Hans Jacob Bassoe, Esgian

This week another stranded drillship was acquired, this time by an undisclosed "European client," while Petrobras announced the final two winners of its Brazil floater lot 2 - unit without MPD. Meanwhile, Seadrill reported adding contracts worth $145 million during Q3 2021.

Contracts

Maersk Drilling and Petrogas North Sea Ltd have agreed to exercise a previously agreed exclusive option to employ harsh-environment jackup Maersk Resilient to drill an appraisal well at the Birgitta field in the UK North Sea. It is worth noting that this contract was cancelled towards the end of 2020 due to pandemic-related difficulties and challenging market conditions, however Maersk retained an exclusive option to drill the Birgitta well in 2021. As per Maersk, the contract will expectedly commence in end-2021, in direct continuation of the rig’s current work scope with NAM offshore UK. The contract has an estimated duration of 60 days and a value of approximately $5.4 million.

Odfjell Drilling and Lundin Energy have agreed to engage 6th gen. deepwater, harsh-environment semisub Deepsea Stavanger to drill one additional well offshore Norway, as part of the options agreed in a contract signed earlier this year. The rig will commence drilling in January 2022 and will look to wrap up before starting its next engagement with Equinor offshore Norway during the first quarter of 2022.

Petrobras has announced Ventura Petroleo S.A. (Petroserv) as the winner of the 2nd and 3rd rig for lot 2 - unit without MPD. The company offered in the 6th Gen. drillship DS Carolina and 6th Gen. Intl. semi SSV Victoria. Both are currently on contract with Petrobras. The contracts are scheduled to commence in Q4 2022 with a duration of 1,040 days (but may be terminated on the 760th day of operation). Other companies offered ahead of Ventura, such as China Union and Seadrill. However, China Union was previously disqualified due to missing documents, while Seadrill's West Tellus, West Carina and West Jupiter have already been awarded the winner of previous Petrobras tenders.

Maersk Drilling has secured a one-well contract from OMV Norge AS, which will involve the ultra-harsh environment CJ70 XLE jackup Maersk Intrepid drilling an HPHT exploration well targeting the Oswig prospect (Block 30/5C) in the North Sea, offshore Norway. The contract is expected to commence in mid-2022, and the parties are in discussions to add additional services to the scope. The contract includes a one-well option to drill the Eirik exploration well, and also contains an emission reduction bonus scheme based on rewarding CO2 emission reductions in addition to operational performance bonuses. It is worth noting that the Maersk Intrepid is the first Maersk drilling rig to be upgraded to a hybrid, low-emission rig.

For the third quarter of 2021, Seadrill reported adding contracts worth $145 million to its backlog, with the total backlog valued at $2.1 billion as of September 30, 2021. Key additions to the backlog during the period included a four-well contract plus options in Angola worth $35 million for drillship West Gemini, with commencement currently targeted for the fourth quarter of 2021. Drillship West Neptune secured a 90-day contract with Talos in the US Gulf of Mexico worth $26 million, expected to commence in direct continuation of the current LLOG contract. The semisub West Hercules was awarded a one-well contract with Equinor in Canada worth $57m with commencement in April 2022. Additionally, Equinor exercised another one-well option in Norway for the rig under a continuous optionality provision worth $9 million. Also, Shell exercised the options on its contract involving drillship West Tellus, which contributed $18 million to the backlog. Seadrill also reported on some contracts signed post completion of the third quarter, which contributed over $0.5 billion to its backlog. These included two three-year fixed term contracts signed with Petrobras involving drillships West Carina and West Tellus for work on the Buzios field offshore Brazil, commencing September 2022. The semisub Sevan Louisiana was awarded a one firm well contract with Eni in the US Gulf of Mexico commencing late December 2021. LLOG exercised an option on the drillship West Neptune in the US Gulf of Mexico worth $10 million. Seadrill also reported that its Plan of Reorganisation was approved by the US Bankruptcy Court for the Southern District of Texas on October 26, 2021. The plan allows raising $350 million in new financing and reduces liabilities by $4.9 billion to $0.7 billion, while leaving customer, trade and employee claims unaffected. Existing shareholders will see their holding in the new entity decrease to 0.25%. Seadrill indicated that the reorganization is expected to complete in early 2022.

Drilling and discoveries

Jackup Valaris 107 is in the final stages of its current operations with operator Jadestone offshore Australia. Carnarvon operations team is ready to receive the jackup and commence drilling operations at the Buffalo-10 well, offshore Timor-Leste. The rig is expected to commence its contract with Carnarvon in about two weeks time.

PTTEP announced a successful gas discovery from the exploration well Nangka-1 in block SK417, offshore Malaysia. The well was driller earlier this year, in June 2021, following the prior discovery from the wildcat well Dokong-1 on the same block. The Nangka-1 discovery adds to the success at Sarawak block SK417's Dokong, SK410B's Lang Lebah, SK405B's Sirung and SK438's Kulintang fields.

