Demand strong for high-quality drilling rigs and drillships

Paul Boughton

Continuing worldwide demand is driving investment in high-quality drilling rigs and drillships. Sean Ottwell reports.

Trinidad Drilling has re-signed long-term, take-or-pay contracts with expanding gross margins on 24 existing rigs.

"Trinidad is known in the industry for its modern, technically advanced equipment that performs well in today's challenging drilling environment," said Lyle Whitmarsh, company president and ceo."Our ability to re-sign our equipment to multi-year, take-or-pay contracts and lock in improving market conditions reflects the ongoing demand for our equipment and our track record of high performance," he added.

As a part of its strategy to manage cyclicality in the drilling industry, Trinidad maintains a blend of long-term and spot market exposure over its fleet. This provides revenue stability during weak industry conditions, while also allowing the company to participate in the upside as conditions improve.

In line with this strategy, Trinidad recently completed contract negotiations on 17 rigs which were due to expire at the end of 2011. These rigs have now been re-signed with the same customer for an additional three-year term at 100 per cent utilisation at increased day rates. The company says that successful re-contracting of these rigs reflects the increasing demand for high-quality drilling equipment.

In addition, Trinidad has re-signed another seven rigs, including four rigs that will be moved to the Powder River basin in Wyoming, creating a new operating area. These seven rigs have also been contracted for three years at 100 per cent utilisation.

Including the rigs being constructed in 2011 and the re-signed contracts, Trinidad has 52 per cent of its fleet under contract with an average term remaining of approximately 2.3 years. Following the completion of the rig build programme, the company will have a total of 122 drilling rigs with 56 in Canada, 63 in the US and three in Mexico.

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Jackups and drillships

Noble has exercised two of its four options with Sembcorp Marine's subsidiary Jurong Shipyard for the construction of additional high-specification, heavy-duty, harsh environment JU3000N jackup drilling rigs. This order will bring to four the total number of new jackup rigs the company will have under construction.

Total delivered costs are estimated at approximately US$235 million per rig, including project management, spares, and start-up costs. Payment terms are consistent with the order of the two rigs placed in December 2010: 20 per cent of the construction price due at contract signing, 20 per cent at steel cutting, and the remainder at delivery. Unit deliveries from the shipyard are expected in the third quarter of 2013 and first quarter of 2014. The company still has options for up to two additional units which must be exercised by 1 January next year.

The Friede & Goldman JU3000N design is an enhanced evolution of the JU2000E design and represents the latest generation of high-specification jackup drilling rig with greater capacities and capabilities than most existing units. The rigs, which are approximately 231 feet in length and 270 feet in breadth, will have the capability to operate in water depths up to 400 feet and drill to depths of 30,000 feet. They will each have a 75ft cantilever, 2.5 million pounds of hook load capacity, a high capacity mud circulating system, and a 15,000 psi blowout preventer system. The units are capable of off-line pipe handling and offer accommodation for up to 150 people.

"Noble's fleet evolution is well underway as we focus on adding rigs with superior technology, equipment, and capabilities," said David W Williams, Noble’s chairman, president and ceo. "With the addition of two more JU3000N units, Noble will have four out of the eleven jackups in existence or under construction with hoisting capacities of 2.5 million pounds. We expect ultra-premium units such as these to be in high demand and look forward to serving our future customers' growing needs in this key market segment."

Lundin Petroleum has commenced its Malaysian drilling campaign with the spud of the Tarap-1 well in the SB 303 Block offshore Sabah, East Malaysia.

The well will target Miocene sandstones in the Kindu sub basin. The well will be drilled with the Offshore Courageous rig in a water depth of approximately 70m. It will be a deviated well, directionally drilled to intersect a series of stacked seismic anomalies, with a planned total depth of 2140m subsea.

The well is the first of the five well programme planned in 2011 by Lundin Malaysia in its Malaysian blocks.

Lundin Petroleum holds 75 per cent interest in SB303 through its subsidiary Lundin Malaysia. Lundin Malaysia's partner is Petronas Carigali with a 25 per cent interest. Lundin Malaysia operates five blocks in Malaysia, namely PM308A, PM308B, SB303, SB307 and SB308.

