Esgian Rig Analytics Market Roundup (Week 18)

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

Contracts

Valaris has secured more work for its jackup drilling rigs for operations in the UK North Sea. Valaris has been awarded a two-year contract extension with Harbour Energy in the UK North Sea for the 225-ft standard duty jackup Valaris 92. The extension period is expected to begin in the first quarter of 2024 in direct continuation of the existing contract. The operating day rate for the extension period is $95,000, during which the rig is expected to be exclusively undertaking plug and abandonment (P&A) work. The rig has been working for Harbour Energy since February 2017 and this latest extension will keep it occupied until early 2026. Furthermore, Valaris has secured a one-well contract with NEO Energy in the UK North Sea for the 400-ft heavy-duty ultra-harsh environment jackup Valaris Norway. The contract is expected to start in July 2023 and has an estimated duration of 20 days. The operating day rate is $105,000. The rig is currently working for Centrica Storage in the UK after which it will carry out the work scope for NEO followed by a one-well contract to drill the Devil’s Hole Horst (DHH) appraisal well for North Sea Natural Resources (NSNR). THREE60 Energy will operate the well. The rig is available for new work from October 2023.

TotalEnergies has exercised a priced option for Valaris’ 12,000-ft drillship Valaris DS-15 for operations offshore Brazil. This is the second of two 100-day options and the first one was exercised last January. Following the exercise of this second priced option, the 12,000-ft rig is expected to be under contract through the second quarter of 2024. There are no further options remaining under this contract. The operating day rate for the option period, which has an estimated duration of 100 days, is approximately $254,000. The drillship has been working for TotalEnergies in Brazil since mid-2021.

Valaris’ 350-ft jackup Valaris 117 is now expected to stay under contract to Eni offshore Mexico into June 2024. The 2009-built rig began working offshore Mexico for Eni in December 2021 and was previously expected to end its term in December 2023.

TotalEnergies has awarded Transocean’s 10,000-ft semisubmersible Transocean Barents a one-well contract for exploration drilling offshore Lebanon at a day rate of $365,000. The contract offshore Lebanon is expected to take around 65 days, beginning in direct continuation of Transocean Barents’s current contract with TotalEnergies drilling the Benriach prospect in the West of Shetland area. The new contract with TotalEnergies also includes three one-well options at day rates between $375,000 to $390,000. TotalEnergies will use the rig to drill an exploration well on Block 9 offshore Lebanon, which lies adjacent to a recently established maritime border with Israel.

Transocean’s 1,640-ft semisubmersible Transocean Endurance has been awarded a new two-well contract offshore Norway. In addition, the rig has also had an option exercised on an upcoming contract offshore Australia. The two-well contract with an undisclosed operator offshore Norway is expected to begin in July 2023 and has a day rate of $385,000. Transocean Endurance is currently in Norway following the conclusion of its term with Equinor in late April 2023. Transocean Endurance was awarded a multi-well plug and abandonment contract offshore Australia in March 2023, Transocean has confirmed that the operator has exercised the first of five available options for the rig. The rig is scheduled to begin the 240-day P&A contract with an undisclosed operator offshore Australia in January 2024 at a dayrate of $380,000. The newly exercised option is also at a day rate of $380,000 and keeps the rig working into February 2025. The remaining four options are at a dayrate of $390,000 and if exercised, will keep the rig offshore Australia into the fourth quarter of 2025.

Noble’s 10,000-ft semisubmersible Noble Discoverer (Maersk Discoverer) has been awarded a one-well contract with Ecopetrol offshore Colombia. Ecopetrol will use the rig to drill the Orca North-1 exploration well. The contract is expected to commence between November 2023 and January 2024 and has an estimated duration of 72 days. Noble Discoverer is currently drilling the Wei-1 well offshore Guyana for CGX Energy. Operations on this well are expected to be completed in June 2023.

