Esgian Rig Analytics Market Roundup (Week 33)

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

Contracts

SFL Corporation has signed a drilling contract in Canada with a subsidiary of Equinor for the 10,000-ft harsh environment semisubmersible Hercules with an estimated contract value of about $100 million. The contract is for one well plus one optional well and is expected to begin in the second quarter of 2024. The duration for the firm contract period is approximately 200 days including transit to and from Canada. Odfjell Drilling will manage the rig on behalf of SFL. Hercules is currently drilling for ExxonMobil in Canada before it will transit to Namibia for a contract with Galp Energia expected to start in the fourth quarter of 2023. The  Equinor contract will begin following the completion of work with Galp Energia.

Diamond Offshore has confirmed that the 12,000-ft drillship Ocean BlackRhino will continue working with Woodside offshore Senegal until June 2024, following the exercise of priced option wells with an estimated duration of 60 days. Ocean BlackRhino has been working for Woodside at the Sangomar development offshore Senegal since July 2021. Diamond expects the rig to undergo around 70 days out of service in 2024 for its five-year special periodic survey (SPS) and MPD upgrade.

Seadrill-owned 400-ft jackup West Tucana has secured an extension to its current operations in Qatar, keeping the rig operating until third quarter of 2025. This extension will be in direct continuation of the existing term. The West Tucana is owned by Seadrill and bareboat chartered to Gulfdrill, a 50:50 JV between Seadrill and Gulf Drilling International. A dayrate is received by Gulfdrill and a bareboat charter rate is received by Seadrill from Gulfdrill.

Arabian Drilling has announced a contract extension for the 400-ft jackup ArabDrill 60 for work offshore Saudi Arabia. This latest extension comes in direct continuation of its current contract for drilling operations with Saudi Aramco offshore Saudi Arabia. The term of the extension was not disclosed by Arabian Drilling, however, market sources indicate this extension is for 10 years. As a result, the rig is now committed until Q3/Q4 2033.

French operator TotalEnergies has exercised its options for two drillships in Angola, the 10,000-ft West Gemini and the 12,000-ft Quenguela. In its latest fleet status report, Seadrill said that TotalEnergies exercised an option for the West Gemini drillship. The option term will be in direct continuation of the existing term, scheduled to end in November 2024, and is expected to continue until the second quarter of 2025. The option was previously expected to end in July 2025 but the end date has now changed to May 2025. The West Gemini is owned by Seadrill and operated through Sonadrill Holding Ltd., Seadrill’s 50:50 joint venture with an affiliate of Sonangol. In addition, TotalEnergies exercised an option for the Quenguela drillship. The option term will be in direct continuation of the existing term, scheduled to end in November 2023, and is expected to continue until the first quarter of 2025. The end date was previously set for October 2024 but has now changed to January 2023. The Quenguela is owned by Sonangol and operated through Sonadrill.

Bor Drilling has secured a short-term extension for its 400-ft Prospector 1 jackup with Neptune Energy in the Netherlands. The rig has been working for Neptune in the UK and Dutch sectors of the North Sea since 2022 and a contract was supposed to end in August 2023. The extension will start in September and end in October 2023 and afterwards, there is also an option to extend with an end date set for Q3 2024. Noting that the North Sea region is experiencing a lower dayrate level compared to the rest of the world, Borr CEO, Patrick Schorn, said: “With the overall market continuing to strengthen, particularly in other regions, we remain positive that this extension will provide a bridge towards favourable long-term commitments elsewhere.” Borr is actively marketing the Prospector 1 for opportunities around the globe.

BW Energy has exercised an option for Borr Drilling 400-ft jackup Norve, keeping the rig working offshore Gabon into January 2024. This most recently exercised option begins in November 2023 and follows a previous option exercised in the first half of 2023. Further options are available that could keep the rig working with BW Energy into the second quarter of 2024. BW Energy has been using the rig for the Hibiscus / Ruche Phase 1 development drilling campaign on the Dussafu licence offshore Gabon.

Drilling Activity and Discoveries

Turkish state oil company TPAO has begun drilling the Akseki-1 exploration well in the Eastern Mediterranean with owner-operated 12,000-ft drillship Abdulhamid Han. The 7th generation drillship Abdulhamid Han began work for TPAO in August 2022. TPAO has described the rig as working in the “Mavi Vatan” – a Turkish phrase translated as “Blue Homeland”. Under the Mavi Vatan doctrine, Turkiye claims an exclusive economic zone in the Black, Aegean and Mediterranean Sea, with claims in the Mediterranean reaching into zones also claimed by Greece and Cyprus.

