Hans Jacob Bassoe, Esgian

BP has now officially declared the two-year option on its contract for Diamond Offshore ultra-deepwater drillship Ocean BlackLion for further operations in the US Gulf of Mexico. The rig is now firmly committed to the operator until the third quarter of 2024. Meanwhile, Diamond has also secured further work for its semisub Ocean Apex offshore Australia. On completion of the rig's contracts with Woodside and OMV Sapura in November 2022, it will immediately pass to BHP which will keep it working until Q1 2023. 

Vantage Drilling has secured a letter of intent (LOI) for its jackup Soehanah (also known as Pearl Driller) with an undisclosed operator for work off Indonesia. The new drilling campaign will be carried out in between the two previously awarded contracts for the rig with KUFPEC and Medco Energi, likely commencing in Q1 2022.

Shelf Drilling has confirmed new contracts as well as updated on project commencements, asset sales and planned maintenance activity. Recent fleet activity included the jackup Parameswara completing a contract with Adani, offshore India in September 2021 and subsequently securing a three-year contract with ONGC, offshore India, expected to commence in January 2022. Jackup Compact Driller is expected to commence a four-well contract with Cairn Energy, offshore India in mid-November 2021. Jackup J.T. Angel commenced a contract with ONGC, offshore India in August 2021 and is expected to remain engaged until third quarter of 2024. Jackup Trident XII also commenced a three-year contract with ONGC, offshore India in late October 2021. Following a period of planned suspension and maintenance since October 2020, jackup Main Pass I resumed operations for Saudi Aramco, offshore Saudi Arabia, in October 2021. The rig is expected to remain engaged with Saudi Aramco until end 2030. Jackup High Island IX also completed its planned suspension and maintenance activity in September 2021 and resumed operations for Saudi Aramco, offshore Saudi Arabia. The jackup is expected to remain engaged with Saudi Aramco until mid-2031. The contract for jackup Rig 141, which is working for Gempetco, offshore Egypt, has been extended until December 2021. Henceforth, there is no current visibility on future engagements for this jackup. Meanwhile, jackups Shelf Drilling Chaophraya and Shelf Drilling Krathong will commence their planned suspension and maintenance activity in March and August 2022, respectively. Both jackups are currently engaged in operations for Chevron, offshore Thailand. During the period, Shelf also completed the sale of two jackups - High Island VII and Randolph Yost - in August and September 2021, respectively. Information on the sale price and the buyers for these jackups has not been disclosed.

Empyrean Energy has informed that it has executed an integrated drilling contract (IDC) with COSL for the drilling of the Jade prospect exploration well on Block 29/11, offshore China. Empyrean is the operator of the block and has 100% working interest during the exploration phase. In the event of a commercial discovery, its partner CNOOC may assume a 51% participating interest in the development and production phase. The signed IDC confirms the substantially reduced turnkey quote for the drilling of the Jade prospect of $12.3 million on a dry hole basis, an approximate 34% saving on the initial quote ($18.5 million). On a success basis, testing of any oil column has been quoted at $7.4 million. Empyrean previously awarded the well site survey to COSL in October 2021, and the survey is expected to start   as soon as there is a good weather window. Also, COSL has confirmed rig availability and a target spud date of 15 December to 30 December 2021. As per market sources, semisubmersible Nan Hai Jiu Hao is expected to be engaged for this contract and henceforth, there is no current visibility on further engagements for the rig. With the drilling and geological programs having been finalised and incorporated in the IDC, Empyrean will pay 10% deposit ($1.23 million) within 15 days, under the terms of the contract. Earlier this month, CNOOC EnerTech was engaged to manage a number of critical pre-drilling permits and logistical requirements, as well as performing a major managerial role over all aspects of the drilling operations. The drilling of the Jade prospect remains subject to further funding being secured by Empyrean, with the company aiming to finalise the necessary arrangements in the coming weeks. Jade is the first of the three identified prospects within Block 29/11, which also contains the Topaz and Pearl prospects. Jade has a GCA (Gaffney Cline & Associates) audited mean in place potential of 225 MMbbl and a P10 in place upside of 395 MMbbl.