Noble’s jackup rig Noble Tom Prosser has been awarded two new contracts for work offshore Sarawak, Malaysia, to drill 14 wells. The two contracts include a rig-sharing agreement between two undisclosed customers. The first contract is expected to start in July 2023 and the 400-ft jackup has already mobilized from Australia to Brunei Bay. The second contract is expected to start in February/March 2024, while the total firm duration of both contracts is 650 days. The contracts include options to extend after the firm duration.

ExxonMobil has awarded an additional 6.3 years of backlog to the four Noble drillships operating under its commercial enabling agreement (CEA) offshore Guyana. This extends the contract duration for the four rigs from the fourth quarter of 2025 to the second quarter of 2027. The 10,000-ft Noble Tom Madden, Noble Sam Croft, Noble Don Taylor, and Noble Bob Douglas are now all contracted to ExxonMobil offshore Guyana into June 2027. Under the CEA framework, dayrates for these rigs are repriced on 1 March and 1 September of each year.

Noble’s 12,000-ft drillship Noble Valiant will be moving from Suriname to the US GOM following the reassignment of a previously awarded contract to the rig and a new one-well contract with an undisclosed operator. Noble Valiant has been working for TotalEnergies offshore Suriname since the first quarter of 2021. The rig is expected to finish work with TotalEnergies in May 2022. A one-well contract with Kosmos Energy in the US GOM that was previously awarded to 12,000-ft drillship Noble Faye Kozack has been moved to Noble Valiant with work expected to take place from July to September 2023 at a dayrate of $450,000. Noble Valiant has also been awarded a new one-well contract with an undisclosed operator in the US GOM at a dayrate of $450,000, to take place from October to November 2023. Noble Faye Kozack has been working for QuarterNorth Energy in the US GOM and will next move on to a one-well contract with LLOG that will include MPD services.

Equinor has added additional work to the backlogs of Odfjell Drilling’s 10,000-ft semisubmersibles Deepsea Aberdeen and Deepsea Stavanger for operations in Norway. Equinor has added additional firm scope for the Deepsea Aberdeen as provided for in the contract in November 2020. The new wells, which will be drilled on the Svalin field starting in Q4 2023 have an estimated duration of 174 days, extending the Deepsea Aberdeen’s firm backlog into Q2 2025. Equinor has the opportunity to exercise further wells under the optionality mechanisms contained in the contract. The added firm scope has an approximate value of $67 million, excluding integrated services, performance and fuel performance incentives, giving the dayrate of about $385,000. In addition, Equinor has exercised further wells for the Deepsea Stavanger under the continued optionality mechanism provided for in the contract in May 2021. Following the exercising of the optional wells, Deepsea Stavanger’s firm backlog with Equinor now extends into Q1 2024. Equinor has the opportunity to exercise further wells under the continued optionality mechanism. A notable performance incentive rate in addition shall apply when wells are delivered safely and ahead of target. Integrated services are provided through the contract and compensated separately. Both rigs are currently working for Equinor and Deepsea Stavanger is expected to start working for Aker BP at the beginning of 2025.

SFL Corporation has signed a contract with Portuguese operator Galp Energia for the 10,000-ft harsh environment semisubmersible rig Hercules for operations in Namibia. The contract, with an estimated value of about $50 million, is for two wells plus optional well testing and is expected to begin in the fourth quarter of 2023. Without any options, the duration is approximately 115 days, including mobilisation to Namibia. Hercules is currently undergoing its special periodic survey (SPS) in Hanøytangen, Norway before its mobilisation to Canada for a contract with ExxonMobil, after which it will start its transit to Namibia. As previously reported, Galp Energia plans to drill an exploration well on Petroleum Exploration License 83 (PEL83) offshore Namibia in 2023 or early 2024. PEL83 covers 10,000 square kilometres in the Orange Basin and is located north of recent discoveries in the area. The new contract will keep this SFL Corporation-owned rig continuously employed until the end of the first quarter of 2024. The rig is managed by Odfjell Drilling and this is the third contract for work in Namibia the company has agreed to within the last year. The previous ones include Deepsea Bollsta’s contract with Shell and Deepsea Mira’s contract with TotalEnergies.