Demand

Petrobras has indicated plans to invest approximately $2 billion in the deepwater Roncador field in Campos Basin by 2026. As per Petrobras’ Chief Exploration and Production Officer, Fernando Borges, the investment is part of the total planned capex of $16 billion earmarked for the Campos Basin as part of its Strategic Plan 2022-26 and would involve drilling of more than 100 new wells by 2026. The investment at Roncador will be directed towards the conduct of a high-resolution seismic survey and the drilling of additional wells. It is to be noted that the operator had invited bids earlier this year for sourcing a high spec drillship to carry out development drilling at Roncador for a two-year firm contract, along with options. The intent was to have the rig commence operations by September 2022, however there is currently no information on the outcome of the tender. Petrobras is the operator for Roncador with a 75% interest and is partnered by Norway’s Equinor (25%).

Shell has confirmed that it has backed out of the Siccar Point-operated UK West of Shetland proposed Cambo development. The decision comes as the operator awaits approvals ahead of a final investment decision for the planned project, however more uncertainty now clouds the future of the project. This comes after months of heavy opposition from environmental groups. Shell has stated economic reasons for pulling out of the project and says that it is still committed to providing oil and gas for the UK market. Siccar Point says that it has not given up hope of moving ahead with the project, with first oil still proposed in 2025. 

Rig Sales & newbuilds 

Samsung Heavy Industries (SHI) has confirmed earlier reports that it has sold one of its stranded 7th generation drillships for a total of $245 million to a "European client", which is believed to be Stena Drilling. It is understood that the rig is the Ocean Rig Crete, which was originally ordered by Ocean Rig and then later cancelled by Transocean following its purchase of the company. The drillship will be delivered by March 31, 2023, but Stena has to determine the delivery day by Oct. 5, 2022. Otherwise, SHI can cancel the deal without returning a deposit worth $15 million to the European company.

Financial

For the third quarter of 2021, Velesto Energy reported a decrease in revenue to $22 million from $31 million reported in the same quarter of 2020 mainly due to lower activities in its drilling rigs segment. For the period, the company reported a net loss of $12 million compared to a profit of $0.1 million during the corresponding quarter of 2020. Velesto also reported fleet utilisation of 50% during the third quarter of 2021, which was its highest quarterly utilisation this year, although it was lower than the reported utilisation of 60% during the same quarter of 2020. The company reported that four of its jackups—Naga 2, Naga 5, Naga 6, and Naga 4—are currently working for Petronas offshore Malaysia, while the Naga 8 is working for Hess offshore Malaysia. Another jackup Naga 3 is currently warm stacked and is being marketed for potential contracts. 

Oil Price

Brent Crude oil price was over $80 last week but as the news of the new covid-19 Omicron variant was announced the price fell about 10% to $72 this week. The negative trend continued as OPEC+ announced the oil cartel will continue as planned with the increasing oil production. The Brent Crude touched $67 after the news but recovered slightly and ended on $70.

Other news 

Equinor reported that the company has entered into an agreement with Vermilion Energy for the sale of it's non-operated equity position in the Corrib gas project, offshore Ireland. The two parties have agreed a consideration of USD 434 million, before closing adjustment, with an effective date set at 1 January 2022. As part of the transaction, Equinor and Vermilion have agreed to hedge approximately 70% of the production for 2022 and 2023, and have also agreed a contingent payment that will be paid on a portion of the revenue if European gas prices exceed a given floor level. Equinor owns 36.5% of the Corrib project with Vermilion (operator with 20%) and Nephin Energy (43.5%).

PTTEP has unveiled its investment plans for 2022 along with an investment plan for the period 2022-26 with the key objectives of maintaining production volumes and increasing petroleum reserves from major assets, developing key projects for adding to future production volume, and capturing new business opportunities to foster sustainable growth during energy transition. For 2022, the company has planned investments worth $5,666 million, which comprises of $3,217 million worth of capex and $2,449 million worth of opex. As part of its investments earmarked for 2022, the company has set aside $262 million to accelerate exploration activities involving drilling of exploration and appraisal wells in Malaysia, United Arab Emirates and Mexico. For the period 2022-26, the company has earmarked $27,164 million comprising of capex worth $16,534 million and opex worth $10,630 million. With respect to its 5-year investment plan, the company will look to focus on accelerating the development of oil and gas fields in Malaysia after making some successful petroleum discoveries during 2021. At the same time, PTTEP will also look to target investments in new businesses focused around energy transition and low carbon emissions to create sustainable growth.

The Lebanese Petroleum Administration has re-launched a second offshore oil and gas licensing round for eight remaining blocks with deadline for submission of bids been set for June 15, 2022. Following its initial approval in April 2019 cvering only two blocks, the round was postponed several times, including in 2020 due to the COVID-19 pandemic. A consortium of operators including TotalEnergies, Eni, and Novatek completed exploration drilling in Block 4 offshore Lebanon in 2020, but without commercial success. The consortium has also postponed a drilling campaign planned in Block 9.  

KeyFacts Energy Industry Directory: Esgian

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