Ashley Heppenstall, president and ceo of Lundin Petroleum said:"We are very pleased to commence our five well drilling programme in Malaysia, a country where the Lundin Group achieved significant exploration success in the 1990s."

The company has also drilled its first appraisal well 16/3-4 on the Avaldsnes discovery located in PL501 in the North Sea sector of the Norwegian continental shelf (NCS).

The main objective of the well 16/3-4 is to delineate the Avaldsnes discovery made in 2010 with estimated recoverable resources between 100- 400 million barrels of oil in PL501. The target is to confirm the presence of late Jurassic sand approximately 5 km southeast of the Avaldsnes discovery well 16/2-6.

The planned total depth is approximately 2000m below mean sea level and the well will be drilled using the semi-submersible drilling rig Bredford Dolphin. Drilling is expected to take approximately 45 days. The second appraisal well, 16/2-7, will spud directly following the completion of well 16/3-4 using the same rig.

Lundin Petroleum is the operator of PL501 with 40 per cent interest. Its partners are Statoil Petroleum with 40 per cent and Mærsk Oil Norway with 20 per cent

In other news, Pacific Drilling has received delivery of its newest drillship, the Pacific Mistral. It can operate in water depths of up to 12,000 feet and drill wells of up to 35,000 feet total depth. The rig features technologically advanced equipment that allows customers to improve drilling efficiency, including offline handling capabilities.

Pacific Drilling ceo Chris Beckett said, "We are proud to announce the delivery of the Pacific Mistral. This constitutes the third on-time, on-budget delivery in Pacific Drilling's fleet of six premium ultra-deepwater drillships. The final payment to the shipyard was substantially funded by our project facilities agreement lenders, consisting of two export credit agencies and nine commercial banks based in the US and Europe. We are in the advanced stages of negotiations with several major E&P companies and expect to announce a drilling contract for the Pacific Mistral in the near future."

With its best-in-class drillships and highly experienced team, Pacific Drilling is a fast growing company that is dedicated to becoming the preferred ultra-deepwater drilling contractor. In addition to the three ultra-deepwater drillships delivered to date, Pacific Drilling expects delivery of an additional drillship in August 2011 and has two drillships on order at Samsung for delivery during 2013.

Aker Solutions has won two contracts to supply complete drilling equipment packages for two new deepwater drilling units that are being built by Cosco, the Chinese shipbuilding company.

The combined value of the contracts is about US$195 million, and includes options for a further two units.

"These contracts underline our attractive offering in the deepwater drilling market. Current tender activity is high, and we are pleased to see that our position in the deepwater market is competitive," said Thor Arne Håverstad, executive vice president and head of Aker Solutions' drilling technologies business.

The equipment will be delivered to both units during 2012 and 2013.

Rowan sells LeTourneau to fund drilling technologies

Text: Rowan has entered into a share purchase agreement with Joy Global, a worldwide leader in high-productivity mining solutions, to sell all shares of common stock held by Rowan in LeTourneau Technologies for US$1.1 billion in cash.

Matt Ralls, president and ceo, commented, "We are pleased to enter into this agreement with Joy to monetise our investment in LeTourneau. This transaction is consistent with our stated strategy to separate non-core businesses, and we expect that most of the after-tax proceeds, estimated at approximately US$875 million, will ultimately be redeployed into our offshore drilling business, either through continued growth of our high-spec jackup fleet or expansion into the ultra-deepwater drilling segment.

Ralls expects this transaction to create additional opportunities for LeTourneau and its employees, who will become part of an organisation that is focused on manufacturing and will continue to encourage further innovations in both the mining equipment and drilling systems businesses.

“I want to personally thank the LeTourneau management team for the many organisational and operational improvements they have made in the company and their invaluable assistance in reaching an agreement with Joy. I likewise want to thank all of the LeTourneau employees for their dedication and service over the years as part of the Rowan family," he added.

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