Drilling Activity and Discoveries

Shell will use Noble’s 12,000-ft drillship Noble Voyager (Maersk Voyager) for drilling offshore Colombia later this year. The rig has been working for Shell since the second quarter of 2022 and is currently drilling offshore Mexico. Shell is understood to be planning appraisal drilling in Colombian waters. The company made the Gorgon-1 discovery at block COL-5 in 2017 and followed it up with the Gorgon-2 appraisal well in 2022, which confirmed the presence of natural gas.

Murphy Oil has made a discovery at the Longclaw #1 exploration well on Green Canyon Block 433 in the US GOM, encountering around 62 feet of net oil pay. The well, which was drilled to a total measured depth of 25,106 ft with Transocean 12,000-ft drillship Deepwater Asgard, is undergoing further evaluation. Longclaw #1 is located near Murphy’s King’s Quay floating production system. Longclaw #1 was spud in the first quarter of 2023 after Murphy temporarily suspended drilling the Oso #1 exploration well on Atwater Valley Block 138. The company intends to resume drilling Oso #1 in the third quarter of 2023 once necessary permits and managed pressure drilling equipment have been received. Murphy recently spud the Chinook #7 exploration well on Walker Ridge Block 425 with Noble 12,000-ft drillship Noble Stanley LaFosse. Murphy stated that Oso and Chinook are larger opportunities for the company.

Demand

Brazilian regulatory agency Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP) has approved the addition of Santos Basin offshore block S-M-1259 to the study phase of its permanent concession offer (OPC). ANP stated that the block has a total area of 2,289 square kilometres with water depths varying between 2,300 and 2,590 m and that studies indicated an estimated volume in place of around 5 billion barrels of oil equivalent. The block will undergo analysis by the relevant environmental agencies and only then be reassessed by the ANP and possibly be included in a new public notice of the OPC. Earlier in April, the ANP approved studies of the Jaspe block in the Campos Basin.

TotalEnergies has signed a heads of agreement with Angola’s Agência Nacional de Petróleo, Gás e Biocombustíveis (ANPG) and Sonangol related to the future development of the Cameia and Golfinho fields on Blocks 20 and 21 in the Kwanza Basin offshore Angola. A final investment decision for this development is expected in 2023 after partners and authorities’ approval. This future development project on Blocks 20 and 21 will comprise an FPSO connected to a subsea network. TotalEnergies holds an 80% interest in each block while Sonangol holds the remaining 20%. TotalEnergies currently has Seadrill 7,000-ft drillship West Gemini and Transocean 10,000-ft drillship Deepwater Skyros under contract offshore Angola into 2024. ANPG Chairman Paulo Jeronimo said the agreement would allow first production in the Kwanza area and may generate interest from other operators, including the beginning of other developments in the basin.

Mobilisation/Rig Moves

Noble Corporation’s 400-ft jackup Noble Regina Allen has arrived in the Netherlands where it will undergo repairs. The Noble Regina Allen experienced a mechanical failure with the jacking system of one of its legs in mid-December 2022 after which its contract with EOG Resources offshore Trinidad & Tobago was terminated early. The contract was previously expected to continue into September 2023. The rig was then demobilised to a port in Trinidad where repair plans were under development with plans for potential redeployment in the second half of 2023. As reported in April 2023, the jackup departed Trinidad and Tobago, heading to the Netherlands. Transported on board Boskalis’ heavy-lift vessel Black Marlin, it arrived in Rotterdam on 27 April. In its 4Q 2022 report in February 2023, Noble said the rig would be out for the rest of the year as the company was continuing to develop the repair plan. The rig has no forward commitment at this time.

