Soumya Mutsuddi, Esgian

This week saw a flurry of announcements as Borr, Noble, Diamond, Shelf, and ADNOC Drilling announced new contract awards and / or extensions for their rigs. Meanwhile, Keppel terminated contracts for two under-construction rigs.

Contracts

Borr Drilling received a binding LOI from an undisclosed operator for the jackup Prospector 5 involving work off West Africa. The firm program involves six wells and is expected to commence during Q4 2022, with an estimated duration of fourteen months plus options. Borr added that the LOI will expectedly convert into a contract shortly, and has an estimated total contract value of $68.9 million (excluding options). Borr also informed that Petronas exercised options on jackup Idun, resulting in the rig’s firm engagement with the operator off Malaysia extending to September 2023. Borr added that for the year 2022 (as of 9th August), the company has been awarded fourteen new contracts, extensions, exercised options, and letters of awards representing 5,610 days, or 15.4 years, and $650.2 million worth of potential revenue (including mobilization revenues but excluding options). 

Shelf Drilling reported a new contract award from Masirah Oil for jackup Compact Driller involving work off Oman. The contract includes two firm wells along with two optional wells. Commencement is expected in October 2022 following completion of the rig's current engagement with Cairn Oil & Gas off India. 

ADNOC Drilling was awarded two contracts totaling more than $3.4 billion by ADNOC Offshore for hire of eight jackups over a period of 15 years. The contracts will support the expansion of ADNOC’s crude oil production capacity to five million barrels per day (mmbpd) by 2030. The rigs will be hired along with manpower and equipment to support drilling operations across ADNOC’s offshore fields. The names of the rigs were not identified. 

Noble Corp reported new contracts and extensions in its latest fleet status report. Drillship Noble Faye Kozack was awarded a one-well assignment with LLOG at a dayrate of $420,000, including MPD services, for work in the US GOM. Operations are scheduled to begin in late 2022 or early 2023. In Suriname, APA Corp. exercised its second of two one-well options for drillship Noble Gerry de Souza. The final well will be novated to TotalEnergies at an undisclosed rate and will keep the rig working until October 2022. The four drillships under the Commercial Enabling Agreement with ExxonMobil for work off Guyana were awarded 7.4 years of incremental term in connection with the sanctioning of the Yellowtail development. This is expected to keep Noble Tom Madden, Noble Sam Croft, Noble Don Taylor, and Noble Bob Douglas busy until November 2025. Also off Guyana, jackup Noble Regina Allen is expected to remain working with Repsol until later this month. It will then head to Trinidad & Tobago for its next charter with an unnamed operator. The firm work involves six wells at a dayrate of $102,000, along with three two-well options. The first option has now been exercised at an elevated rate of $112,000 per day and two two-well options remain. Jackups Noble Houston Colbert and Noble Mick O'Brien have had their upcoming charters off Qatar firmed up, with the rigs booked until February 2026 and April 2026, respectively.

Diamond Offshore announced new contract awards for its rigs in the UK North Sea, Australia, and US GOM. Harsh environment semisub Ocean GreatWhite was awarded a five-well job by an undisclosed client in the UK North Sea for an estimated duration of 300 days. Contract commencement is expected in Q1 2023 and total value is approx. $80 million. The contract also includes options for up to eight additional wells. Semisub Ocean Apex was awarded three new contracts involving work in the Northwest Shelf off Australia. The first contract with Woodside is expected to commence in May 2023 for an estimated duration of 75 days. The second contract with Chevron is scheduled to commence in direct continuation of the first and also for an estimated duration of 75 days. The third contract with Santos is expected to commence in Q2 2024 for an estimated duration of 150 days. The three new awards add approx. $90 million worth of backlog for the Ocean Apex. Diamond added that a potential fourth contract is currently under negotiation which could fill out the rig’s remaining availability in 2023, keeping it busy until late 2024. Ultra-deepwater drillship Ocean BlackHornet secured a two-year extension with its current client BP in the US GOM, in direct continuation of the rig's current term. The extension will keep the rig working until early 2025 and total value for the extension is approx. $290 million. Also, the contract for drillship Auriga has been extended by BP in the US GOM for an additional one-year term in direct continuation of the rig's current term.  The contract value for this extension is approximately $150 million. These new contracts add approximately $610 million worth of backlog and are in addition to the $995 million of backlog reported as of 1st July 2022.

