Soumya Mutsuddi, Esgian

This week Shelf Drilling reported new contract and extensions for its jackups, and Japan Drilling announced a new engagement offshore Malaysia. Meanwhile, ADES charters two Keppel legacy jackups, and Aquadrill reaches an agreement to sell a stacked semisub.

Contracts 

Japan Drilling Co. (JDC) semisub Hakuryu-5 secured a new contract involving work for Petronas offshore Sarawak, Malaysia. JDC informed that the contract was secured through the company’s local agent in Malaysia, NABA Drilling Sdn. Bhd. The contract involves drilling of four firm wells along with options for six wells, and is estimated to commence around Q3 2022. The rig recently commenced work on a one-well contract for Inpex off Japan.

Maersk Drilling secured additional work for the 6th gen ultra-deepwater semisub Maersk Developer, as Karoon Energy exercised options to drill up to two wells at the Neon field offshore Brazil. The contract extension has a duration of 80 days, and will commence in direct continuation of the rig's work at the Patola field, scheduled to start during H2 2022. The extension has a firm value of approximately $21 million and expected to keep the rig working into the first quarter 2023.

Shelf Drilling reported new contracts and extensions awarded to its jackups subsequent to the first quarter of 2022. High Island V secured a 3-year extension with Saudi Aramco, which will keep the rig working until May 2025. Key Singapore secured a 6-month extension with Cairn Oil & Gas offshore India, with the rig’s firm period now extending to May 2023. Shelf also indicated that the customer has options on the contract, however did not give any details. Also, Shelf Drilling Scepter has been awarded a new contract by Cuu Long Joint Operating Company (CLJOC) involving work offshore Vietnam between July and September 2022. The rig recently finished a 3-year engagement with Chevron off Thailand, and is currently in Singapore. 

Drilling and discoveries

Energean announced a commercial gas discovery at the Athena exploration well in Block 12, offshore Israel. As per preliminary analysis, the Athena discovery contains recoverable gas volumes worth 283 bcf on a standalone basis. Energean said that Athena could be commercialised in the near-term via tie-back to the Energean Power FPSO, or alternatively, could form part of a new Olympus Area development. The Olympus Area is Energean’s newly defined area which includes Athena, plus the undrilled prospects on Block 12 and the adjacent Tanin Lease. The well was drilled by the 6th gen harsh environment drillslhip Stena IceMax over a period of 51 days. Energean informed that the rig has now commenced drilling the Karish Main-04 appraisal well, following which it will complete the Karish North development well. A decision on whether to drill the previously communicated optional wells (Hermes and/or Hercules) is expected to be made by the end of Q2 2022, the company indicated.

Following integrated analysis of exploration results, JV partners CGX Energy and Frontera announced discovery of light oil and gas condensate at the Kawa-1 exploration well in the Corentyne block, offshore Guyana. The well was spud by 6th gen ultra-deepwater semisub Maersk Discoverer and the rig is expected to spud a second exploration well, Wei-1, later this year. The companies did not comment on the volume of resources discovered at Kawa-1.

Petrogas North Sea made a gas discovery at the 22/19a-8 Brigitta East appraisal well, which was drilled by jackup Maersk Resilient to a total depth of 4,150m. This is the first operated well for Petrogas on the UK Continental Shelf. The operator notes the well results were inline or better than the pre-drill expectation and will allow the company to move to the next stage of the project. Petrogas plans to develop the Brigitta Gas Field within the next three years.

JV partner Finder Energy informed that semisub Ocean Apex has spudded the Kanga-1 exploration well in SapuraOMV-operated permit WA-412-P offshore Australia. In case of a success, the well will be comprehensively evaluated with a wireline program which includes pressures and sampling. As per the approved drilling plans, the Kanga-1 will be will be plugged and abandoned once drilling is completed. On its next engagement, Ocean Apex is schedule to undertake P&A operations for Woodside off Australia.

Harbour Energy informed that the Timpan exploration well in the Andaman PSC offshore Indonesia has been spudded. Drilling is being undertaken by the 6th gen ultra-deepwater drillship Capella. The contract involves two firm wells, with one well subcontracted to Repsol, in addition to options for two additional wells.

Clontarf Energy acquired a stake in the Sasanof exploration prospect (permit WA-519-P) offshore Australia through the acquisition of a 10% interest in Western Gas. As per Clontarf, the acquisition will comprise of a cash consideration of $4 million and 100,000,000 ordinary shares valued at £480,000 ($592,370) as at May 6th close. In the event of a discovery being declared at Sasanof-1, the consideration will be further increased by 150,000,000 ordinary shares, up to a maximum of £8.7 million ($10.7 million). Sasanof-1 will be drilled by the 6th gen semisub Valaris MS-1 during May-June 2022, with rig mobilisation set to commence on 16th May. Drilling costs are estimated at $20 million, of which Clontarf is funding $4 million. In the event of a cost overrun, Clontarf will be responsible for 20% of a further $5 million, thereafter costs will paid for on a pro-rata basis.