The Norwegian Petroleum Directorate (NPD) has granted Equinor a drilling permit for a wildcat well offshore Norway. The well 30/4-4 Sara is located in production licence 043 FS in the North Sea about 7 km north of Martin Linge. The licence is operated by Equinor with Petoro and Sval Energi acting as partners. It will be drilled in September with the 10,000-ft Transocean Spitsbergen semisub for an expected duration of 33 days. The rig has been working for Equinor for years and is firm until early 2025 with options thereafter.

Shell has found natural gas shows in its Suçuarana-1A well in the Campos Basin off Brazil. The well was spudded on 24 June in 2,940.5 m (9,647 ft) of water using the 10,000-ft semisub Noble Developer. This is not yet a declaration of discovery. The rig has been working for Shell since April 2023 and does not yet have a follow-up assignment announced. However, sources indicate the rig has been bid into multiple opportunities within the Americas.

Equinor has made an oil and gas discovery following the conclusion of drilling operations on two wells near the Fram field located in the North Sea off Norway. The wildcat well 35/11-26 S and appraisal well 35/11-26 A, named Crino/Mulder, are located in production licence 090 where Equinor is the operator with Vår Energi, INPEX Idemitsu Norge, and Neptune Energy participating as partners. The wells are located about 4 kilometres west of the Fram field and 130 kilometres northwest of Bergen. Equinor secured a drilling permit for these wells in June 2023. The water depth at the site is 356 metres and wells were drilled by the 10,000-ft Deepsea Stavanger semisub. Well 35/11-26 S encountered a 7-metre gas column and a 26-metre oil column in the Heather Formation, in sandstone layers totalling 33 metres with moderate to good reservoir quality. The oil/water contact was not encountered. The Brent Group and the Cook Formation were water-filled with moderate to good reservoir quality. The secondary exploration target in the Lista Formation was not encountered. Well 35/11-26 A encountered sandstones of moderate to good reservoir quality in the Heather Formation; the reservoir was aquiferous. Oil and gas were also proven in shallower intra-Heather sandstones in both wells. Preliminary estimates place the size of the discovery between 1.5 and 5.5 million Sm3 of recoverable oil equivalent. The licensees will now assess the discovery in relation to existing infrastructure in the Fram area, along with other discoveries in the vicinity. The proximity to existing infrastructure provides potential opportunities for cost-efficient development.

Demand

Saudi Aramco (Aramco) has extended the submission deadline of the revised commercial proposal from 13 August to 20 August 2023 for the Lump Sum Turnkey (LSTK) tender for 5 jackups rigs and associated services. Under the tender, the scope is to drill and complete 108 wells for the initial term of 3 years plus a total of 72 wells for the optional extension of 2 years.

Indian state operator ONGC has launched a tender to contract three HPHT jackups for three years with an estimated starting date in Q3 2024. ONGC is seeking three 300-ft independent leg cantilever-type HPHT jackup rigs for drilling exploratory/development operations off the West Coast of India. Bids are due on 20 September 2023. A pre-bid conference will take place on 22 August 2023. The operator also has a tender for five jackups for three years with an estimated starting date in Q2 2024.

Mobilisation/Rig Moves

Deep Value Driller AS reported in the Q2 2023 report that the 12,000-ft drillship Deep Value Driller has finalised sea trials and is expected to be delivered to Saipem (the charterer) by mid-August. The previously forecasted reactivation cost was $43.6 million, but due to cost inflation and unforeseen additional costs the total project cost is estimated at $55 million. The company experienced an unforeseen and temporary relocation of the drillship, which added approximately $4 million in costs. Saipem will take over the drillship prior to departure from Westcon Yard, where the unit is being reactivated. The drillship will then mobilise to the Ivory Coast where it will commence drilling operations. Deep Value Driller AS will begin to receive daily rates from the charterer at delivery of the unit in Norway.

Vantage Drilling 375-ft jackup Topaz Driller is mobilising to Morocco, where it is scheduled to begin a 90-day contract for Eni at a dayrate of $125,000. Topaz Driller recently concluded work for Petrobel offshore Egypt under a bareboat contract with ADES. Following the work with Eni offshore Morroco, Topaz Driller will head to Cote d’Ivoire, where it will drill for Foxtrot International. The Foxtrot contract has a firm term of 60 days with a 30-day option available.

