Soumya Mutsuddi, Esgian

This week Shelf Drilling, Island Drilling, COSL Drilling, and Japan Drilling Company announced new contracts for their rigs, while brent crude prices touched multi-year highs as global sanctions start to disrupt Russian oil sales. Meanwhile, Equinor and ConocoPhillips received drilling permits for new exploration campaigns offshore Norway.

Contracts 

COSL Drilling Europe has been awarded a new contract from CNOOC for the provision of its 6th gen, mid-water semisub COSLInnovator for work in British waters. The rig will undertake plug and abandonment operations at the UK Ettrick field from April 2022 until around November 2022. There are no options attached to this contract. The rig is currently idle in Norway, where it has been since completing its last commitment in May 2021 with Harbour Energy. 

Japan Drilling Company (JDC) has been awarded a new contract by Medco E&P Natuna Ltd for jackup Hakuryu-11. As per JDC, the contract is expected to commence between July and August 2022 and will involve the rig operating offshore Indonesia.

Shelf Drilling has secured a new contract award for jackup Shelf Drilling Mentor with an undisclosed operator offshore Nigeria. The contract has an estimated duration of 225 days with an option for additional wells. The contract is expected to commence in Q2 2022. The rig is currently working offshore The Congo for Mercuria.

Enauta has exercised the option on its contract for 6th gen. ultra-deepwater semisub Alpha Star to execute the drilling of two additional wells in the Atlanta field, offshore Brazil. As per Enauta, the overall amount estimated and approved for two additional wells is $35 million. Enauta is the 100% owner of the Atlanta field, located in the Block BS-4, in the Santos Basin.

In its latest fleet update, Shelf Drilling has confirmed new contract awards and extensions for its jackup fleet. Cairn India has secured Key Singapore for a new two-well contract, commencing in May 2022 and lasting for around six moths. Meanwhile, Eni Italy has declared 18-months of options on its contract for Key Manhattan, which will keep the rig occupied into August 2023. In Thailand, PTTEP has signed a new three-year deal for jackup Shelf Drilling Enterprise with an additional one-year option also attached to the contract. Work under the deal will commence in July 2022, following conclusion of its current contract in April 2022 and subsequent contract preparation project.

Eco (Atlantic) Oil and Gas Ltd. has contracted the 6th gen. harsh-environment semisub Island Innovator for drilling the Gazania-1 well in Block 2B offshore South Africa. The work is planned to commence in Q4 2022. Block 2B is located in the Orange Basin, which straddles the offshore waters of Namibia and South Africa, where major discoveries on both the Graff-1 well, drilled by Shell, and the Venus-1 well, drilled by TotalEnergies, have recently been announced. This contract will fill the gap of work between Petrofac in the UK and Maersk Decom in Mauritania for the Island Innovator, keeping it fully occupied during 2022. Azinam is the current operator of Block 2B with a 50% participating interest, with JV partners being Africa Energy (27.5%), Panoro Energy (12.5%), Crown Energy (10%). Eco Atlantic will become Operator for Block 2B with a 50% working interest, subject to completion of its 100% acquisition of Azinam Group Limited.

Drilling and discoveries

Equinor has been granted a drilling permit for wildcat well 7220/8-2 S in production licence 532 offshore Norway. Drilling will be carried out by 6th gen. harsh-environment semisub Transocean Enabler during March 2022. The rig is currently working for Equinor in Norwegian waters.

Ultra-deepwater semisub Ocean Monarch is expected to complete its current engagement for Posco Daewoo offshore Myanmar by mid-March 2022. The contract was understood to have attached options, however these will not be exercised and the rig will leave Myanmar upon completion of the engagement. Beyond that, there is no current work visibility for the rig in 2022 and it is likely to be stacked.

Neptune Energy announced that it has commenced drilling the Hamlet exploration well in the North Sea off Norway using the Odfjell Drilling operated 6th gen harsh-environment semisub Deepsea Yantai. The Hamlet prospect is located 7 km north of the Gjøa field within the Neptune-operated licence PL153. The drilling program comprises a main-bore (35/9-16S) with an optional side-track (35/9-16A) based on the outcome of the exploration well. Neptune Energy is the operator of the license with a 30% interest, with partners being Petoro (30%), Wintershall Dea (28%), and OKEA (12%).