Drilling and discoveries

Aker BP received regulatory consent to use the harsh-environment jackup Maersk Integrator for well intervention activities on the Valhall Flanke West field (licence 006B) off Norway. The rig is on a long-term contract with the operator, with the firm work running into late 2027.  

JV partner Tullow Oil informed completion of drilling operations at the Beebei-Potaro exploration well in Repsol-operated Kanuku licence, offshore Guyana. The well was found to be water bearing and will be plugged and abandoned. Tullow will integrate the well results into its regional subsurface models and work with its JV partners before deciding on next steps. Drilling was carried out by jackup Noble Regina Allen, which is next scheduled to undertake a development drilling campaign for EOG off Trinidad and Tobago. The contract’s firm work involves six wells along with three 2-well options. 

Equinor re-entered the Sitka O-02 well off eastern Canada using ultra-deepwater semisub West Hercules. The well is located in Exploration Licence 1156 in 2,799 ft. of water and is the final location of the rig's two-well charter with Equinor. The tophole portion of the well was drilled in 2020 by semisub Transocean Barents. The campiagn is expected to finish in Q4 2022, following which the rig will mobilise to Norway for its five-year SPS. Odfjell Drilling is then expected to take over as rig manager.

Equinor received regulatory approval to use the harsh-environment semisub Transocean Encourage for well workover operations on its operated Kristin field (licence 134B) off Norway. The rig’s firm charter with Equinor runs into Q4 2023 and the contract is understood to include a 3-year option. 

Jackup Shelf Drilling Scepter completed a two-well development drilling engagement for Cuu Long Joint Operating Company (CLJOC) off Vietnam during August 2022 and moved inshore Singapore. Currently, there is no visibility on future engagements for the rig. 

Demand

Valeura Energy updated that it has progressed planning, technical and financing arrangements for a five-well infill drilling programme on the Wassana field (licence G10/48) offshore Gulf of Thailand, where it expects to commence drilling operations in late Q2 2023. Valeura is currently finalising well designs and expects to hire a drilling rig and procure the key long lead equipment during this quarter. The company holds an operated 89% working interest in licence G10/48, which contains the Wassana oil field and is targeting an increase in the field’s oil production rates to 4,500 bbls/d, consistent with the externally-evaluated 2P reserves profile, which includes 6.5 million bbls of oil (net working interest). Valuera also holds an operated 43% working interest in the Rossukon oil field (licence G6/48) offshore Gulf of Thailand and is engaged in discussions with regulators and partners relating to development of the field. The company is exploring the optimal timing and the potential for a phased development schedule to bring the Rossukon field on stream in Q4 2023 and informed that it will provide more clarity on the development plan in due course.

Eni invited expressions of interest (EOI) for a drillship requirement in its operated licence Area 5-A off Mozambique. The drillship is required to be a DP full dual-activity rig, capable of operating in minimum water depth of 2,400m and reaching minimum drilling depth of 5,400m. The rig is required to be 5th generation or higher, and with proven experience of operating in cyclone-affected conditions. The firm period involves drilling and P&A of one well off Mozambique, and three wells off West Africa, to be undertaken in direct continuation of the initial well. As per the document, the first well is expected to spud in Q4 2022/Q1 2023. The contract also involves an optional period involving drilling, well testing, abandonment and completion of an additional six wells in direct continuation of the firm work.

Mobilisation / Upgrades

Harsh-environment jackup Maersk Invincible is being upgraded for emission reduction and hybrid operations at the Port of Grenaa, Denmark. As per Maersk, the upgrades would enable the rig to cut down on NOx and CO2 emissions. The rig is scheduled to commence its next engagement with Aker BP off Norway during Q3 2022. 

Ultra-deepwater semisub Aquarius arrived in Las Palmas, Canary Islands, where it is expected to undergo reactivation. The rig has not worked since mid-2020 and its last engagement was with ExxonMobil off Canada. Currently, there is no visibility on any upcoming engagements for the rig, however it is understood to be actively marketed across multiple regions.

Velesto Energy completed offline capabilities upgradation works for two jackups, Naga 5 and Naga 6. As per Velesto, the offline capabilities are expected to help reduce the amount of time the rigs spend on drilling wells, thereby reducing overall drilling costs as well as reducing emissions. Naga 5 commenced operations for PTTEP off Malaysia in July 2022, while the Naga 6 is currently in Singapore and expected to commence operations for Petronas off Malaysia towards end August 2022.

Following completion of system and equipment upgrades, newbuild drillship Abdulhamid Han commenced mobilisation for its maiden drilling assignment for TPAO. The rig is scheduled to drill the wildcat well Yorukler-1 in the Antalya basin off Turkiye.