Aker BP concluded the drilling of wildcat well 35/4-3 in its operated  production licence 685 offshore Norway. The well was found to be dry and will be permanently plugged and abandoned. Drilling was undertaken by the 6th gen harsh environment semisub Deepsea Nordkapp which will now drill wildcat well 6507/2-6 in Aker BP-operated production licence 261 in the Norwegian Sea.

Neptune Energy concluded the drilling of appraisal wells 35/9-16 S and 35/9-16 A on the Hamlet discovery (operated production licence 153) offshore Norway. Well 35/9-16 S encountered a 58-metre gas column and a 34m oil column, while Well 35/9-16 A encountered a 35m oil column. Preliminary estimate of the size of the discovery is between 2.2 and 3.4 million Sm3 of recoverable oil equivalent. The licensees will consider tying the discovery into existing infrastructure in the Gjøa field and will assess the discovery alongside other nearby discoveries and prospects. Drilling was undertaken by the 6th gen harsh environment semisub Deepsea Yantai, which will now drill production wells in Neptune-operated licence 586 in the Norwegian Sea. 

Demand

Longboat Energy executed an agreement with OMV to farm-in to two exploration wells offshore Norway. Under the agreement, Longboat is acquiring 20% working interests in the Oswig (PL1100, PL1100B) and Velocette (PL1016) wells. The Oswig well is operated by OMV and will be drilled this summer with the total post-tax cost net to Longboat estimated to be ~$3 million (excluding carry). The other licencees are Wintershall Dea and Source Energy. The Velocette well will be operated by OMV and is anticipated to be drilled in the second quarter of 2023 at an estimated total post-tax cost net to Longboat of ~$3 million (excluding carry). The other licensee for the well is Inpex.

Neptune Energy plans to spend more than $1 billion over the next five years to secure energy supplies for the UK and speed the transition to net zero. From an exploration/appraisal standpoint, Neptune along with its partners plan to drill an appraisal well at the Isabella prospect in the Central North Sea during second half of 2022. As per Neptune, this would involve investments worth $120 million and if the prospect proves economic to develop, the partners would invest a further $1 billion to bring the development onstream.

Beach Energy is targeting FID for a potential development well at the Kupe gas field offshore New Zealand during the second half of 2022. Drilling and connection of the well is planned for 2023. The Kupe gas project is operated by Beach Energy (50%), with partners being Genesis Energy (46%) and New Zealand Oil & Gas (4%).

Mobilisation

Jackup Valaris 107 arrived in Australia after having undergone repairs at a yard in Singapore. The rig was scheduled to start an engagement for Vermilion Energy off Australia last month, but the commencement had to be postponed due to the need for the rig to undertake repairs. Following the engagement with Vermilion, Valaris 107 has further work lined up off Australia with an ‘undisclosed operator’ and then with Eni. 

Rig Sales / Charter

Keppel O&M signed bareboat charter contracts with ADES for the deployment of two KFELS B class jackups in Saudi Arabia. The rigs will be chartered by ADES for a period of five years commencing Q4 2022 and the contracts are expected to generate revenue of about S$135 million (US$97 million) for Keppel. In April 2022, Keppel had announced the termination of newbuild rig contracts with certain customers, and the company now informed that those rigs will be used to fulfil these bareboat charter contracts. In connection with its proposed combination with Sembcorp Marine, Keppel added that these two rigs and their bareboat charter agreements are part of Keppel O&M’s legacy rigs and will be transferred to an Asset Co that is majority-owned by external investors on legal completion. Keppel also indicated that it continues to actively pursue more charters as well as sales opportunities for its rigs.

Aquadrill entered into an agreement with PetroRio Jaguar Petroleo (subsidiary of PetroRio) to sell the 6th gen ultra-deepwater semisub Capricorn for $40 million. Aquadrill indicated that the rig is expected to be used by PetroRio on its own acreage in Brazil, thereby removing it from the open market for drilling tenders. As partial payment, Aquadrill has received a non-refundable exclusivity fee of $1 million and a deposit of $4 million is due on or before 22nd June 2022. The balance of the purchase price is due upon delivery and completion of the sale, which must take place by 5th August 2022. Closing of the transaction is subject to customary closing procedures and conditions. The rig last worked for Kosmos Energy in the US GoM during the last quarter of 2019 and has remained stacked since. 

Technology and upgrades

Lamprell secured a contract from an ‘international rig operator’ involving major upgradation work on three jackups before their deployment in the Gulf region. Work on the first rig will begin immediately following its arrival at Lamprell’s Hamriyah quayside this month, with work on the second and third rigs to follow later. Lamprell also indicated the workscope involved represented a ‘small’ contract, meaning that the value was below $50 million. 