JV partner Carnarvon Energy updated that the Pavo-1 well in licence WA-438-P offshore Australia has been drilled down to around 3,282m Measured Depth (“MD”). Elevated gas readings and increased resistivity were observed between 2,944m MD and 3,001m MD indicating the presence of hydrocarbons. Wireline logging will be undertaken to obtain definitive results on the nature and extent of the hydrocarbon zone. The wireline logging results will be announced to shareholders upon the completion of the wireline logging program. Carnarvon also indicated that the well is being secured and the jackup Noble Tom Prosser is being prepared for down-manning due to potential cyclone activity as a precautionary activity in accordance with industry standard safety plans. Once it has been deemed safe to do so, the rig will be up-manned in preparation for wireline activities. Following completion of the Pavo-1 well, the rig will drill the Apus-1 well which is located around 20 km 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%.

Eni is expected to commence drilling at the Dan Tranh-1X well in block 115/09 offshore Vietnam in late March 2022, Reuters reported citing PetroVietnam. Reuters added that PetroVietnam will also invite Essar to bid for Vietnam’s other offshore blocks late this year or early next year, following a meeting in Hanoi between executives of the two companies.  

ADNOC Drilling's recently purchased jackup Al Nouf (previously named Shelf Drilling Journey) is expected to commence its three-year plus two one-year option campaign with ADNOC offshore the UAE this week.

Lundin Energy has completed its drilling campaign using harsh-environment semisub West Bollsta offshore Norway. The rig, which had been on hire with the same operator since September 2020, has mobilised inshore Hanoytangen for stacking. The rig currently has no firm follow-on commitments yet in place.

Borr Drilling jackup Prospector 1 is preparing to start drilling operations for Neptune Energy offshore the Netherlands. The rig will undertake a development drilling campaign for the operator that is set to last until August this year.

ConocoPhillips has been granted an exploration drilling permit for wildcat well 6507/5-11 in production licence 891 offshore Norway. Drilling will be carried out by the 6th gen. harsh environment semisub Transocean Norge during March 2022. The rig is expected to commence operations for ConocoPhillips shortly, with the contract expected to have a firm duration of about 200 days with options attached.

The 6th gen drillship Valaris DS-4 is undergoing sea trials and tests offshore the Canary Islands ahead of its next contract with Petrobras. The contract is expected to commence in June 2022 with a duration of approximately 1.5 years.

Equinor received consent from the Petroleum Safety Authority Norway for exploration drilling in production licence 1049 in the North Sea. Well 34/9-1 S will be drilled in the Cambozola prospect using the Odfjell managed 6th gen deepwater and harsh environment semisub Deepsea Stavanger. The rig is currently operating for Equinor in Norwegian waters. 

Demand

3D Oil has been awarded exploration permit VIC/P79 containing the Vanguard gas prospect, situated in the Otway Basin offshore Australia. The permit covers 2,576 km2 and was awarded with a minimum work commitment that includes one exploration well during the first three years of the work program. The work program for VIC/P79 involves one exploration well at Vanguard Prospect in Permit Year 3, after the reprocessing, merging and interpretation of 630km2 of existing 3D seismic data. The Secondary Term will focus on adding additional value by exploring the large, underexplored region to the west. This will be achieved by acquiring and processing 1000km2 of 3D seismic data in Permit Year 5 with the intention of searching for additional closures. 

In its Q4 2021 report, Awilco Drilling stated that it is currently bidding its remaining rig - warm-stacked, mid-water semi WilPhoenix- on two tenders in the UK North Sea. One of these will commence in 2022 and the other in 2023 and both are currently undergoing customer evaluation and pending award. The driller also anticipates that a further two P&A programs will invite tenders within Q1/Q2 2022 for around four years of P&A work commencing in Q1/Q2 2023.

Chariot Energy has been formally awarded a 75% interest and operatorship of the Rissana licence offshore Morocco. The licence is to be operated in partnership with the Office National des Hydrocarbures et des Mines ("ONHYM") which will hold a 25% interest. The Rissana licence covers an approximate area of 8,489 km2 and surrounds Chariot’s existing Lixus offshore licence. The initial minimum license commitment is the acquisition of a 2D seismic survey, which will help to evaluate the extension and potential of these gas plays across Rissana.

i3 Energy has confirmed that the farm-in, joint operating agreement and trust deed have been agreed between the parties to enable Europa Oil and Gas to acquire a 25% non-operated working interest (WI) in a sub-area of UKCS Licence P.2358 Block 13/23c (containing the Serenity discovery) by funding a 46.25% paying interest for one appraisal well on the field, whereafter i3 will retain a 75% operated WI in the Block. i3 said that a further announcement will be made should Europa successfully complete its accelerated book-build and when transaction agreements for the farm-out are executed. As previously announced, the Company has been in discussions with a number of potential Serenity farm-in partners and these other discussions remain ongoing and may result in farm-out of additional working interests in the New Serenity Block. Majid Shafiq, CEO of i3 Energy plc, commented: "i3 is delighted to announce this potential farm-out which on completion will facilitate the drilling of an appraisal well on the Serenity oil field later this year. This well will provide critical information which will help us to delineate the size of this potentially very large discovery and move it towards development. On completion of the farm-in we look forward to welcoming Europa as our joint venture partner and to a fruitful relationship between our two companies."

