Soumya Mutsuddi, Esgian

This week Shell declared options on an ongoing contract for drillship Maersk Viking offshore Malaysia, while Petrofac secured a new deal for mid-water semisub Stena Don offshore UK. Also, Eni made the first gas discovery from Abu Dhabi's offshore exploration concessions, while Equinor encountered a dry well on its Ginny exploration prospect offshore Norway. Meanwhile, Odfjell Drilling announced plans of spinning off its well services and energy segments into a new company.

Contracts 

Maersk Drilling announced execution of two options by Sarawak Shell Berhad/Sabah Shell Petroleum Corporation (SSB/SSPC) on a previously announced contract offshore Malaysia involving 7th gen. ultra-deepwater drillship Maersk Viking. The first option will be novated to TotalEnergies EP Malaysia for drilling of one deepwater well at the Tepat project, while the second option will be novated to PETRONAS Carigali Sdn. Bhd., a subsidiary of PETRONAS, for the drilling of one deepwater well at the Layang-Layang project. Both projects are located off the coast of Sabah, Malaysia. The extensions have a total estimated duration of 120 days and are expected to commence in July 2022, in direct continuation of the rig’s prior work scope with SSB/SSPC. The total contract value of the extensions is approximately $32 million, including fees for the use of managed pressure drilling. Three one-well options remain on the contract with Shell Malaysia.

Stena Drilling has signed a new contract for the provision of mid-water semisub Stena Don with Petrofac. The rig will be put to work at the Tailwind-operated Gannet E field offshore the UK and will commence in Q4 2022 lasting an estimated 80 days. The contract with Petrofac includes an option to extend for up to three optional wells on behalf of other clients with an estimated total option scope duration of 55 days. Petrofac/Tailwind used the same rig last year for work at its Evelyn field in UK waters. On its previous engagement, the Stena Don completed a successful exploration drilling campaign for Chariot Energy offshore Morocco and has recently returned to UK waters, currently docked off the Orkney Islands.     

Drilling and discoveries

Licence partner, OKEA, announced that drilling operations on the Ginny exploration well 6407/9-13 in Equinor operated licence PL 1060 in Norwegian Sea are being concluded with the well found to be dry. Drilling was carried out by Seadrill operated 6th gen. ultra-deepwater and harsh-environment semisub West Hercules. OKEA added that the well will now be plugged and abandoned once data acquisition is completed and data acquired will be used to evaluate further potential in the licence, which includes the Galtvort discovery, and support OKEA’s other exploration activities in the area. On its next engagement, the West Hercules is scheduled to undertake operations for Equinor offshore Canada during second quarter of 2022.  

Equinor has been granted an exploration drilling permit by the Norwegian Petroleum Directorate for wildcat well 34 / 4-17 S in block 34/4, production licence 057 in the North Sea. Drilling will be carried out by Odfjell Drilling owned 6th gen. deepwater and harsh-environment semisub Deepsea Stavanger during February 2022. Equinor had secured safety consent from the Petroleum Safety Authority to drill the well in December 2021. 

Aker BP has been granted an exploration drilling permit by the Norwegian Petroleum Directorate for wildcat well 35 / 4-3 in production licence 685 in the North Sea. Drilling will be carried out by Odfjell Drilling owned 6th gen. harsh-environment and winterised semisub Deepsea Nordkapp during February 2022. Aker BP had secured safety consent from the Petroleum Safety Authority to drill the well in January 2022.

Shell has been granted an exploration drilling permit by the Norwegian Petroleum Directorate for production well 6305/5-C-3H in production licence 209 in the Norwegian Sea. Drilling will be carried out by the 6th gen harsh environment ultra-deepwater semisub Transocean Barents during February 2022. Shell had secured safety consent from the Petroleum Safety Authority to drill the well in January 2022.

CGX Energy and Joint Venture (JV) partner Frontera has made a discovery at the Kawa-1 exploration well in the Corentyne Block, Offshore Guyana. The well encountered 177 feet (54 metres) of hydrocarbon-bearing reservoirs  within Maastrichtian, Campanian and Santonian horizons based on initial evaluation of Logging While Drilling (LWD). The join venture partners CGX Energy and Frontera Energy has committed to spud a second well, exploration well Wei-1, also in the Corentyne block, in the second half of 2022. The semisub Maersk Discoverer was contracted to spud the Kawa01 and the JV has exercised an option to use the rig to spud the second well in the second half of 2022.

Eni announced that interim results from its first exploration well XF-002 in Abu Dhabi’s Offshore Block 2 Exploration Concession indicate between 1.5 – 2 trillion standard cubic feet of raw gas in place. ADNOC has said that this discovery marks the first from Abu Dhabi’s offshore exploration concessions, and highlights the strategic significance of ADNOC’s block bid rounds and its expanded approach to strategic partnerships. A consortium led by Eni and PTTEP were awarded the exploration rights for Offshore Block 2 in 2019 as part of ADNOC’s debut competitive block bid round. Offshore Block 2 covers an area of 4,033 km² northwest of Abu Dhabi. Drilling operations continue to reach deeper formations to fully unlock the resource volume in Offshore Block 2 and further explore the potential across the block as well as across Offshore Blocks 1 and 3 exploration concession areas, which were also awarded to Eni and PTTEP. Eni indicated that after completing the well drilling in Q2 2022, the size of the well final findings will be assessed.