Financials

Diamond Offshore reported contract drilling revenue worth $150 million for the first quarter of 2022, decreasing from $184 million reported in the fourth quarter of 2021. The decrease was mainly due to semisub Ocean Apex remaining off contract and two other semisubs, Ocean Patriot and Ocean Endeavor, being out of service for repairs during the quarter. Contract drilling expense for the period increased to $145 million from $139 million in the previous quarter, primarily due to shipyard projects for the Ocean Patriot and Ocean Endeavor. Diamond informed that the Ocean Endeavor may require another out-of-service period for further repairs and enhancements later in 2022, subject to ongoing assessments. The company added $29 million worth of backlog during the quarter, bringing the total contracted backlog as of April 1, 2022 to $1.2 billion, representing 15.6 rig years of work. Diamond also informed that with the 7th gen drillship Auriga commencing operations on a one-year contract with BP, the company now has three ultra-deepwater drillships working for BP in the GoM. 

Shelf Drilling reported revenues of $156.0 million for the first quarter of 2022, increasing by 14.7% compared to fourth quarter of 2021. The increase in revenue was driven by an increase in rig utilisation due to new contract commencements in Angola, Congo, and India. Adjusted EBITDA for the period also increased to $58.2 million from $43.5 million reported in the previous quarter. The company reported a net loss of $4.6 million for the period. Contract backlog as at 31st March 2022 was $1.7 billion, with 28 out of 30 rigs under contract. 

Maersk Drilling reported revenue of $248 million for the first quarter of 2022, decreasing from $320 million reported in the fourth quarter of 2021. This was mainly due to the impact of lower utilisation during the quarter, 68% down from 78%, and was partially offset by higher financial uptime of 98.8% compared to the previous quarter's 96.9%. Maersk secured contracts worth $357 million during the quarter and the company’s average dayrate for the period was $214,000. As of 31st March 2022, the company’s revenue backlog was $2.1 billion. 

Other News

Noble and Maersk informed that they had submitted ‘Remedy Proposals’ to the UK CMA on 29 April 2022 in relation to its concerns on the possible lessening of competition in jackup supply in NW Europe, following their proposed merger. On 09 May 2022, the UK CMA published its decision that there are reasonable grounds for believing that one of these remedy proposals might be accepted. This ‘Remedy Proposal’ comprises the divestment of the rigs Noble Hans Deul, Noble Sam Hartley, Noble Sam Turner, Noble Houston Colbert, and Noble Lloyd Noble (the "Remedy Rigs") including all of the related support and infrastructure that the purchaser will need to run the rigs as an effective standalone business. Also, relevant off-shore and on-shore staff are expected to transfer with the rigs. On this basis, both companies will seek to reach an agreement with a potential purchaser regarding the sale of these rigs. The UK CMA will review the terms of the Remedy Proposal and the suitability of potential purchasers, which will include seeking third party comment.  The duration and outcome of the review process remains uncertain. If a Remedy Proposal is accepted by the UK CMA, closing of the transaction is expected to occur in mid-2022, the companies informed.

Noble Corp announced that the company’s shareholders approved all proposals related to its merger with Maersk Drilling at the Extraordinary General Meeting held on 10th May 2022, with 99% votes cast in favor of the transaction. Noble added that completion of the transaction remains subject to acceptance of an exchange offer by holders of at least 80% of Maersk Drilling shares, merger clearance and other regulatory approvals, listing on the NYSE and Nasdaq Copenhagen, and other customary conditions. 

Equinor and Sval Energi entered into an agreement for the sale of Equinor’s non-operated share in the Greater Ekofisk Area and a minority share in Martin Linge (19%). The agreement includes 7.604% of Ekofisk area licenses PL018, PL018B and PL275 (including the Ekofisk, Eldfisk and Embla fields, and 6.63922% in the Tor Unit). Following this, Equinor will have no ownership interests in the Greater Ekofisk Area but will retain a 51% ownership share in Martin Linge and continue as the field operator. The agreement includes a cash consideration of $1 billion and a contingent payment structure linked to realised oil and gas prices for both assets for 2022 and 2023. The closing of the transaction is subject to customary government and license approvals and is expected to be completed during the second half of 2022.

Petroleum Safety Authority Norway (PSA) launched an investigation related to a lifting incident on the harsh environment semisub Deepsea Atlantic on 8th May 2022. PSA informed that while hoisting a 32-tonne slip joint from a vessel, the rig crane broke down and its wire ran free. The joint dropped to the deck of the vessel and then into the sea. As per PSA, no personal injuries or damage to subsea structures or the vessel were reported. The Odfjell Drilling owned rig is currently contracted to Equinor, with the incident occurring on the company's operated Statfjord North satellite field. Through its investigation, PSA seeks to identify the causes of the incident and possible lessons to be learnt, and to share the information with the industry.

KeyFacts Energy Industry Directory: Esgian