Esgian Rig Analytics Market Roundup (Week 48)

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

Contracts

Malaysia’s Velesto Drilling has agreed on an extension of a contract with Carigali Hess Operating Company Sdn Bhd (Carigali Hess) for another year and six months. Velesto will continue to assign the 400-ft jackup Naga 8 for the extension period of the contract, with an estimated contract value of $74 million. The extension will start on 19 April 2024 and run until 18 October 2025, subject to any further extensions as may be mutually agreed upon between Velesto Drilling and Carigali Hess. The rig has been working for Hess for years and is currently under a three-year contract, which started in 2021 and is set to end in April 2024. Naga 8 is a premium independent-leg cantilever jackup rig that has a drilling depth capability of 30,000 feet and has a rated operating water depth of 400 feet. Carigali Hess is a joint venture between PC JDA Limited, Hess Oil Company of Thailand Ltd. Co., and Hess Oil Company of Thailand (JDA) Ltd. The JV is engaged in gas production in Block A-18 of the Joint Development Area administered by the Malaysian-Thailand Joint Authority (MTJA).

Seadrill has secured a short-term contract for 12,000-ft drillship West Vela in the US GOM with QuarterNorth Energy, to run for around three months. The contract is valued at $45 million The new contract with QuarterNorth Energy is expected to commence after West Vela completes its current contract with Beacon Offshore in the first half of 2024 and transitions from its current management with Diamond Offshore to Seadrill. The start date is currently scheduled for around June 2024. The contract includes a priced option, the specific date for when the option work will be performed is yet to be agreed. West Vela is one of several units that Seadrill acquired in April 2023 with its acquisition of Aquadrill. Along with West Vela, drillships West Auriga, West Capella and West Polaris are also expected to transition to Seadrill management in the future.

LLOG has extended its contract for Seadrill 12,000-ft drillship West Neptune in the US GOM. The extension is in direct continuation of the rig’s existing term and keeps the rig working into the second quarter of 2025. The extension adds $76 million to Seadrill’s backlog. LLOG had previously exercised options for the unit, keeping it working into September 2024. West Neptune is expected to undergo around 45 days of out-of-service time in the third quarter of 2024 for its 10-year special periodic survey.

Dolphin Drilling has been awarded a contract by EnQuest in the UK for its semisub Borgland Dolphin. As a result, Dolphin no longer plans to move the rig from the North Sea to India. Instead, the work with Oil India is now expected to be transferred to Blackford Dolphin, which is currently working in Nigeria. The 1,500-ft Borgland Dolphin has been smart stacked in Norway since early 2022. The contract with EnQuest includes a firm 137-day drilling programme and includes a contribution for the reactivation of the Borgland Dolphin, with EnQuest having a further option, to be confirmed within 90 days of contract signing, to extend for a significant additional work scope as part of a strategic alliance over the five-year period. Borgland Dolphin is scheduled to begin the contract with EnQuest in April 2025. Within this 5-year period, Dolphin Drilling would have schedule flexibility, enabling the company to strategically position the rig in the North Sea, where extensive, multi-year production and development well drilling and well plug and abandonment campaigns are expected to be undertaken. Dolphin Drilling is working with potential clients to establish flexible contracts that allow such work to be planned and executed. Separately, EnQuest said it has entered into a rig contract to return to drilling of two wells at Kraken in 2025, holding the option to extend the contract to accommodate additional work scopes. Previously, the Borgland Dolphin was supposed to go to India for a 14-month firm contract with Oil India, extendable by another 7 months, starting in Q3 2024. Now, Dolphin Drilling is in negotiations with Oil India to transfer this scope to the Blackford Dolphin with an earlier start date in Q2 2024. Meanwhile, the Blackford Dolphin’s previously announced contract with Peak Petroleum in Nigeria, which was expected to start in late March 2024 in direct continuation of the rig’s current contract with GHL also in Nigeria, has been removed from the rig’s backlog due to “continued breach of contract conditions by client.” This includes a failure to pay the rig’s mobilisation fee in the amount of $6 million. Given the uncertainty, the contract is no longer considered in the calculation of revenue backlog.