The Advanced Drilling Services (ADES)-owned 400-ft jackup Admarine 507 has begun its contract with Saudi Aramco in Saudi Arabia. This contract for the jackup Admarine 507 (ex-West Ariel) is for three years plus one year of option. The rig completed its reactivation and Schedule “G” upgrades in mid-March 2023 at the Lamprell Hamriyah shipyard in Sharjah. This is the first of the three rigs ADES was reactivating and upgrading in Sharjah. The other two rigs, Admarine 505 (ex-West Cressida) and Admarine 506 (ex-West Leda) are expected to depart the shipyard in Sharjah in Q2 2023. Admarine 507 is a KFELS B Class rig that operates in water depths of 400 ft.

Chevron has moved Stena Drilling’s 10,000-ft drillship Stena Forth to Cyprus, where the rig is to drill the Aphrodite-3 (A-3) appraisal well on Block 12. The A-3 appraisal well follows the original Aphrodite natural gas discovery made in 2011 by Noble Energy and the A-2 appraisal well drilled in October 2013. According to an amendment to the production sharing contract that Chevron and its partners signed in 2022, the well is to be completed by August 2023. The A-3 well will be used as a production well in future development of the Aphrodite field. Stena Forth has been working for Chevron in the Mediterranean since the fourth quarter of 2022 and previously drilled the Nargis well offshore Egypt. In January 2023, Stena Forth was awarded a contract to drill three wells in the Mediterranean offshore Egypt with Shell. This work is to begin in 2023 upon completion of the rig’s existing contractual commitments with Chevron.

The Transocean-managed 10,000-ft semisubmersible Transocean Norge has moved to the Nova field offshore Norway to begin work with Wintershall Dea. The rig secured a multi-year rig share agreement with Wintershall Dea and OMV in September 2022. The partners in the rig-share agreement have exercised multiple options for Transocean Norge in recent months, including four one-well exercised options announced in April 2023. In their Q1 2023 earnings call on 2 May 2023, Transocean confirmed that Wintershall Dea had exercised another one-well option for Transocean Norge at a day rate of $358,000. Following these exercised options, the harsh environment rig is now contracted through the third quarter of 2024 with further contracted work in 2025, 2026 and 2027.

Following the resolution of extended permitting delays, Noble 10,000-ft drillship Noble Globetrotter I is now expected to begin work with Petronas offshore Mexico in mid-May 2023. The rig will undertake a two-well campaign for Petronas offshore Mexico at a day rate of $325,000, with work continuing into August 2023. Noble Globetrotter I will then return to the US GOM for P&A work with Shell expected to run from September to November 2023. The work with Petronas was previously expected to begin in December 2022.

Other News

Tullow Oil and Perenco have signed a cashless asset swap agreement, agreeing to exchange participating interests in licences in Gabon. The transaction is expected to be complete by the end of 2023. Under the agreement, Tullow Gabon has agreed to assign and transfer certain of its existing participating interests in the Limande, Turnix, Moba, Oba and Simba assets to Perenco in exchange for the assignment and transfer by Perenco of certain of its existing participating interests in the Kowe and DE8 assets. After the transaction, Tullow Oil will hold 40% interests in the Kowe (Tchatamba), DE8 and Simba fields while Perenco will obtain Tullow’s current 40% interest in Limande, 27.5% interest in Turnix, 24.3% interest in Moba and 10.0% interest in Oba. Tullow said that the transaction provided it with a stronger position in the Kowe licence and its Tchatamba infrastructure which will support potential future developments and that opportunities for drilling programs near existing infrastructure had been identified at Simba and DE8. Kowe, DE8, Simba, Limande, Turnix are in shallow water areas offshore Gabon while Moba and Oba include onshore areas.

