Teresa Wilkie, Esgian

This week Valaris announced a wave of new contracts for its offshore rig fleet, while ExxonMobil made two new discoveries offshore Guyana. Meanwhile, Esgian released its latest market commentary reviewing the 2021 offshore drilling rig market.

Contracts 

EnVen Energy Corporation has signed a contract with Transocean for the use of 6th generation, ultra-deepwater drillship Discoverer Inspiration to carry out drilling in the US Gulf of Mexico. EnVen has committed to one firm well with options for two additional wells and expects to take delivery of the drillship early in the third quarter of 2022. The rig is currently undertaking P&A operations offshore the US for Hess.

Maersk Drilling and Aker BP have agreed to renew and extend the frame agreement that establishes Maersk Drilling as the jackup rig drilling partner. The commitment will renew the frame agreement by a five-year period and includes a commitment from Aker BP for the provision of the ultra harsh-environment jackup rigs Maersk Integrator and Maersk Invincible for activities offshore Norway during this period. The revised set-up will allow Aker BP to assign the two rigs to multiple operations with multi-purpose use of the rigs during the frame agreement period. Different rate structures will apply during the period reflecting different operating modes, agreed incentive schemes, and market developments. Over the frame agreement renewal period, the five-year commitment for the two rigs is expected to have a combined total contract value of approximately USD 1 billion.

Valaris has been awarded new bareboat charter agreements with ARO Drilling for several jackups. ARO Drilling has signed contracts with Aramco for the same periods as the bareboat charter agreements. Heavy-duty harsh environment jackup VALARIS 250, heavy-duty modern jackup VALARIS 116 and standard-duty modern jackups VALARIS 143 and 146 will each commence three-year extensions to their bareboat charter agreements upon completion of their existing agreements with ARO Drilling in December 2021. Also, ARO Drilling owned rigs ARO 3003 and ARO 3004 have each been awarded five-year contract extensions with Aramco that will commence upon completion of their existing contracts in December 2021.

Shelf Drilling has secured contract extensions for jackups Shelf Drilling Chaophraya and Shelf Drilling Krathong from Chevron Thailand Exploration and Production Ltd, for operations in the Gulf of Thailand. Shelf indicated that the extensions are in direct continuation of the planned out of service projects at the end of each rig’s current contract with the same client. The duration is 39 months for the Shelf Drilling Chaophraya and 36 months for the Shelf Drilling Krathong, with commencement expected in Q3 2022 and Q4 2022, respectively. Both the rigs have been working for Chevron offshore Thailand, with the Shelf Drilling Chaophraya under contract since December 2016, while the Shelf Drilling Krathong since June 2017.

Petrofac has awarded Island Drilling Company AS a contract to conduct a workover on Tailwind Energy’s Orlando Field with semisub Island Innovator in Q2/Q3 2022. Island Innovator is a 6th generation Harsh Environment rig delivered in 2012. In addition, the unit has two options for other potential work.

Island Drilling has announced award of a contract from Maersk Decom Mauritania A/S for the 6th gen. harsh environment semisub Island Innovator to carry out P&A of four firm wells and one optional well on the Tullow Oil operated Banda and Tiof fields offshore Mauritania. Total work duration is estimated to be 75 days with commencement expected in Q4 of 2022. The rig is expected to be back in the North Sea in beginning of 2023. Island Innovator has now been awarded a series of contracts that will see it committed from end-March 2022 through the rest of next year.

PGNiG has awarded a one-well contract for the provision of semisub Deepsea Yantai to drill the Copernicus exploration well on PL 1017, offshore Norway. The rig will begin work between June and September 2022 for around 45 days. Once the work with PGNiG is completed, the Deepsea Yantai will complete the firm and optional program under its current contract with Neptune Energy.

Drilling and discoveries

Two significant discoveries have been made at the Fangtooth-1 and Lau Lau-1 wells on the prolific Stabroek Block, offshore Guyana. The discoveries will add to the previously announced gross discovered recoverable resource estimate of over 10 billion boe. The Fangtooth-1 well was drilled in water depth of over 6,000 feet by ultra-deepwater drillship Stena DrillMAX, while the Lau Lau-1 was drilled in 4,793 feet of water by ultra-deepwater drillship Noble Don Taylor.

Equinor and its partners (Vaar Energy and Gassco) has been granted consent to use harsh-environment semisub Deepsea Atlantic for production drilling at the Johan Sverdrup oil field offshore Norway. The consent was granted by the Petroleum Safety Authority (PSA) Norway and it covers production drilling, completion and temporary plugging at Johan Sverdrup.