Demand

EnQuest say that its cash capital expenditure for 2022 is expected to be approximately $165 million, reflecting planned drilling programmes during the year. The company indicated that three wells are planned to be drilled at its self-operated Magnus field and two wells at the CNOOC-operated Golden Eagle field, both offshore UK. Also, drilling of four wells is planned at the PM8/Seligi project offshore Malaysia. The abandonment expenditure for 2022 is expected to be around $75 million. 

Western Gas announced that it has secured all necessary government approvals required to drill the Sasanof-1 exploration well in permit WA-519-P offshore Western Australia. The drilling campaign is planned to start in Q2 2022 using the sixth gen. semisub Valaris MS-1. Western Gas had previously said that drilling costs were estimated at $20-25 million.

Equinor has, on behalf of the partners, presented an impact assessment for the development and operation of Wisting, with the plan for development and operation (PDO) scheduled to be finalised at the end of 2022. The impact assessment to be issued for public consultation is covering both the development phase and the operations phase of the Wisting project in the Barents Sea, offshore Norway. The Wisting discovery contains close to 500 million barrels of oil equivalent and the licence partners are Equinor (35%), Lundin Energy (35%), Petoro (20%), and INPEX Idemitsu Norge AS (10%).

Lundin Energy has announced a 2022 capital budget of $830 million, of which the exploration and appraisal expenditure accounts for $230 million. Exploration accounts for 55% of the expenditure and the remaining programme targets approximately 140 MMboe of net unrisked resources. The programme involves the drilling of six wells, of which five remain to be drilled, featuring targets across the Company’s acreage position on the Norwegian continental shelf. These are Ofelia in North Sea licence PL929 operated by Neptune Energy (Lundin 10% WI), Poseidon in North Sea licence PL1104 operated by Equinor (Lundin 40% WI), Bounty in Norwegian Sea licence PL935 operated by ConocoPhillips (Lundin 20% WI), P-Graben in Utsira High licence PL265 operated by Equinor (Lundin 7% WI), and Lupa in Barents Sea licence PL229 G operated by Var Energi (Lundin 50% WI). Around 45% of the exploration and appraisal budget is to be spent on appraisal in relation to moving development projects towards sanction by the end of 2022. The Company has five potential projects which are being prioritised for development within the temporary tax incentives, which require a PDO to be submitted before the end of 2022. The total resource potential for the projects is estimated to be approximately 240 MMboe net. 

Norway’s Ministry of Petroleum and Energy has approved plans to develop several Equinor-operated gas and condensate discoveries in the Norwegian Sea. Equinor and its partners plan to invest 6.5 billion Norwegian crowns ($742 million) to develop several discoveries in the Kristin field and nearby, estimated to hold 58 million barrels of oil equivalent. As per the Ministry, the project known as Kristin South Phase 1, is expected to start production in 2024 with gas to be exported to Europe via an existing offshore pipeline system. The phase 1 development will target the Kristin Q discovery in the southern part of the Kristin field and the Lavrans discovery, southeast of Kristin. Partners at Kristin South are Equinor (54.8%, operator), Petoro (22.5%), Vår Energi (16.7%), and TotalEnergies (6%).

Mobilisation

1977-built semisub Borgland Dolphin recently completed an exploration drilling campaign for Wellesley Petroleum offshore Norway and has arrived inshore Norway for stacking. Currently, the rig has no firm follow-on commitments in place.

JV partner Carnarvon Energy reported that jackup Noble Tom Prosser is currently mobilising to the Pavo-1 well location in the Bedout basin, licence WA-438-P offshore Australia. Drilling is expected to commence within the next week after allowing for towing and set up. Following completion of the Pavo-1 well, the rig will drill the Apus-1 well which is located around 20km south-west of the Pavo-1 well location. Carnarvon holds 30% interest in licence WA-438-P while Santos is the operator and holds 70%. 

Financial 

Borr Drilling announced that the company’s equity offering of 13,333,333 new depository receipts, listed on the Oslo Stock Exchange (the “Offer Shares”) at a subscription price at $2.25 per Offer Share, were settled on 31st January 2022. The company's issued share capital has been increased by $1,333,333.30 to $15,055,150.80, divided into 150,551,508 common shares, each with a nominal value of $0.10 per share. 