Drilling Activity and Discoveries

Wintershall Dea has decided to drill the first well in the Luna carbon storage licence in the Norwegian North Sea, with a storage potential of 5 million tonnes of CO2 per year. The CO2 storage licence is located 120 km west of Bergen in a water depth of 200 metres. It is adjacent to the licence where the Northern Lights CO2 storage project is under development. Wintershall Dea was awarded operatorship of the Luna licence by the Ministry of Petroleum and Energy in November last year. The operator currently has only one rig under contract in the region, the 6th Gen 10,000-ft semisub Transocean Norge. The rig is expected to stay with Wintershall Dea and its partner OMV into 2027. Wintershall Dea has a 60% share of the licence. CapeOmega Carbon Storage recently farmed out its 40% participating interest to TotalEnergies, and government approval of the transaction is ongoing. Wintershall Dea is also the operator of the Havstjerne licence in Norway and also holds storage licences in the UK and Denmark.

The Norwegian Petroleum Directorate (NPD) has granted Harbour Energy Norge a drilling permit for a well located offshore Norway. The wildcat well 15/9-25 Amethyst is located in production licence 1138 in the North Sea. The water depth at the site is 84 metres. The well will be drilled with the 492-ft CJ70 jackup Noble Integrator. Harbour awarded the one-well contract with an estimated duration of 35 days in August 2023. The rig is currently warm stacked in Stavanger and drilling is planned to start in January 2024. Later that year, it will move on to work for Aker BP on a long-term framework agreement.

Norway’s Petroleum Safety Authority (PSA) has granted Equinor consent to use Transocean 1,640-ft semisubmersible Transocean Encourage for production drilling at the Vigdis field. Vigdis is in the Tampen area in the northern part of the North Sea, between the Snorre, Statfjord and Gullfaks fields. The water depth in the area is around 919 ft (280 m). Transocean Encourage is contracted to Equinor offshore Norway into the first quarter of 2026 following the exercise of six one-well options in July 2023.

Norway’s Petroleum Safety Authority (PSA) has granted Norske Shell consent to use the 3,900-ft semisub Deepsea Yantai for plugging and abandonment (P&A) operations at two fields offshore Norway. Shell awarded a contract to the Odfjell Drilling-managed Deepsea Yantai for the P&A of nine wells at four different locations across the Knarr and Gaupe fields in September 2022. Knarr is a field in the northern part of the North Sea, 50 kilometres northeast of the Snorre field. The water depth is 400 metres. Gaupe is a field in the central part of the North Sea close to the border to the UK sector, about 35 kilometres south of the Sleipner Øst field. The water depth is 90 metres. The rig’s scope of work on these two North Sea fields is estimated to last 145 days. Although initially planned for Q3/Q4 2023, these operations are now expected to start in early 2024. The rig has worked for several different operators during this year, and it is currently working for Neptune Energy on the Ofelia appraisal well. It is expected to complete these operations and move on to its next contract in the coming days.

Demand

Chevron has filed an application with Namibia’s Ministry of Environment, Forestry and Tourism for an environmental clearance certificate to carry out drilling on block 2813B in PEL 90 in the northern Orange Basin. The certificate would provide for the drilling of up to 5 exploration and 5 appraisal wells beginning in the fourth quarter of 2024 on block 2813B. Chevron is the operator of PEL 90 with an 80% interest, while NAMCOR and Inter Oil (Trago) each hold 10% interests. Chevron has tendered for a floating rig to carry out exploration drilling offshore Namibia.

Petrofac is seeking expressions of interest (EOI) to provide a jackup rig and ancillary services required for a plug and abandonment (P&A) campaign in the Middle East. Petrofac, on behalf of Ras Al Khaimah Petroleum Authority (RAKPA), is planning to conduct the P&A campaign on nine wells (Saleh 1-8, plus Saleh 5a) within the Saleh field offshore Ras Al Khaimah. The operational window for the commencement date is between Q3 2024 and Q3 2025. As per Petrofac’s comments, the proposed rig must already be located in the Middle East region and be able to operate at 100 metres of water depth. The deadline for responding to this EOI is 8 December 2023.

Mobilisation/Rig Moves

Following a month-long yard stay in Norway, Stena Drilling’s 5,000-ft semisub Stena Spey is returning to Ithaca Energy’s K2 location in the UK North Sea. The rig had been operating for Ithaca Energy since early June 2023, working on the K2 exploration well. It was initially supposed to stay there for about 45-75 days, but after discovering that hydrocarbons were present in the reservoir in the Forties member sandstones, with 45 feet of net thickness, Ithaca and its partner Dana Petroleum decided to use the rig to also drill an appraisal sidetrack. This was supposed to keep the semisub busy at the K2 location through December 2023 but, after losing anchors during Storm Babet in late October, the rig moved to CCB yard in Ågotnes, Norway. After about a month in the yard, the rig is now returning to the K2 well site to finish the remaining scope for Ithaca. It is expected to arrive at its location on Tuesday 28 November 2023. It has no other commitments thereafter and is available for new work in 2024.

