As reported this week, Seadrill's West Tellus started its three-year campaign in Brazil, Shell plans to drill an exploration well offshore Mauritania by the end of 2023, and Valaris and Transocean reported their fourth quarter 2022 results.
In case you missed it, you can access our previous Rig Market Roundup here.
Contracts
Shell Nigeria Exploration and Production Company (SNEPCo) has exercised a 330-day priced option for Valaris 12,000-ft drillship Valaris DS-10 at a day rate of $231,000. The newly-exercised option begins in April 2023 and keeps the rig working offshore Nigeria through March 2024. Valaris DS-10 has been working for Shell offshore West Africa since late 2021, moving from Namibia to Nigeria in April 2022.
Eni exercised a one-well option for Valaris 400-ft jackup Valaris 107 in February 2023, keeping the rig working in direct continuation of its existing contract offshore Australia. The operating day rate for the exercised option period, which continues into April 2023, is $126,500, an increase from the previous day rate of $115,000. Valaris 107 began work with Eni offshore Australia in November 2022. The jackup is expected to remain working offshore Australia for most of 2023. Its next contract with GB Energy is now expected to run from April to June 2023 at a day rate of $118,000.
Three Valaris jackups have secured new contracts, with one unit to move to Trinidad for a one-year term and two units fixed to multi-year contracts offshore Saudi Arabia. Valaris 400-ft harsh environment jackup Valaris 249 has secured a one-year contract with an undisclosed operator offshore Trinidad, to commence late in the second quarter or early in the third quarter of 2023. The rig will work at a day rate of $125,000. Valaris 249 is currently drilling for OMV offshore New Zealand. Valaris will receive a mobilization fee of $8.5 million plus a daily rate of $64,000 while the unit is in transit from New Zealand to Trinidad. The 400-ft Valaris 108 and 350-ft Valaris 76 were both awarded new multi-year contracts with Saudi Aramco offshore Saudi Arabia. During these contracts, Valaris will bareboat charter the jackups to ARO Drilling, a joint venture between Saudi Aramco and Valaris. Both rigs are currently under contract to Saudi Aramco. The 2007-built Valaris 108 was awarded a three-year contract to commence in third quarter 2023 while the 1999-built Valaris 76 was awarded a five-year contract to commence in first quarter of 2024.
Italy’s Saipem has entered into an agreement with Deep Value Driller AS for the bareboat charter of the 7th generation drillship with the same name. The 12,000-ft Deep Value Driller drillship, formerly owned by Dolphin Drilling and known as Bolette Dolphin, was delivered by Hyundai Heavy in 2014, worked for three years with Anadarko in West Africa, and was then warm stacked at the Canary Islands in 2017 after Anadarko terminated the contract. In mid-2020, it moved to Norway for more efficient stacking and it is currently warm stacked at Westcon Yard in Ølensvåg. Deep Value Driller AS acquired it in 2021. The contract with Saipem covers an estimated firm period of approximately three years and it may be extended by up to approximately a further one-year period. It adds about $160 million of firm revenue backlog, excluding the rate payable for any optional extensions of the contract. The company has started reactivation activities for the drillship, which are expected to be completed during the summer of 2023 upon which the drillship will be delivered to the charterer. To fund the reactivation activities, refinancing of the company’s existing credit facility and general corporate purposes, Deep Value Driller has entered into a $75 million senior secured term loan facility agreement with Nordic Trustee. The loan facility will mature three years from the date of the facility with a balloon payment of approx. $50 million after equal monthly amortizations in the period from 18 months after the date of the facility until maturity. The loan facility will be secured by a first priority security interest in the drillship and the assets held by the group.
Drilling Activity and Discoveries
Seadrill’s 10,000-ft drillship West Tellus has commenced its three-year campaign with Petrobras off Brazil. The charter for work at the Buzios field was awarded in 2021, along with the same term for the 12,000-ft drillship West Carina. The contract value at award was $549 million, inclusive of mobilisation revenue and additional services.