Other Market news

Odfjell Drilling is contemplating spinning off its Well Services and Energy segments (the "Spin Off") into a newly established company, Odfjell Technology Ltd. ("OTL" or “Odfjell Technology”), and to list the shares in OTL on the Oslo Stock Exchange during first quarter of 2022. The Energy segment consists of platform drilling and engineering & projects, as well as a 21% ownership in Odfjell Oceanwind, a company focused on developing mobile offshore wind units providing flexible energy solutions to offshore infrastructure. Odfjell indicated that the Spin Off enables all parts of the business to think beyond their existing core activities, capabilities, markets, and competitive environment to evolve and strengthen their position to meet the needs of customers in the energy transition phase and towards the anticipated increasing activity levels in the global oil & gas industry. Odfjell also indicated that the Spin Off will enable increased focus in OTL on innovation and development of new services, technologies and products required in the energy transition, offering reduced emissions for customers through e.g., increased drilling efficiencies and by applying new technology. Prior to executing the Spin Off, an internal reorganisation will be carried out and the relevant Well Services and Energy companies will become subsidiaries of OTL. Subject to completion of the Spin Off, OTL will be led by the current CEO of Odfjell Drilling, Simen Lieungh, as the CEO. Odfjell also indicated that, following the Spin Off, Odfjell Drilling and Odfjell Technology will collaborate closely through strategic frame agreements to provide fully integrated services as valued by its clients. OTL is contemplating to issue 4-year, NOK denominated, senior secured bonds totalling approximately NOK 1,100 million (~$123 million). Net proceeds from the bond issue together with a new $25 million super senior revolving credit facility will be used to carry out the internal reorganisation and to repay the existing $150 million credit facility (maturing June 2023) related to the spin off business.

TotalEnergies and Kistos Energy Limited have signed an agreement under which Kistos will acquire a 20% interest in the Greater Laggan Area producing gas fields and associated infrastructure alongside various interests in certain nearby exploration licences. Kistos will acquire 20% working interests in the producing Laggan, Tormore, Edradour, and Glenlivet gas fields, located offshore the UK West of Shetland. In addition, the acquisition includes a  20% interest in the undeveloped Glendronach gas field and  25% interest in block 206/4a, which contains the Benriach prospect. The transaction price includes a firm consideration of $125 million, as well as two contingent payments, the first one up to $40 million depending on the gas price in 2022, and the second one in the event of development of the Benriach discovery. Kistos indicated that the acquisition will be financed from internal resources and expected to complete in the second quarter of 2022 subject to approval of the UK authorities.

FAR Limited has received an off-market takeover offer from  Samuel Terry Asset Management, a Sidney-based  boutique investment management company, which currently has a 4.9% interest in FAR. As per Samuel Terry Asset Management, the offer is to acquire all the issued fully paid ordinary shares in FAR for A$ 0.45 cash per share so as to increase its interest in FAR to at least 50.1%. In response, FAR has notified that the proposed offer is not yet open and will not close until mid-March at the earliest and accordingly there is no need for shareholders to take any action at this time. FAR will consider the offer and will advise shareholders of its recommendation in due course. Also, FAR said that the offer is conditional, and accordingly, there is no certainty that the intended takeover bid will complete.

Rockhopper Exploration has announced that the company along with Harbour Energy and Navitas Petroleum have extended the provisions of the previously signed heads of terms from 31 January 2022 to 31 March 2022, with a view to signing definitive documentation on the transaction by this date. As per a previous announcement dated 8th December 2021, Rockhopper Exploration along with Harbour Energy and Navitas Petroleum had signed detailed heads of terms under which Harbour will divest its current licence interests in the Sea Lion development offshore Falkland Islands, while Rockhopper and Navitas will align their working interests with Rockhopper holding 35% and Navitas holding 65%.

According to Upstream, Chevron has exited the Shell-operated Blacktip project in the deepwater Gulf of Mexico by executing an agreement to assign its 20% interest in Blacktip to Shell. In exchange, Shell agreed to participate and fund a 30% working interest share in the Chevron-operated Silverback prospect in Mississippi Canyon 35.

TPAO announced that it has successfully completed the flow test of the 2nd reservoir section (R1) in Türkali-1 appraisal well in the Sakarya gas field, offshore Turkey. The planned flow tests were carried out at two appraisal wells and five different reservoirs. Data acquired from the flow tests are being evaluated to further optimise field development and FEED. The Türkali-1 well was drilled to a total depth of 3,920 m. by the 6th gen drillship Fatih, while well flow tests in the field are being conducted by another TPAO-owned 6th gen. drillship Kanuni.

Wintershall DEA has transferred its stake in the Gulf of Suez Concession offshore Egypt to the Egyptian General Petroleum Corporation. However, the company still holds 17.25% stake in the offshore West Nile Delta concession, one of the largest Egyptian gas projects. The decision to conclude the involvement in the oil production at the Gulf of Suez is part of Wintershall's corporate strategy, with the company’s Energy Transition Pathway and its focus on natural gas.

KeyFacts Energy Industry Directory: Esgian