ARO Drilling-owned 300-ft jackup ARO 4001 has completed its planned maintenance at the Arab Shipbuilding and Repair Yard (ASRY) in Bahrain. The rig arrived at ASRY in Bahrain in May 2023, where it performed its planned maintenance. After this, the jackup moved to Ras Tanura, Saudi Arabia, on 13 August 2023, where it will perform the acceptance testing and move to a location to continue its contract with Aramco. The expected recommencement of operations is in August 2023. The current contract is expected to end in January 2026.

Shelf Drilling North Sea’s 400-ft jackup Shelf Drilling Fortress is expected to mobilise to the UK Central North Sea for CNOOC over the next several days. The rig, previously known as Noble Sam Hartley, secured a new contract with CNOOC for operations at the Golden Eagle platform in early August 2023. The firm term of the contract is two wells with a total duration between four and five months. The contract value for the firm period is about $17 million. The contract also includes options for additional wells with a total estimated duration of 13 months, which could keep the rig busy into early 2025. The rig is currently in Invergordon where it’s preparing for the move to the North Sea, which is expected around 16 August 2023. AHTS vessel Maersk Tracker will be in charge of the rig move. The rig previously worked for CNOOC on the Golden Eagle field in 2020 and 2021.

ADES Advanced Drilling Services-owned 375-ft jackup Admarine 505 (ex-West Cressida) completed its reactivation and Schedule “G” upgrades at the Lamprell Hamriyah shipyard in Sharjah. Admarine 505 secured its upcoming job in Q2 2022 with Saudi Aramco through Seadrill. In Q4 2022, Seadrill completed the sale of their jackups in the Middle East to ADES. The rig is currently in transit from Hamriyah Shipyard in Sharjah to Ras Tanura, Saudi Arabia, where it will commence its three years of operations plus one year of option with Aramco by Q3 2023 (estimated September 2023). This is the third of the three rigs ADES was reactivating and upgrading in Sharjah. Admarine 505 is a Baker Marine Pacific Class 375 rig that operates in water depths of 375 ft.

Foresea 10,000-ft drillship ODN I has completed its planned maintenance at Rio Grande Shipyard. The 2012-built DSME 10000-design unit underwent extensive maintenance and updates in dry dock. It departed the yard on 10 August. ODN I will spend 30 days off Rio de Janeiro before resuming operations. Its contract with Petrobras runs into early 2026, pending an available option.

Transocean 10,000-ft semisub Transocean Barents has arrived at Block 9 offshore Lebanon for a one-well contract with TotalEnergies at a dayrate of $365,000. Transocean Barents mobilized from the North Sea for the job with TotalEnergies. The unit will be used to drill an exploration well; expected to spud by the end of the month. TotalEnergies, which is the operator of Block 9 with partners Eni and QatarEnergy, will drill at an already identified prospect which may extend from Block 9 into Israeli waters. In July 2023, TotalEnergies exercised a one-well option in the Eastern Mediterranean for the rig at a dayrate of $370,000, keeping Transocean Barentsin the Mediterranean into January 2024 with further two one-well options available.

Borr Drilling-owned 400-ft jackup Frigg (Arabia III) completed its major maintenance, reactivation and Schedule “G” upgrades at the Ocean Oilfield Hamriyah shipyard in Sharjah. Frigg secured its upcoming job with Saudi Aramco in Q4 2022. The rig arrived at the shipyard in Sharjah in February 2023. Following the completion of these operations, the jackup is currently in transit from the shipyard in Sharjah to Ras Tanura, Saudi Arabia, where it will commence its five years of operations plus options with Aramco by Q3 2023 (estimated September 2023). Frigg is a KFELS Super A Class rig that operates in water depths of 400 ft.

Other News

The Danish Energy Agency has postponed the second tender for CO2 storage permits in the Danish sector of the North Sea. The tender was supposed to open on 15 August 2023 but it has now been delayed. The country’s first tender for offshore permits for exploration and use of the subsoil for storing CO2 in the North Sea was initiated by the CO2 tender order, after which applications for permits are opened on 15 August each year, with a deadline for applications on 1 October of the same year. However, it was agreed with the agreement on framework conditions for CO2 storage in Denmark of 21 June 2022 that, after the end of the first tender, the agreement group should decide whether the state’s ownership share in the permits should be higher in the future. Therefore, the second tender for offshore permits is postponed until this is clarified. The agency expects that a new date for the tender round will be set later in 2023.