Drilling and discoveries

Shell is set to commence drilling operations on the 22/12D Jaws exploration well in the UK North Sea this week, using the jackup Valaris 122. As per market sources, the jackup will be drilling at a standalone location in the Jaws field and will drill one high pressure/high temperature well. While the total duration of drilling and completion activities is expected to be around one hundred and forty-five days, as per Esgian Rig Analytics, the jackup will remain contracted to Shell until May 2022. Shell is the operator of the Jaws exploration well in the P2380 block, while Cairn Energy (soon to be renamed Capricorn Energy) holds a 50% stake in the license. The project is located near Shell’s Nelson platform and will be fully abandoned on completion of drilling operations.

The jackup Hakuryu-11 has commenced drilling operations for Idemitsu offshore Vung Tau, Vietnam, as part of its subcontracting agreement with PV Drilling. This subcontracting agreement was previously reported by JDC in December 2019, with the workscope involving drilling of four firm wells along with option(s) on one or two well(s).  Previously, the jackup was engaged in exploration drilling for Mitsui Oil, offshore Japan and as per Esgian Rig Analytics, it will remain engaged in drilling operations offshore Vietnam until early June 2022.

Kosmos Energy says that the first of three planned infill wells in the Okume Complex, offshore Equatorial Guinea was completed in August 2021 with hookup currently in progress. As per Esgian Rig Analytics, Vantage Drilling jackup Sapphire Driller has been operating on the Okume complex since July 2021. In the third quarter of 2021, drilling of an additional well commenced, which is expected to be online in the fourth quarter of 2021. As per Kosmos, the third planned well is now expected to be deferred, as the jackup is being utilised to plug and abandon an existing well in Equatorial Guinea and is required to mobilise for its next contract before it can complete the drilling of the last well. As per Esgian Rig Analytics, jackup Sapphire Driller is expected to commence a three-year contract with North Oil Co, offshore Qatar in early 2022.

Aker BP has made a minor oil discovery during the drilling of a wildcat well in the Norwegian North Sea, which is not considered to be commercial. The wildcat well 24/12-7 is in production licence 1041 where Aker BP is the operator. Aker BP was issued a drilling permit for the well from the Norwegian Petroleum Directorate (NPD) in October 2021. Preliminary calculations of the size of the discovery show approximately 0.8 million standard cubic metres of recoverable oil equivalent, which the licensees do not consider to be commercial.  Odfjell Drilling owned semisub Deepsea Stavanger was used for drilling the well, and the rig has now come off hire. On its next engagement, the semisub will commence exploration drilling for Equinor offshore Norway in February 2022, wherein it is expected to remain engaged until mid-2022.

Demand

Deltic Energy has completed a farm-out transaction for five of its gas licences in the Southern North Sea with Cairn Energy through Cairn's wholly owned subsidiary, Nautical Petroleum. Under the terms of the agreement, Cairn has paid a consideration of $1 million by way of contribution towards historic back costs, and now holds a 60% interest in each of Licences P2428 (Cupertino Area) and P2567 (Cadence) and a 70% interest in each of Licences P22560, 2561 and 2562 which are located between Breagh and Tolmount gas fields. Cairn will also become the operator of each of the five licences and is funding 100% of an agreed work programme for each of the five licences up to the point of making a drill or drop decision on each licence. Following a drilling decision being made on either of P2428 and P2567, Cairn will fund 70% of the costs of whichever well is drilled first, subject to a gross well cost cap of $25 million. Since announcement of the agreement, the shooting of 3D seismic data over Licence P2428 and surrounding areas has commenced. ION Geophysical are currently in the process of acquiring approximately 700km2 of seismic data, which is focussed on the Plymouth Zechstein Reef Prospect and will de-risk future drilling. The survey is expected to be completed before the end of November, with processed data due to be delivered in the second quarter of 2022.

