October 2019 /// Vol 240 No. 10

Columns

Drilling Advances

Steadier as she goes

Jim Redden, World Oil

If you happen to have a floater idling about that is equipped to handle nasty sea states, now’s the time to take it out of mothballs.

The heightened demand for semis capable of operating in the Barents Sea, the Norwegian North Sea and equally harsh environments is but one indication of a global offshore market that continues to steer in a positive direction as 2020 approaches. Major offshore drilling contractors also point to the more placid Caribbean, namely Guyana and neighboring Suriname, as rapidly ascending job sites that have been fewer and farther between over the past few years.

Moreover, while the ultra-deepwater Golden Triangle of the Gulf of Mexico, Brazil and West Africa are again showing signs of life, the pace of recovery is not yet on par with their closer-to-shore counterparts. Those were but a few of the trends seen during the latest earnings season by prominent contractors Transocean Ltd., Diamond Offshore Drilling Inc., Noble Corp. and the recently re-branded Valaris, formerly Ensco-Rowan.

Transocean President and CEO Jeremy Thigpen cites the securing of a nearly 120-day contract for the Transocean Barents semisubmersible to drill three wells for Equinor offshore Newfoundland, Canada, in the Flemish Pass as a “tangible indicator that the high-specification harsh-environment market is in full recovery.”

‘We’re extremely pleased with the direction of the high-specification harsh-environment market, where our top-tier assets are fully utilized. Day rates are approaching and, in some cases, exceeding $400,000/day and customers are once again providing downtime banks and reimbursements for mobilization and demobilization,” he said.

Valaris President and CEO Thomas P. Burke said the emerging recovery is not reserved to floating assets, as reflected in a trio of harsh-environment jackups that landed either extensions or new contracts. “All of our marketed jackups are either currently under contract or scheduled to begin contracts,” he said. Valaris replaced its storied predecessors in late July as part of “our transition to a larger and more diverse organization,” Burke said of the name change.

As for the globe’s deeper waters, Thigpen says, “while we’re somewhat frustrated with the pace and trajectory of the ultra-deepwater market, we remind ourselves that we have moved off the bottom and are clearly in the early stages of what we expect will be a much broader recovery.”

Outside of the traditional deepwater triumvirate, major discoveries by ExxonMobil have heightened interest in the Guyana and Suriname basin, where no less than five rigs, including three Noble ultra-deepwater drillships, are expected to be on location by year-end 2019, says Noble Sr. V.P. of Marketing and Contracts Robert Eifler. “Additional rig needs offshore Guyana are increasingly likely over time, as well as offshore Suriname, where further exploration is set to commence during the third quarter,” he told analysts on Aug. 2.

The North Sea, however, remains one of the world’s more reliably stable operating theaters. “It goes without saying that everyone for a while now realizes that the North Sea has picked up, first and foremost, among other geographies,” says Diamond Offshore President and CEO Marc Edwards.

Hard line. While floater day rates are improving, Burke says more than two-thirds of the contracts running to the end of 2020 are for durations of less than one year. “We are seeing floater utilization go up, and correspondingly, we have seen floater pricing go up. But the lengths of the contracts we were responding to are shorter than when we would like.”

Overall, however, market conditions have improved to the point that drillers say they are hesitant to re-activate stacked units without acceptable compensation. “We will not reactivate an asset without being compensated for the reactivation and startup costs in the form of higher day rates, longer terms and/or lump sum reimbursements,” says Transocean’s Thigpen. “We’ve established a very high bar for reactivating an asset at this point in time.”

The same for Noble. “We are going to continue to show a great deal of discipline around reactivations. We are anxious to do that (reactivate cold-stacked rigs), but we are not going to do it until the contract will reward us for the investment put into the unit and to get a good return for stakeholders,” CEO Julie Robertson said.

Rewarding efficiency. Offshore contractors also are quick to point out that per-rig efficiencies and digital advances are not the sole domain of their land peers. “According to the (IHS-Markit) Rushmore database, we’ve drilled three of the best four wells that have ever been drilled in the Gulf of Mexico,” says Diamond’s Edwards.”These are wells down to 30,000 ft. They’re very complicated, and in a regulatory environment that is one of the most onerous in the world.”

Edwards said the recent installation of the Sim-Stack technology, described as the industry’s only cybernetic BOP service, on two semis has already paid dividends by heading off two unplanned subsea BOP stack pulls.

During the second quarter, Noble debuted its wholly owned managed pressure drilling (MPD) on the Noble Globetrotter II drillship for a Black Sea drilling program. 

Meanwhile, Thigpen argues it’s high time day rates get in sync with the efficiencies delivered. “We bring tremendous efficiency to our customer drilling programs. As such, we need to increase day rates to levels that are more reflective of the value that we create. More importantly, day rates must improve to levels that enable us to generate meaningful free cash flow.”” 

The Authors ///

Jim Redden Jim Redden, a Houston-based consultant and a journalism graduate of Marshall University, has more than 40 years of experience as a writer, editor and corporate communicator, primarily on the upstream oil and gas industry.

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