Demand
Africa Oil Corp. and Panoro Energy have been awarded blocks offshore Equatorial Guinea. Both awards are subject to ratification by the government of Equatorial Guinea. Africa Oil Corp. has signed two production sharing contracts with the Republic of Equatorial Guinea for Blocks EG-18 and EG-31. Africa Oil will hold 80% operated interests in each block with the balance to be held by state oil company GEPetrol, which has the option of acquiring an additional 15% participating interest in each block. The minimum work commitment for both blocks in the initial work period is $7 million with no drilling commitment. Africa Oil stated that it has identified several gas-prone prospects in the shallow waters of Block EG-31 and a basin floor fan prospect in Block EG-18 which it says is similar to its interests in South Africa and Namibia. Panoro Energy has been awarded a 56% interest and operatorship of Block EG-01, also pending ratification. Its partners will be Kosmos Energy with 24% and GEPetrol with 20%. During the first three-year period, Panoro will conduct subsurface studies and evaluate the prospectivity of the block. It will the option of entering into a two-year period, during which it will drill one exploration well. Panoro stated that past exploration on Block EG-01 has led to the identification of a prospect inventory within tie-back distance to the Ceiba field and Okume Complex facilities. Block EG-01 borders Block G, where Panoro has a 14.25% non-operated interest and Block S, where Panoro has agreed to farm in to a 12% non-operated interest. Hydrocarbon plays on EG-01 are analogous to Block G plays with the potential for deeper targets similar to Block S, where drilling is planned for 2024.
Shell has signed an amendment to its exploration and production contract for Block C10 offshore Mauritania with the Ministry of Petroleum, Energy and Mines, granting it a six-month extension for its first exploration phase. Shell is to drill an exploration well on the block before the end of 2023. Shell has also signed a new exploration and production contract for Block C2, which is adjacent to C10. Shell originally signed exploration and production contracts for Blocks C10 and C19 in June 2018 and began a seismic survey in 2019. State oil company Société Mauritanienne des Hydrocarbures (SMH) has a 21% interest in projects Block C10 and a 25% interest in C2.
Other News
Tailwind Energy has completed the final commissioning of the Gannet GE-04 well in the UK North Sea and production via the Triton FPSO has started. The GE-04 well was drilled in late 2022 and completed in January 2023 using the 1,640-ft Stena Don semisubmersible rig. The well results were above the pre-drill expectation. Initial flow rates have now exceeded 10,000 barrels of oil per day. The diving support vessel Deep Discoverer mobilised to the Triton area in early February to carry out the subsea tie in of the Gannet GE-04 well. Following the successful tie-in, the commissioning of the well has been completed and production has started. The Triton Hub is now producing at gross rates not seen for the last 10 years.
Transocean reported a net loss attributable to controlling interest of $350 million for the quarter ended 31 December 2022. Contract drilling revenues decreased by $85 million from the previous quarter, mainly due to reduced activities for five rigs that were idle during the quarter and partially offset by higher revenue efficiency and earnings related to newbuild 12,000-ft drillship Deepwater Atlas, which began operations in October 2022. For the full-year 2022, Transocean’s net loss attributable to controlling interest was $621 million. CEO Jeremy Thigpen noted that during 2022, the company secured approximately $4 billion in incremental backlog, which was its largest annual addition since before the 2014 downturn.
Valaris reported net income of $31 million for the fourth quarter of 2022, down from $78 million in third quarter 2022. Adjusted EBITDA decreased to $54 million from $76 million in the third quarter. Revenues for the fourth quarter were $434 million, down from $427 million in the third quarter of 2022. Valaris stated that this was primarily due to lower utilization and lower average day rates for its harsh environment jackup fleet, partially offset by an increase in utilization for the company’s floating rig fleet. Floater revenues increased to $211 million from $202 million in the third quarter 2022 while jackup revenues decreased to $182 million from $196 million in the third quarter 2022. President and CEO Anton Dibowitz said that 2022 had “laid the foundation for continued success during the unfolding industry upcycle.” Speaking during the company’s earnings conference call, Dibowitz said that the company was looking at 2024 as an inflection point for its earnings, with three drillships expected to complete legacy contracts and be available for re-contracting at market rates, along with contributions from its rigs reactivated in 2023.
Image credit: Seadrill