Offshore drilling contractor Transocean reported a net loss attributable to controlling interest of $465 million for the first quarter of 2023, compared to a net loss of $350 million in the fourth quarter of 2022. The company’s total contract drilling revenues for the first quarter were $649 million, up from $606 million in the fourth quarter of 2022 while adjusted EBITDA was $217 million, up from $140 million in the previous quarter. Contract drilling revenues increased due to increased activity for rigs that returned to work after being idle in fourth quarter 2022 and an increased day rate on two rigs. Transocean stated that its first quarter 2023 results included net unfavorable items of $190 million, largely made up of losses on disposal of assets and retirement of debt. After consideration of these net unfavourable items, the first quarter of 2023 adjusted net loss was $275 million. Transocean CEO Jeremy Thigpen stated that the contracts secured during the first quarter, primarily for its harsh environment fleet, completed the previous wave of ultra-deepwater fixtures and provided “further evidence of a broad, sustained upcycle.” The company reported a contract backlog of $8.6 billion as of its April 2023 fleet status report.

E&P company Longboat Energy has reached an agreement with Japan Petroleum Exploration Co., Ltd (JAPEX) to make a significant investment into its Norwegian subsidiary, Longboat Norge, and to form a joint venture. The joint venture will be renamed Longboat JAPEX Norge with the goal of building a Norwegian-focused independent, pursuing a growth-led strategy through the acquisition of development projects, growing 2P reserves, and reaching a significant production level within three to five years. The JV will continue to target the drilling of one to three exploration and appraisal wells per year. In return for a 49.9% interest in Longboat JAPEX, JAPEX will make an investment totalling up to $50 million made of up to three tranches with the initial cash investment of $16 million in full on completion of the transaction. The second tranche of $4 million is contingent and becomes payable on the successful negotiation and completion of a small production acquisition, under current contemplation. The acquisition remains subject to final negotiation and there is no certainty it will reach completion, in which event the associated investment will fall away. The third tranche of up to $30 million is contingent on a successful discovery on the Velocette prospect, located in the OMV-operated licence PL1016, targeting Gross Mean Resources of 177 mmboe with a 30% Chance of Success. The Velocette well will be drilled in Q3 2023 with the Transocean Norge semisub. As part of the investment, JAPEX will provide the JV with a five-year $100 million acquisition financing facility to finance acquisitions and associated development costs. The completion of the investment is anticipated during the third quarter of 2023.

Offshore drilling contractor Valaris Limited reported net income of $49 million for the first quarter of 2023, up from $31 million in the fourth quarter of 2022. During the first quarter, Valaris was awarded new contracts and extensions with associated contract backlog of around $820 million, increasing its total contract backlog to $2.8 billion. The company’s revenues decreased to $430 million in the first quarter compared to $434 million in the previous quarter due to lower utilization for its harsh environment jackup fleet, offset by higher average day rates for the floating rig fleet. Valaris reported floater revenues increasing to $215 million from $211 million in fourth quarter 2022, while jackup revenues decreased to $170 million from $182 million over the same period. Revenues for the company’s Saudi Arabian joint venture ARO Drilling increased to $124 million compared to $120 million, due to a higher average day as jackups Valaris 147 and Valaris 148 began three-year contract extensions. President and CEO Anton Dibowitz stated, “We continue to be highly constructive on the outlook for the industry and our business, with increasing demand and constrained supply continuing to tighten the market.”

Speaking at the company’s Q1 2023 earnings call, executives at Valaris stated that based on its current market outlook, the company expects to exercise its purchase option for newbuild drillship Valaris DS-13 and will continue to evaluate the purchase option for newbuild Valaris DS-14 against other uses of capital. The 12,000-ft DSME 12000 design drillships are both under construction at Daewoo Shipbuilding & Marine Engineering in South Korea. Valaris has the purchase option to take delivery of Valaris DS-13 by year-end 2023 for a purchase price of around $119 million and the purchase option to take delivery of Valaris DS-14 by year-end 2023 for a purchase price of $218 million. Valaris noted that the $119 million for Valaris DS-13 is attractive based on current rig prices, while the $218 million for Valaris DS-14 is more in line with recent transactions for similar assets. The company expects that the timing for getting one of the newbuilds ready for a new contract would be in line with the reactivation of one of its stacked assets at around 12 months.