Financials

Noble Corp. reported net income of $37 million for Q2 2022, up from a net loss of $37 million in Q1 2022. Contract drilling services revenue for the period totaled $262 million, increasing from $192 million in the first quarter. Marketed fleet utilisation increased to 85% from 75% in the previous quarter, and contract drilling services costs were $178 million, compared with $166 million in the first quarter. The company's estimated revenue backlog was approximately $2.1 billion as of 30th June 2022, excluding 3.5-year term contracts that were finalised for jackups Noble Mick O'Brien and Noble Houston Colbert after the end of the quarter. Noble’s proposed merger with Maersk Drilling is expected to close on 3rd October 2022 subject to shareholder and regulatory approvals. 

Borr Drilling reported total operating revenues of $105.3 million for Q2 2022, increasing by 28% against Q1 2022. The company’s net loss for the period was $165.3 million, increasing by $114 million compared to the previous quarter mainly due to an to an impairment loss in Q2 2022 related to an LOI for the sale of three newbuild rigs. Adjusted EBITDA for the period was $37 million, increasing by 73% over the preceding quarter. Borr informed that it reached agreements in principle with all secured creditors to defer its secured debt to 2025, subject to raising equity and the boards’ and credit committees’ approvals and final documentation.

Shelf Drilling reported revenue of $150.7 million in Q2 2022 decreasing from $156 million reported in Q1 2022, mainly due to lower effective utilisation. Adjusted EBITDA for the period also reduced to $49 million from $58.2 million reported in the previous quarter. The company’s net loss for the period was $16.7 million. Shelf’s capital expenditures and deferred costs increased to $33.1 million from $22.9 million in the prior quarter mainly due to higher spending on contract preparations in Southeast Asia and higher planned maintenance and shipyard costs in Saudi Arabia, along with higher spending on fleet spares during the period. Shelf’s contract backlog as of 30th June 2022 was $1.8 billion, increasing from $1.7 billion as at 31st March 2022. Shelf’s acquisition of five jackups from Noble Corp for $375 million (announced in June 2022) is expected to complete in October 2022.

Diamond Offshore reported contract drilling revenue of $177 million for Q2 2022, increasing from $150 million in Q1 2022. Contract drilling expense for the period was $142 million, which was relatively stable compared to $145 million reported in the first quarter. Adjusted EBITDA for the period was $15.2 million compared to a negative EBITDA of $11 million reported in the previous quarter. During the period, Diamond was able to reduce its net loss to $21.9 million from $34.5 million reported in the preceding quarter. 

Other News

Sval Energi signed an agreement to acquire Suncor Energy’s assets in the Norwegian Continental Shelf, which includes 17.5% ownership in the Fenja field (PL 586), 30% ownership in the Oda field (PL 405), and eight additional licences. Sval informed that the transaction will add a daily production of approximately 4000 boe and 19 million boe in reserves to its portfolio. The commercial effective date for the transaction is 1st March 2022 and the deal is expected to be closed before end 2022, subject to approval from the relevant Norwegian authorities. Suncor informed that the gross proceeds of the transaction is approximately $410 million (Canadian dollar equivalent), before closing adjustments and other closing costs.

Keppel Corporation issued notices of termination for three contracts involving one jackup, one tender-assist semisub, and one high-specification liftboat. The jackup contract relates to an order received by Keppel FELS from TS Offshore in March 2014 involving the construction of an N Plus rig capable of operating in water depths of 500 feet. The concerned rig is known as TS Jasper and the contract was worth $500 million. Contract termination for the tender-assist semisub relates to an order received in January 2015 for the Sapura Raiqa, while order for the liftboat was secured in July 2015 from Crystal Heights Holdings Limited worth approx. $85 million. Keppel informed that the basis for these terminations was the failure of the respective clients to pay the outstanding amounts due and payable under each contract related to the TS Jasper and the liftboat, and the client’s conduct showing that it no longer intends to perform its remaining obligations under the contract related to the Sapura Raiqa, including but not limited to accepting delivery of the rig and making the remaining payments. Following the termination of these contracts, Keppel FELS will retain all payments received under these contracts to date, and will retain ownership of TS Jasper and Sapura Raiqa, including the right to sell these rigs. The construction of the liftboat had not and will not be commenced. Keppel also informed that the two rigs will be transferred to an Asset Co (Rigco Holding Pte. Ltd.)  in connection with its proposed combination with Sembcorp Marine.

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