Following the completion of the North Sea Transition Authority’s (NSTA’s) first competitive Carbon Storage licence round, Perenco UK and partner Carbon Catalyst have been awarded a licence to progress the Poseidon carbon capture and storage (CCS) project encompassing the Leman gas fields in the UK North Sea. Leman is one of the largest geological structures in the Southern North Sea sector of the UK Continental Shelf (UKCS) and offers a mixture of depleted gas reservoirs and saline aquifers in which to permanently store recovered CO2. The field is connected via pipeline to the PUK Bacton Terminal, which will receive and process CO2 from various onshore sources and send offshore to inject into reservoir rocks for permanent geological storage. The project will immediately move into further detailed appraisal of the storage sites and begin work to bring the selected concept to a delivery. It is due to come online by 2029. Initial CO2 injection rates will be circa 1.5 million tonnes per annum (Mtpa), ramping up to 40 Mtpa, over a 40-year period.

The Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) has advised that on 12 January 2023, Woodside relinquished Exploration Licences (EL) 1157 and 1158. The licences were surrendered before entering Period II. No wells were drilled. In October 2022, Woodside confirmed that it had initiated its withdrawal from the Orphan Basin and would be returning EL 1157 and EL 1158. Woodside forfeited nearly CAD 148 million (USD 110 million) on EL 1157 and CAD 44 million (USD 33 million) on EL 1158. Woodside said the decision is in line with its exploration strategy to focus on projects with clear pathways to commercialisation.

Dolphin Drilling reduced its quarterly loss as its revenues increased during the second quarter of 2023 driven by the Blackford Dolphin contract in Nigeria. Dolphin Drilling reported revenue of $21.8 million in the second quarter of 2023, up from $1.8 million in the previous quarter. The increased revenues reflect earnings achieved on the 6,000-ft Blackford Dolphin semisub at an average earnings efficiency of 97.2% when excluding downtime for days waiting for licenses. Dolphin’s reported net loss for the second quarter was $1.6 million compared to a loss of $19.8 million in Q1 2023. The total revenue backlog of $377 million, excluding option periods, effective on 30 June 2023.

Dolphin Drilling is exploring what it would take to bring the cold stacked 5,500-ft semisub Transocean Leader back to the market while also marketing its two owned and two managed semisubs for new opportunities. During the second quarter of 2023, Dolphin Drilling announced its acquisition of two semisubmersible rigs from Transocean, Paul B. Loyd, Jr. and Transocean Leader, and a further three-year extension for Paul B. Loyd Jr. During its Q2 2023 webcast on Tuesday, Dolphin said it was positively surprised with the condition of the cold stacked Transocean Leader, which was much better than expected. The rig is stacked in the UK and Dolphin is exploring what it would cost to bring it back to the market. In general, a longer contract would be needed but nothing will be done reactivation-wise before getting a firm commitment on the rig. The rig’s layup costs are rather low at about $1-2k per day. Furthermore, the 1,500-ft semisubs Borgland Dolphin and Bideford Dolphin remain smart stacked in Norway and are actively bid to multiple tenders as the company remains in active dialogue for future contract awards in the North Sea and internationally. Bideford Dolphin is targeting shorter contracts in the UK North Sea while the Borgland Dolphin is targeting longer contracts in the international market. The stacking cost of these two rigs was a combined total of $28k per day, slightly improved compared to the previous quarter and costs of $31k/day. Dolphin also has the marketing rights for the two Keppel rigs of a CS60 ECO MW design, the Nordic Spring and Nordic Winter. Dolphin believes these belong to the Norwegian market and that’s where they’re being marketed. When it comes to potential new contract awards, Dolphin said there’s a significant amount of tenders that will be awarded over the next two quarters with Borgland Dolphin being the first in the queue for a new award followed by Bideford Dolphin and then by the two Keppel rigs.