Noble Corporation reported net income of $108 million for the first quarter of 2023, compared to $135 million in the fourth quarter of 2022 and a net loss of $37 million in the first quarter of 2022. Contract drilling services revenue for the first quarter of 2023 totaled $575 million, compared to $586 million in fourth quarter 2022. Noble attributed the decrease to lower utilization. Total revenue was $610 million for first quarter 2023, down from $623 million in fourth quarter 2022. Noble’s total backlog is at $4.6 billion with new contracts totaling $1.1 billion secured over the past three months. Noble President & CEO Robert W. Eifler stated “Our first quarter results reflect a strong start to the year from an operational, financial, and commercial perspective. The steady tightening of offshore drilling fundamentals is affording attractive opportunities to place our fleet into improving contracts.” The company expects the trend of “steadily rising dayrates and expanding contract duration for ultra-deepwater units” to continue.

Ithaca Energy has signed an agreement with Shell, which defines a marketing process for Shell’s 30% working interest in the Ithaca-operated Cambo project located in the West of Shetland region. Shell decided to withdraw from the project in late 2021 while the project was still operated by Siccar Point Energy, which is now part of Ithaca. The project has since experienced delays amid regulatory hurdles and pressure from environmental groups and is yet to reach the final investment decision (FID) and receive regulatory approvals. Ithaca previously expressed its hopes for changes in the UK’s Energy Profits Levy (EPL) that would allow it to continue to move ahead with the project, saying that support is needed from all stakeholders to progress it to FID. Now, to enable the progression of the project towards FID, a number of outcomes are possible under the agreement between Shell and Ithaca. More here…

Odfjell Drilling’s profit in the first quarter of 2023 was down compared to the same period of 2022 while its operating revenue increased during the period. Odfjell Drilling’s operating revenue for Q1 2023 was $171 million, which is an increase of $16 million compared to Q1 2023 due to increased activity in both segments. However, the company’s profit in Q1 2023 was $2 million compared to $67 million in the same quarter of 2022. The backlog was expanded to $2.3 billion. Odfjell Drilling says it continues to see good appetite for its services and it remains in tender processes both in the North Sea and globally. Odfjell Drilling has recently secured two LOIs for the Deepsea Atlantic for operations in the North Sea as well as additional firm work for the Deepsea Aberdeen and Deepsea Stavanger. In its core area of the offshore drilling market, Odfjell sees a continual lack of supply of harsh environment or Tier 1 vessels such as those within its fleet and no signs of any pick up in the newbuild market. Looking ahead, the company sees continued interest in the Norwegian Continental Shelf and expects to see further contracts with similar dayrates being signed. In addition, the West of Shetland is an area where Odfjell expects to see further activity. Outside of the North Sea, further interest and opportunities are visible, particularly in places such as Brazil, Australia, Canada and West Africa.

Following two letters of intent (LOIs) for operations in the North Sea, Odfjell Drilling has made plans to replace the subsea blowout preventer (BOP) on its 10,000-ft Deepsea Atlantic semisubmersible rig. Odfjell Drilling secured the two LOIs with an undisclosed operator for the Deepsea Atlantic at the end of March 2023. The two LOIs run concurrent with one another and include 23 months of continual operations. The total contract value is about $290 million, excluding any integrated services, upgrades/modifications or mobilisation fees. Given the length, requirements, and value of the contract, Odfjell has agreed with the client to replace the BOP on the Deepsea Atlantic, which will increase the long-term capabilities of the unit. The company anticipates the total investment to be around $40 million, which will be part funded by way of an interest free loan of $20 million from the client repayable over five years from 2024. This is not expected to result in any additional or unplanned downtime for the rig.

Image: SS Hercules; Credit: Equinor/Ole Jørgen Bratland