Valaris 12,000-ft drillship Valaris DS-12 has left Angola after completing work for TotalEnergies in November 2023. The rig is now en route to Las Palmas in the Canary Islands. Valaris DS-12 is expected to move on to Egypt after a stop in Las Palmas. The rig secured a four-well contract with BP offshore Egypt in late 2022 that is expected to keep the rig working into late 2024. This contract is valued at $136 million. The rig had been working in Angola for much of 2023, including work with Cabinda Gulf and TotalEnergies. Valaris DS-12 last worked with BP in Egypt from around February to July 2020.

Noble 12,000-ft drillship Noble Voyager has arrived in Trinidad & Tobago after completing an exploration well offshore Mauritania in November 2023. Noble Voyager drilled the PannaCotta-1 well for Shell in Mauritania, which was plugged and abandoned after only traces of hydrocarbons were found. Noble Voyager is currently available. Noble executives stated during their third quarter earnings call in early November that they anticipate securing work for the rig in the first quarter of 2024.

COSL Drilling’s 6th Gen harsh-environment 4,921-ft semisub, COSLProspector, has arrived in Namibia’s Walvis Bay while en route to Norway. COSLProspector started its journey from China to Norway in October 2023 due to a new two-year contract with Vår Energi, which was secured earlier this year. The contract also includes three options for one year each. The rig has now stopped in Walvis Bay for refuelling, and its next stop is Las Palmas. After that, it will continue its journey towards Norway, where it’s expected to arrive in late January or early February 2024. Once there, it will undergo a special periodic survey (SPS) and complete the works related to Acknowledgement of Compliance (AoC), which is necessary for the rig to be able to operate in Norway. After all this, the semisub is expected to begin its contract with Vår in the Barents Sea in Q3 2024.

Other News

In an arbitration case between drilling contractor Awilco Drilling and offshore construction yard Keppel FELS, now part of Seatrium, the tribunal has ruled in favour of Awilco. The arbitration case was related to the termination of a newbuilding contract between Awilco Rig 2 Pte. Ltd. (AR2) and Keppel FELS for the construction of a semisubmersible drilling rig, hull number B382, also known as Nordic Spring. Awilco has received the arbitration tribunal ruling, which is in AR2’s favour in an amount of $43 million plus interest and legal costs. The tribunal will issue a further award related to interest and costs, and Awilco will revert with further information, including any notice of appeal received. This was the second arbitration case between the two parties. The ruling for the first one, related to a dispute stemming from the termination of a newbuild contract for the semisubmersible Nordic Winter, was awarded earlier this year in favour of Keppel FELS. Both of these rigs, managed by Dolphin Drilling, are still under construction in Keppel’s yard.

Brazilian state-owned company Petrobras has unveiled its Strategic Plan for 2024-2028, under which investments of $102 billion are expected to made. This is a 31% increase over the previous plan. The $102 billion capital expenditure (CAPEX) is split into $91 billion for projects under implementation and $11 billion for projects under evaluation. CAPEX in the Exploration and Production (E&P) segment represents 72% of the total, followed by Refining, Transport and Marketing with 16%, Gas and Energy and Low Carbon with 9% and Corporate with 3%. The $73 billion E&P CAPEX will have 67% allocated to pre-salt projects. Petrobras will allocate $7.5 billion to exploration projects over the five years, with $3.1 billion for exploration in Brazil’s Equatorial Margin; $3.1 billion for exploration in its Southeast Basins; and $1.3 billion to other countries. This investment included the drilling of around 50 wells in areas where the company has exploration rights in acquired blocks.

Offshore drilling contractor Seadrill reported net income of $90 million for the third quarter of 2023, with $414 million of revenue and adjusted EBITDA of $151 million. Seadrill President and CEO Simon Johnson commented: “Market fundamentals remain robust and our positive view on the length and durability of this upcycle is unchanged.” The company’s total operating revenue of $414 million was consistent with its second quarter results. Seadrill’s contract revenues were $324 million, down $5 million from the prior quarter due to planned out-of-service days on two rigs. In September 2023, Seadrill initiated a share repurchase program for the repurchase of up to $250 million of the company’s common shares. As of 24 November 2023, $213 million in shares had been repurchased. Seadrill’s board has increased the company’s aggregate share repurchase authorization, allowing it to repurchase up to an additional $250 million of its outstanding common shares. As of 30 September 2023, Seadrill’s order backlog stood at $2.3 billion, down to $2.2 billion as of 27 November 2023.