Rig sales

Diamond Offshore has now confirmed that 2009-built, 6th-generation semisub Ocean Valor is being marketed for for sale by the company. The rig is currently stacked off Brazil, where it has remained since completing its last drilling campaign with Petrobras, which ended in November last year.

Turkish Petroleum Corporation (TPAO) has purchased the 7th Generation drillship West Cobalt from South Korean yard DSME for $180 million, with delivery expected in early Q2 2022. The drillship was previously ordered by offshore drilling contractor Northern Drilling but was canceled in 2019. TPAO has been looking to expand its offshore drilling fleet as Turkey is increasing its exploration and development activities in the Black Sea and in the Eastern Mediterranean Sea. Over the past few years, TPAO has added three 6th Generation drillships to its fleet, namely Kanuni (Prev. Sertao) in 2020, Yavuz (Prev. Deepsea Metro I) in 2018 and Fatih (Prev. Deepsea Metro II) in 2017. West Cobalt will be the fourth drillship acquisition and it is expected to move to the Black Sea after delivery, where it will commence drilling operations. TheWest Cobalt is valued at $180 - $199 million by Esgian Rig Values.

Rig upgrades

Ultra-deepwater drillship Noble Gerry De Souza is being upgraded with a second blow out preventer (BOP) during its current shipyard stay in Las Palmas, Canary Islands, ahead of starting a new contract off Suriname next year. The rig is also having its dual gradient system replaced with an integrated Managed Pressure Drilling (MPD) system during the yard stay. APA is due to begin work with the rig in early 2022 covering one firm well plus two one-well options.

Merger & Acquisition

Noble Corporation and Maersk Drilling have entered into a definitive business combination agreement to combine in a primarily all-stock transaction. Following the completion of the transaction, the Maersk Drilling shareholders and Noble shareholders will each own approximately 50% of the outstanding shares of the combined company. The combined company will be named Noble Corporation and its shares will be listed on the New York Stock Exchange (“NYSE”) and Nasdaq Copenhagen.

Standard Drilling has stated that it will consider voting against the transaction announced yesterday regarding the merger of Noble Corp and Maersk Drilling. The company has stated "Standard Drilling fully supports industry consolidation in the offshore  drilling market. However, we, and other shareholders that have contacted us, are concerned about the proposed exchange ratio and will consider to vote against the transaction" says Martin Nes, Chairman of the Board of Directors of Standard Drilling.

Financial news

For the third quarter of 2021, Vantage Drilling has announced a net loss attributable to controlling interest of approximately $21.7 million for the three months ended September 30, 2021, based on the weighted average shares outstanding, as compared to a net loss attributable to controlling interest of $169.3 million for the three months ended September 30, 2020, which included a non-cash loss on impairment charge of $128.9 million on the carrying amount of drillship Titanium Explorer. As of September 30, 2021, Vantage had approximately $120.3 million in cash, including $14.9 million of restricted cash, compared to $154.5 million in cash, including $12.5 million of restricted cash at December 31, 2020. The Company used $44.5 million in cash from operations in 2021 compared to $61.1 million used during the same period of 2020 and used $3.5 million in cash from operations in the third quarter of 2021 compared to $25.6 million used during the second quarter of 2021. Ihab Toma, CEO, commented: “The underlying fundamentals of our industry continued to improve during the third quarter as reflected in the increased contracting activity and industry-wide utilization."

For the third quarter of 2021, Shelf Drilling revenues decreased to $130.3 million from $130.5 million reported in the second quarter of 2021. The company attributed the decline in revenue to a lower effective utilisation, partially offset by an increase in the average dayrate. Effective utilisation during the quarter decreased to 68% from 71% reported in the previous quarter, mainly due to the completion of two contracts in the UAE and one contract in India combined with the planned out of service time for one jackup in Saudi Arabia, partially offset by the completion of an out of service time for one jackup in Saudi Arabia and the start of a new contract in India.

KeyFacts Energy Industry Directory: Esgian

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