Wintershall Dea and Synergia Energy have been awarded a new licence by the UK’s North Sea Transition Authority (NSTA) to store CO2 under the seabed. The Camelot licence’s annual storage potential is up to 6 million tonnes. The licence is for the Camelot area, which is a combination of depleted gas fields and an overlying saline aquifer. Wintershall Dea will hold a 50 per cent interest together with Synergia Energy, who will be project operator in the appraisal phase. Synergia previously described the award of the carbon storage licence as a significant milestone for the company’s Medway Hub CCS project, which provides for the capture and transportation of CO2 emissions from coastal Combined-Cycle Gas Turbine power stations in liquid form by marine tanker to a Floating Injection, Storage and Offloading vessel (FISO) from which the CO2 would be injected into depleted gas fields and saline aquifers on the UK Continental Shelf. Wintershall Dea views the award as an important stepping stone to access the UK’s CCS industry, and to develop Northwest Europe as a key region for carbon management technologies in the company’s portfolio. The company has a total of four licences in three North Sea countries. The carbon storage licence has a work program that incorporates an appraisal phase comprising seismic re-processing, technical evaluations and risk assessment, a contingent FEED study leading to the potential storage licence application in 2028 following the final investment decision (FID). The Camelot licence also includes a contingent appraisal well. First CO2 injection is anticipated for 2032. Wintershall Dea says that the work programme will be developed and managed by Wintershall Dea Carbon Management Solutions UK. The entity was established in August 2022 to assess and implement carbon management projects in the UK sector of the North Sea.

Borr Drilling returned to profit in the second quarter of 2023 on the back of increased revenues driven by higher average dayrates for several of its jackups. Borr recorded a net income of $0.8 million, an increase of $8.2 million compared to the first quarter of 2023 and a loss of $7.4 million. In the second quarter of 2022, Borr’s loss totalled $165.3 million. The company’s total operating revenues were $187.5 million, an increase of $15.5 million or 9% compared to the first quarter of 2023. Total operating revenues for Q2 2023 consisted of $155.1 million in dayrate revenues and $32.4 million in related party revenues. Dayrate revenues increased by $13.4 million quarter on quarter primarily due to an increase in average dayrates for the 400-ft jackups Gerd, Gunnlod, and Prospector 1 and the 350-ft Idun. Total contract revenue backlog as at 30 June 2023 was $1.65 billion. Borr CEO, Patrick Schorn, commented: “We continue to see positive development in the market for jackup drilling rigs and year to date, we have been successful in securing seven new contracts and LOAs for a total estimated duration of 1,771 days and $289 million in contract value. This equates to market leading dayrates of approximately $163,000 per day (including mobilisation related revenues).” Schorn added: “Following our recent contract awards, our fleet’s contract coverage for 2024 stands at 70%, including firm contracts and priced options, with an average equivalent dayrate of approximately $123,000, including mobilisation-related revenues.”

The UK’s North Sea Transition Authority (NSTA) has awarded Perenco UK and partner Carbon Catalyst two further carbon storage licences, allowing the progress of the Orion carbon capture and storage (CCS) project in the UK North Sea. This follows the recent award of the carbon storage licence to Perenco and Carbon Catalyst to progress the Poseidon CCS project, encompassing the Leman gas fields in the UK North Sea. The Orion Project is designed to deliver an initial injection capacity of 1 Mtpa, rising to 6 Mtpa, and begin injection in 2031. The full project encompasses both the decommissioned Amethyst field and the currently producing West Sole field, utilising depleted gas reservoirs for the permanent storage within geological formations of captured carbon dioxide.

Citing its confidence in the jackup market, drilling contractor Borr Drilling is in active discussions with shipbuilder Seatrium to expedite the delivery of the 400-ft newbuild jackups Vale and Var to August and November 2024, respectively. Borr Drilling stated that it sees “significant opportunities to increase earnings” from the end of 2024 by having these units available for work and expects each rig to generate $30 million to $40 million EBITDA per year once they are working. The company has seen an increasing number of opportunities for the units, including some work in the second half of 2024. Delivery of these 400-ft KFELS Super B Class Bigfoot units has already been accelerated from July 2025 to October 2024 for the Vale and from September 2025 to January 2025 for the Var. The units are both under construction at Seatrium’s yard in Singapore, formerly the KFELS yard. Seatrium was created in 2023 following the combination of Sembcorp Marine and Keppel O&M. They are Borr’s last remaining newbuild rigs at this time.

Image: SS Transocean Barents; Credit: TotalEnergies