Dolphin Drilling’s 1,500-ft semisub Bideford Dolphin is a candidate for sale. The Bideford Dolphin has been warm stacked, or smart stacked as Dolphin calls it, for a very long time, and the rig is currently in Flekkefjord, Norway. In Q3 2023, lay-up expenses remained consistent with previous periods, as the daily combined stacking costs for Borgland Dolphin and Bideford Dolphin were $29,000 ($28,000 in Q2). The Borgland Dolphin has just secured a new contract award for 2025, which will see it stay in the UK North Sea instead of moving to India, while the Bideford Dolphin remains stacked as Dolphin continues to evaluate its options around the asset. The rig owner previously targeted shorter opportunities in the UK North Sea for this rig and was in dialogue with two different operators related to P&A work, but nothing has materialised so far.

Dolphin Drilling expects to close the acquisition of the 1,969-ft semisub Paul B. Loyd, Jr. and the 5,500-ft Transocan Leader from Transocean within 60 days. The acquisition of these two rigs for a total of $61.5 million (plus an additional $3 million) was announced in June 2023. The Paul B. Loyd, Jr. is under a long-term contract with Harbour Energy, but currently sublet to NEO Energy, and is firm until September 2027, with options well into 2032. Earlier in November, Dolphin gained the safety case acceptance from the UK’s Offshore Major Accident Regulator (OMAR) for the Paul B. Loyd, Jr. Meanwhile, the Transocean Leader – to be renamed Dolphin Leader – is cold stacked in the UK and Dolphin is exploring what it would take to bring the rig back to the market. Considering that the Bideford Dolphin is a candidate for sale, the Leader is being prioritised as the next rig for a new contract. What remains is the transfer of contract scope including complying with conditions precedents on schedule for completion and implementation of management systems, which is scheduled for mid-December. The transfer of ownership and flag is also pending. The crew on the Paul B. Loyd, Jr. will be retained and moved over to Dolphin Drilling. The execution date is estimated to close within 60 days subject to satisfaction of remaining timely conditions for completion.

Seadrill 12,000-ft semisubmersible Sevan Louisiana is expected to finish its contract with LLOG in the US GOM in December 2023 as a result of a revised well schedule. Seadrill executives have stated that they are marketing the rig for opportunities in both the US GOM and other regions. The 10-year special periodic survey for the Sevan Louisiana is expected to be completed in the first quarter of 2024 with an estimated 45 days of out-of-service time. Seadrill indicated that if the rig does secure work outside the US GOM, they would look for the client to pay for the mobilisation.

Seadrill expects to complete the special periodic survey (SPS) and some upgrade works on its 6th Gen HE semisub West Phoenix following the completion of a current contract in Norway. The 7,874-ft semisub has been working for Vår Energi in the Balder area in Norway since 2021 and the current contract is scheduled to end in August 2024. The rig’s SPS was due at the end of September 2023. Seadrill said in its Q3 2023 report that the regulatory work is expected to be completed following the conclusion of the Vår Energi contract. Earlier this year, Seadrill emerged as the low bidder in the OMV tender for work at the Neptun Deep project off Romania, which was expected to begin around Q3 2024. The potential award of this contract to West Phoenix would have seen yet another rig leave the North Sea region; however, this hasn’t materialised. During its Q3 2023 call on 28 November 2023, Seadrill said it is actively marketing the rig for opportunities in Norway as well as other markets, and the company remains cautiously optimistic. Meanwhile, the 10,000-ft semisub West Aquarius, Seadrill’s only other semisub currently located in the North Sea region, remains cold stacked in Norway following its transit from Las Palmas earlier this year. The semisub unit, which had been managed by Vantage Drilling, was acquired by Seadrill in April this year as part of its acquisition of Aquadrill.