Ultra-deepwater drillship Stena IceMAX has concluded drilling operations at the Bambo-1 exploration well and the Bambo-1ST1 (side-track), offshore The Gambia for FAR Ltd. The Bambo-1 well was drilled to a depth of 3216m MDBRT, while the Bambo-1ST1 well was drilled to a depth of 3317m MDBRT. Oil shows and potential resrvoirs were encountered and the oil shows indicate further hydrocarbon potential nearby and in the wider A2 and A5 blocks. The Bambo01 and Bambo01ST1 side-track are being plugged and abandoned.

Norway’s Petroleum Safety Authority has authorised Equinor to carry out exploration drilling in Block 34/4 in the North Sea. Well 34/4-17 S in the Statfjord Kile prospect will be drilled by Odfjell Drilling owned 6th gen. harsh environment semisub Deepsea Stavanger. The rig is expected to commence drilling during the first quarter 2022, following conclusion of its engagement with Lundin Energy offshore Norway.

The Maritime Administration Department for Guyana informs that CGX Energy will continue with demobilisation of exploration drilling within the Corentyne Block of Guyana’s Exclusive Economic Zone, where the Kawa-1 well is located. Frontera Energy is the majority shareholder and joint venture partner of CGX in the block. As per the notice, 6th gen. ultra-deepwater semisub Maersk Discoverer will be engaged in demobilisation activities, which are scheduled to be concluded on 31st December 2022.

The Norwegian Petroleum Directorate (NPD) has granted Aker BP ASA drilling permits for wells 25/2-23 S, 25/2-23 A and 25/2-23 B. 25/2-23 S is a wildcat well while 25/2-23 A and 25/2-23 B are appraisal wells, with all of them being located in production licence 873 in the North Sea. Aker BP is the operator of the licence with an ownership interest of 40%, with other licensees being Equinor (40%) and Lotos Exploration and Production Norge (20%). As per NPD, the wells are planned to be drilled in December 2021 by Odfjell Drilling owned 6th gen. harsh environment semisub Deepsea Nordkapp. The rig has been engaged in operations for Aker BP offshore Norway since May 2019 and expected to remain under firm contract until mid-2023. The contract is also understood to have options attached. 

Demand

Shell acquires interest in Block 5, offshore Suriname, from operator Chevron, while Staatsolie retains its non-operated participating interest of 40%. Staatsolie and Chevron signed the Production Sharing Contract (PSC) for Block 5 in October 2021. With the PSC, Staatsolie granted Chevron exploration, development and production rigthts, while retaining a non-operated 40% participation interest and it is the first time that the Suriname NOC participates in offshore activities as a partner.  The block is located in the west of the shallow offshore area and has a size of 2,235 km2.

PetroRio has submitted a development plan for the Wahoo field offshore Brazil with the National Agency of Petroleum, Natural Gas and Biofuels (ANP). The Wahoo discovery is located in Block C-M-101, and has 126 million recoverable barrels of oil (1C), according to the reserve certification issued on 1 January 2021 by D&M. The Wahoo field will involve development drilling to be carried out by Ocyan owned 6th gen. semisub Norbe VI, with operations expected to commence in March 2022.

Rig sales

Vantage Drilling announced the sale of three jackups Emerald Driller, Sapphire Driller and Aquamarine Driller. Vantage Drilling's subsidiary, Vantage Holdings International (VHI) has agreed to sell to ADES Arabia all of the issued and outstanding equity of VHI's wholly-owned subsidiary, Emerald Driller Company (EDC), for a purchase price of $170 million in cash subject to certain adjustments. EDC is the owner of the jackup Emerald Driller, which is operating in Qatar, and will own prior to the closing of the sale transaction the two jackups Sapphire Driller and Aquamarine Driller and their respective drilling contracts, which are expected to commence operations in Qatar in Q1 and Q2 2022.

Market reports indicate that China Merchants Heavy Industry (CMHI) has now completed the sale and handover of two Gusto MSC CJ46 jackups to Abu Dhabi National Oil Company (ADNOC) for operation in the Middle East. The two rigs, previously known as Bestford 3 and Bestford 4, were originally ordered by Bestford Offshore in 2013 but were later cancelled and have since been renamed Fortune BF3 and Victory BF4. Shelf Drilling had originally implemented a bareboat charter for the jackup pair, however this was cancelled in 2020 and Shelf paid a $4 million settlement for the cancellation. The rigs, which are equipped to drill in up to 350ft of water and to a total depth of 30,000ft, are both bound for the Lamprell shipyard in Dubai.