Carnarvon Energy updated that the FEED work on the Dorado project offshore Australia is progressing on schedule and that it aims to FID the project by the middle of this year. Carnarvon estimates 1C resources of 86 million barrels of liquids and 2C resources of 162 million barrels of liquids. The Dorado project is located in permit WA-437-P with Santos being the operator (80%), while Carnarvon holds 20%.

Oil Price

Brent crude prices touched $119.84 a barrel on 3rd March, its highest level since 2012. This comes as Russian oil exports get disrupted as traders try to avoid global sanctions imposed on the country.

Mobilisation

Ultra-harsh environment jackup Maersk Innovator has left Denmark and is en route to the Catcher field in the UK North Sea to commence operations for Harbour Energy. The contract is expected to keep the rig working through 2023 and contains a one-well option.

Harsh-environment jackup Maersk Reacher has completed an engagement for Aker BP offshore Norway and is en route to Denmark. The rig’s next engagement is with TotalEnergies off Denmark and is expected to commence in early July 2022. The contract has a firm period of 21 months and has options attached.

Rig Sales

ADES continues its shopping spree and has now completed the acquisition of 2015-built PPL Pacific Class 400 jackup Hakuryu-12 (now Admarine 680) from Japan Drilling Company (JDC). The rig is valued by Esgian Rig Values in the range of $50 - $58 million. The acquisition price is in the range of $43-$45 million, but, as previously reported by Esgian, drilling equipment worth approximately $7-8 million is not included in the transaction price.

Yard work and upgrades

Diamond Offshore mid-water semisub Ocean Patriot has moved inshore Rotterdam and is expected to be offline for approximately three months to repair damage incurred to its anchor system during a recent weather event. The rig is currently on a long-term contract with Apache for development drilling operations in the UK North Sea. 

Financial

Velesto Energy reported revenues of $38 million from continuing operations for the fourth quarter 2021, increasing from $24 million reported in the corresponding quarter of 2020. This was mainly due to higher revenue generation from the company’s Drilling Services segment as a result of higher average jack-up rig utilisation of 78% (based on 6 rigs capacity), compared to 51% (based on 6 rigs capacity) in the preceding quarter, as well as higher revenue from Oilfield Services for Workover contract in Vietnam. Profit for the period was reported at $1.3 million, compared to a loss of $117 million reported in the fourth quarter 2020.

For the fourth quarter of 2021, Shelf Drilling reported revenues of $136.1 million, a 4.5% sequential increase compared to Q3 2021, a net loss of $17.2 million and a full year net loss of $78.6 million. For the period, the operator reported adjusted EBITDA of $43.5 million, representing an adjusted EBITDA Margin of 32%. Capital expenditures and deferred costs during the same quarter totaled $33.7 million, primarily impacted by the contract preparation project on jackup Shelf Drilling Tenacious. The Company’s cash and cash equivalents balance at December 31, 2021 was $232.3 million and its total debt at December 31, 2021 was $1.2 billion. Contract backlog was $1.7 billion at December 31, 2021 across 28 contracted rigs.

Awilco reported contract revenue of $1 million for the fourth quarter 2021, decreasing from $7.4 million reported in the third quarter. Operating expenses during the period were $5.8 million against $7.4 million in the preceding quarter. The company reported negative EBITDA of $7.8 million for the period, which increased from a negative EBITDA of $3.1 million reported in the third quarter 2021. Net loss for the period also increased to $50.7 million from $4.6 million reported in the third quarter 2021. The company made a net impairment charge of $31 million during the fourth quarter 2021, due to the continued cold stack status of the semisub WilHunter and lack of any contract backlog for its other semisub WilPhoenix. The company indicated that additional funding will be required to support the ongoing arbitration process, equipment recertification for the WilPhoenix and other working capital requirements, for which it is in the process of arranging a shareholder loan.

For the fourth quarter 2021, Icon Offshore reported revenue of $19.29 million, decreasing from $20.8 million reported in the third quarter of 2021. This was mainly due to lower revenue from Drilling Segment and lower utilisation of vessels in OSV Segment. Profit for the period decreased to $1.8 million from $4.03 million reported in the preceding quarter due to lower revenue and higher cost of sales in current quarter. The Order Book as at 31 December 2021 was $177.13 million, comprising of $161.54 million for OSV Segment and RM15.59 million for Drilling Segment. The company also indicated that long term contracts represents 91% of the Order Book.

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