (SOMOIL) for around $830 million. Galp is to receive around $655 million on completion of the sale with $175 million in contingent payments due in 2024 and 2025 dependent on Brent crude prices. The sale is expected to be completed in the latter half of 2023. The sale includes Galp’s 9% interest in Block 14, 4.5% interest in Block 14K and 5% interest in Block 32 offshore Angola.

Carnarvon Energy has confirmed receipt of regulatory approval from the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) for the Offshore Project Proposal (OPP) related to the Santos-operated Dorado project off Australia. Carnarvon says acceptance of the OPP is an important step in the regulatory process to support sanctioning of the project. The plan covers approval to undertake the Dorado Phase 1 liquids development – including gas reinjection to enhance resource recovery – as well as the tieback of future resources within the project area covered by the plan in order to augment Dorado production. Carnarvon notes this means resources like the recently discovered Pavo field could potentially be tied back and produced via the Dorado FPSO. Dorado is located in Production Licence WA-64-L, while Pavo is located in Exploration Permit WA-438-P.

A proposed combination between UK-based oil and gas company Capricorn Energy and Israeli company NewMed Energy has been terminated with immediate effect after failing to secure shareholder support. The business combination agreement was entered into on 29 September 2022 with NewMed Energy to acquire Capricorn for $620 million. A proposed combination between Tullow Oil and Capricorn was terminated in October 2022 in favour of the NewMed transaction. A significant number of Capricorn Energy’s shareholders did not support the NewMed transaction and the board of the company has appointed six new members to conduct a comprehensive strategic review of its business and the potential direction of the future of the company.

HMH has been awarded a contract from Petrobras to deliver and install automated drilling control technologies on Ocyan drillship Norbe IX. The scope includes the installation of HMH’s DEAL platform, Drillers Assist, and CADS 2.0 smart modules, along with various performance and equipment upgrades. Work will be carried out in Brazil in 2024. Norbe IX is working for Petrobras off Brazil under a multi-year charter that is expected to run until early 2025.

Shell has started production at its operated Vito platform in the U.S. Gulf of Mexico. The project has an estimated peak production of 100,000 barrels of oil equivalent per day. The Vito development is owned by Shell (63.11% operator) and Equinor (36.89%). The field spans four blocks in the Mississippi Canyon and is located at a depth of more than 4,000 feet (1,220 metres) of water. The host is located approximately 150 miles (241 kilometres) southeast of New Orleans and 10 miles (16 kilometres) south of the Shell-operated Mars TLP. Shell announced a final investment decision (FID) on the Vito project in April 2018. According to Shell, Vito is the company’s first deep-water platform in the GoM to employ a simplified, cost-efficient host design. In 2015, the original host design was rescoped and simplified, resulting in a reduction of approximately 80% in CO2 emissions over the lifetime of the facility as well as a cost reduction of more than 70% from the original host concept. Vito also serves as the design standard for Shell’s Whale project that will feature a 99% replication of the Vito hull and 80% of Vito’s topsides.

Odfjell Drilling reported a net profit from continuing operations of $29 million for the fourth quarter of 2022 and $83 million for the full year, with EBITDA of $80 million and $308 million for the same periods. Profit was up from $21 million in the fourth quarter of 2021 and $61 million reported for the full year 2021. The company’s operating revenues were $167 million for the fourth quarter of 2022 and $650 million for the full year, up from $143 million and $572 million for the equivalent period of 2021. Odfjell stated that its current backlog is $1.9 billion and that it has significant optimism for continually strengthening market conditions. Odfjell executives noted increasing day rates for deepwater and harsh environment rigs. The company expects increased demand for harsh environment rigs towards 2025 and said that operators are looking towards harsh environment semisubmersibles for work globally due to the tightening drillship market.

Borr Drilling reported a net loss of $21.3 million for the fourth quarter of 2022, compared to $33.6 million in the third quarter of 2022. Total operating revenues were $148.6 million for the fourth quarter of 2022, up 38% compared to the third quarter of 2022 while adjusted EBITDA was $55.1 million, up 26% from the third quarter of 2022. Borr Drilling’s total contract revenue backlog as of 31 December 2022 was $1.7 billion, an increase of around 200% year-on-year. This includes the rigs in Borr Drilling’s Mexican joint venture. Borr Drilling CEO Patrick Schorn commented that the technical and economic utilization of Borr’s fleet was above 98.5% for the quarter. The company has been awarded five new contracts, extensions, exercised options and letters of awards in 2023 to date.

Shareholders of Sembcorp Marine have approved the company’s combination with Keppel Offshore & Marine, with 95.28% voting for the resolution. Under an agreement made in October 2022, Sembcorp Marine is to acquire Keppel O&M. Sembcorp Marine has stated that it will conduct a comprehensive strategic business and organisational review and decide on the best way to integrate the two companies.

Image credit: Vantage Drilling