While the company is still considering the sale of Qatar-focused joint venture Gulfdrill and associated jackups, executives at offshore drilling contractor Seadrill stated that they are “in no rush” to sell until they receive an offer that meets their pricing expectations. Seadrill said that there had been a strong level of interest in the assets but that a sale had not yet been concluded. The company intends to transact at a level that reflects its beliefs on jackup values and underlying dayrate environment, which are continuing to develop positively. Seadrill remains focused on exiting its non-core asset categories. In June 2023, Seadrill announced that it was in active discussions to sell its 50% interest in Seadrill/Gulf Drilling International Gulfdrill and the three 400-ft jackups West Castor, West Telesto, and West Tucana which are bareboat chartered to Gulfdrill and then contracted by QatarGas. QatarGas contracts with Gulfdrill, which receives a dayrate, while Seadrill receives a bareboat charter.

Offshore rig owner Northern Ocean reported a net loss of $17.7 million for the third quarter of 2023, down from $18.0 million in the second quarter. The company stated that it remains confident in the continued improvement of the offshore drilling market but noted that its customers “continue to be extremely disciplined in their allocation of capital.” Northern Ocean reported total operating revenues of $81.0 million for the third quarter, compared to $43.4 million in the previous quarter. The movement was driven by an increase in contract revenue to $73.3 million compared to $34.7 million in the previous quarter. Northern Ocean is the owner of harsh environment semisubmersibles Deepsea Bollsta and Deepsea Mira. The units are both managed by Odfjell Drilling and are currently under contract offshore Namibia to Shell and TotalEnergies, respectively.

Equinor has entered into an agreement to sell its Nigerian business, including its share in the Agbami oil field, to Nigerian-owned energy company Chappal Energies. Equinor stated that the sale is in line with its strategy to optimize its international oil and gas portfolio and focus on core areas. Equinor Nigeria Energy Company (ENEC) will be sold to Chappal Energies. ENEC holds a 53.85% ownership in oil and gas lease OML 128, including a unitised 20.21% stake in the Chevrion-operated Agbami oil field. This deepwater field began production in 2008. The closing of the transaction is subject to the satisfaction of certain conditions including regulatory and contractual approvals.

Baron Oil subsidiary SundaGas Banda Unipessoal, Lda has achieved the first of three steps in securing environmental approvals for the drilling and testing of an appraisal well on the Chuditch field offshore Timor-Leste. Drilling of the Chuditch-2 appraisal well is planned for late 2024 and is subject to financing. Government regulator Autoridade Nacional do Petróleo (ANP) has issued a project classification (Drilling activity – Category A) following its assessment of the company’s project document and has requested that the Baron subsidiary move on to the next step in the process, submission of a terms of reference, including initial public consultations. SundaGas, its partner TIMOR GAP and the ANP have held the first of several planned workshops, reviewing well design, procurement procedures and health, safety and environmental planning. Baron Oil is also evaluating potential options for gas export from the Chuditch field in order to be able to fast track the concept selection processes anticipated following a successful Chuditch-2 appraisal well.

Ithaca Energy has completed its acquisition of the remaining 30% stake in the Cambo field from Shell U.K. Limited, bringing Ithaca’s stake in the North Sea field to 100%. Cambo is an undeveloped field in the West of Shetland area of the UK North Sea. Ithaca CEO Alan Bruce commented that the company is now in a stronger position to engage with potential farm-in partners to enable the future progression of the project to Final Investment Decision (FID). Ithaca stated that the acquisition has minimal near-term cost exposure, with the consideration payable on the earlier of first oil; and the receipt of proceeds of any subsequent sale of a working interest in Cambo by Ithaca Energy; and is subject to Ithaca Energy proceeding with FID and/or the NSTA providing development consent.

Following a non-binding Heads of Agreement (HoA) with an unnamed North Sea operator detailing a potential farm-out of the Pilot development project located in P2244 in the UK North Sea, Orcadian Energy has now agreed on a seven-day extension with the operator to execute definitive documentation for the overall farm-out deal. The HoA was announced in September, providing a period of exclusivity to undertake due diligence on P2244, and execute definitive documentation for a farm-out by 30 November 2023. Orcadian yesterday submitted to the North Sea Transition Authority (NSTA) a request to consent to an assignment of the licence to the operator; and approval of the appointment of the operator as operator of the P2244 Licence. The company has attached to this application the currently agreed Sale and Purchase Agreement (SPA), on the understanding that a fully executed SPA will be filed before 7 December 2023. The company is in conversations with NSTA to confirm that this approach will satisfy the extension conditions for P2244, as set out in October 2023. However, if it does not, and in any event if an SPA is not signed by the new deadline, then Orcadian will withdraw the NSTA request and, unless NSTA agrees otherwise, Orcadian’s interest in P2244 will automatically cease and determine on 30 December 2023.

Image credit: Stena Drilling