Rig upgrades

Maersk Drilling and Aker BP have agreed to outfit jackup Maersk Invincible with hybrid, low-emission upgrades similar to that previously installed on jackup Maersk Intrepid and Maersk Integrator. The alliance between the two also includes bonus schemes rewarding emissions reductions. The upgrades combine the use of hybrid power with NOx conversion units, adding energy efficiency software to further monitor and reduce energy consumption and CO2 emission. During its first month of operations with the equivalent upgrades installed, the Intrepid produced an initial data point of reducing CO2 emissions by around 25%, while NOx emissions were reduced by around 95%.

Financial 

Following an earlier announcement related to the agreement to refinance and defer $1.4 billion of debt maturities and yard instalments to 2025, Borr Drilling is contemplating to offer approximately $30 million in new depository receipts, representing the beneficial interests in the same number of the Company’s underlying common shares, each with a par value of $0.10. The subscription price in the Equity Offering will be set following an accelerated bookbuilding process. Borr informed that certain investors have pre-committed to subscribe for Offer Shares in the Equity Offering in the amount exceeding $30 million and the net proceeds from the Equity Offering will be used for repayment to yards, to strengthen the Company’s working capital and for general corporate purposes.

Borr Drilling has reached agreements in principle with its largest creditors, the Singaporean yards, to refinance and defer a combined $1.4 billion debt maturities and delivery instalments from 2023 to 2025. In return for these concessions, the Company has agreed to make cash repayments on the accrued costs and capitalised PIK interest owed to the yards during 2022 and 2023, in addition to what was agreed in the January 2021 amendments. These additional payments amount to $22.4 million at the completion of the amendment agreements for the deferral (including $6.5 million of amendment fee), expected to be in January 2022 and an additional $28.6 million payable later in 2022. It is also agreed that the payment of the remaining deferred yard costs and capitalised interest originally due in 2023 will be paid out during 2023 and 2024. In addition, regular payments of cash interest and capital costs for deferring deliveries will commence in 2023. The agreement in principle also contemplates applying a portion of future net equity offerings (approximately 35%) to repay amounts owed to the yards, first to be applied to the accrued and capitalised costs, and secondly to repay principal. 

Other Market news

Northern Ocean and Odfjell Drilling have signed contracts as per which Odfjell will provide Northern Ocean's rig fleet with marketing and management services, while commercial chartering decisions will remain with Northern Ocean. Odfjell will immediately start rig management and marketing of the 6th gen. harsh environment semisub West Mira, which is current stacked in Norway. Northern Ocean’s other 6th gen. harsh environment semisub West Bollsta is currently working for Lundin Energy offshore Norway, where it is likely to remain engaged till end of first quarter 2022. The present manager for the rig, Seadrill, will complete operations as per the current contract and then transfer rig management to Odfjell in direct continuation of its activities. 

The Petroleum Safety Authority Norway (PSA) has issued KCA Deutag with an order following the identification of serious regulatory breaches in an audit of KCA Deutag’s management of maintenance on the jackup Askepott. According to the PSA, the notification of the order was made on 2 December 2021, while the order was issued on 20 December 2021. During the audit, the safety watchdog identified five nonconformities concerning classification, maintenance programme, planning and prioritization, maintenance efficiency and barriers. The PSA confirmed the deadline for complying with part 1 of the order is 3rd October 2022 and requested from KCA Deutag to arrange a status meeting in mid-Q1 2022. For part 2 of the order, the offshore regulator has requested a time-delimited schedule for the work and informed it needs to be notified when the order has been complied with.

Maersk Drilling announced the launch of a new company, Horizon56, to develop and provide digital solutions and services to both oil and gas companies and drilling contractors, with a goal to branch out to adjacent markets outside the oil and gas sector. Horizon56 has been founded as a fully-owned subsidiary, with the ambition over time to attract strategic investors to further develop the company and its products and services. The company’s first offering is the RigFlow solution which digitalises core workflows including the information and data flow between the operator’s well plan and the offshore rig operations, and by doing so significantly increases efficiency and transparency for both onshore and offshore teams. The new entity will continue to provide RigFlow services to Maersk Drilling, supporting the delivery of more efficient, consistent, and digitalised drilling operations to Maersk Drilling’s customers. Horizon56 will have offices and employees located in Copenhagen, Stavanger and Aberdeen, and support customers globally. As per Maersk Drilling, scoping and development for RigFlow have been performed in collaboration with companies such as Aker BP and Equinor, and the solution is now deployed across several of its rigs.

KeyFacts Energy Industry Directory: Esgian