Danish offshore drilling contractor Maersk Drilling has received a notification from Tullow Oil of early termination for convenience of the drilling contract for the drillship Maersk Venturer.
Maersk Drilling said in a statement on Tuesday that the drillship Maersk Venturer has been working for Tullow offshore Ghana since February 2018.
The contract, signed in late 2017, was for development drilling on the Jubilee and TEN fields offshore Ghana. It was expected to end in February 2022. However, following Tullow’s early termination decision, the rig is now expected to end the contract in June 2020.
As a consequence of the termination, Maersk Drilling’s revenue contract backlog is reduced by $175 million covering the period from the end of the contract to February 2022.
Subject to commercial prospects, Maersk Drilling said it would take measures to reduce Maersk Venturer’s operating costs following the end of the contract.
Maersk Drilling maintains the profitability guidance for 2020 of EBITDA before special items of $325-375 million.
French oil major Total has selected a Maersk Drilling-owned drillship to drill at what the rig owner says will be a world record water depth in Angola-Namibia campaign.
Maersk Drilling said on Tuesday that it had been awarded contracts for a three-well exploration drilling project by Total E&P Angola Block 32, Block 48 and Total E and P Namibia B.V. for the 7th generation drillship Maersk Voyager.
The Maersk Voyager will be employed offshore Angola and Namibia for a campaign which includes the deepest water depth ever drilled offshore, the rig owner said.
The project includes two wells offshore Angola in Blocks 32 and 48, plus one well offshore Namibia. The campaign is expected to start in January 2020, with an estimated duration of 240 days.
The total value of the firm contracts is approximately $46.3m, including a mobilization fee. The contracts include two additional one-well options.
Maersk said that the well in Angola’s Block 48 would be drilled at a new world record water depth of 3,628 m. According to the drilling contractor, the current world record is 3,400 m, set by Maersk Voyager’s sister drillship Maersk Venturer when it drilled the Raya-1 well for Total offshore Uruguay in 2016.
Morten Kelstrup, COO of Maersk Drilling, said: “We are thrilled to once again push beyond existing boundaries in collaboration with Total, drawing upon our mutual experience from the exciting deepwater exploration projects we have collaborated on over the years.”
Maersk Voyager is a high-spec ultra-deepwater drillship which was delivered in 2014. It has recently performed its scheduled Special Periodic Survey in Walvis Bay, Namibia, after completing campaigns in Ghana and Equatorial Guinea in 2019.
Offshore drilling contractor Maersk Drilling has signed agreements with Halliburton and Petrofac to collaborate on the exploration program to be delivered under Maersk Drilling’s master alliance agreement with Seapulse.
Announcing the new agreements with the oilfield services providers on Wednesday, Maersk Drilling said that Petrofac would deliver well management services and Halliburton would deliver integrated well services, throughout the duration of the program.
The Seapulse portfolio spans shallow water and deepwater wells in several regions. Two wells in the UK North Sea have previously been announced as part of the workscope, which is expected to start drilling in the second half of 2020.
Maersk Drilling COO, Morten Kelstrup, said: “We’re thrilled to join forces with Halliburton and Petrofac for this program which breaks new ground in the industry by using a fully integrated service delivery model aimed at eliminating inefficiencies by aligning incentives and removing complexity across the entire value chain. Halliburton and Petrofac bring strong operational expertise and decades of experience in delivering and integrating oilfield services, which will further contribute to the ability to mitigate the operator cost risk associated with exploration drilling whilst we foster new ways of collaborating across the supply chain.”
Nick Shorten, Managing Director for Petrofac’s Engineering and Production Services West business, said: “Petrofac is delighted to be part of this exciting global supply chain collaboration. The aims of the Maersk Drilling and Seapulse alliance closely align with our own operating principles – we very much look forward to working with all parties to deliver effective and technically robust campaigns.”
“This collaborative model aligns with and leverages Halliburton’s proven integration approach that creates value for our global customers both on- and offshore,” said Steve Haden, Senior Vice President of Halliburton Project Management.
CEO and co-founder of Seapulse, Scott Aitken, added: “We are very pleased to see the well delivery model that we have entered into with Maersk Drilling continue to mature with world-class partners. The Seapulse business model leverages Maersk Drilling’s partnerships’ technological and operational expertise to drill and test a statistically relevant exploration portfolio of a scale normally only associated with major oil companies.”
Danish offshore drilling company Maersk Drilling has secured a three-well drillship contract offshore Myanmar with the Korean oil company POSCO International Corporation.
Maersk Drilling said on Friday that the drilling contract was for the Maersk Viking drillship. The contract is expected to start et 2019 end. According to the drilling company, the 154-day contract is valued $33 million, including a mobilization fee. POSCO will have an option to extend the contract for one more well.
The Maersk Viking is a 7th generation ultra-deepwater drillship delivered in 2013. Maersk Viking recently completed a drilling campaign for Aker Energy in Ghana where it struck oil at the Deepwater Tano Cape Three Points block. According to Maersk Drilling, the Ghana campaign included a well drilled at an ultra-deepwater depth of 10,125 ft.
Commenting on the POSCO deal, Morten Kelstrup, COO of Maersk Drilling said: “We are very excited about having the opportunity to work together with the POSCO International Corporation and helping them achieve their goals. This campaign will enable us to showcase the nimbleness of our deepwater fleet, including the ability to move our floaters from one region to another and quickly start up new operations. We look forward to demonstrating the capabilities of our 7th generation drillships in the Asian-Pacific market.”
In related news, POSCO International, formerly known as POSCO Daewoo, has recently awarded the front end engineering design (FEED) contract for the Shwe Phase 3 gas field development, located offshore Myanmar.
DORIS Engineering in Paris, as HHI sub-contractor, has started the Phase 3 FEED Design Competition whose scope includes a new LP Compression Platform bridge-connected to the existing SHP (Drilling, Central Production & Accommodation Platform).
Earlier, in September, McDermott also received a front-end engineering design (FEED) contract for the Shwe Phase 3 gas field development in late September.
The newly-listed offshore driller The Drilling Company of 1972 (TDC 1972), ex-Maersk Drilling, is now considered the strongest competitor among its mid-sized peers in the offshore drilling market.
Danish offshore driller Maersk Drilling, now named The Drilling Company of 1972 (TDC 1972), on Thursday listed on the Copenhagen Stock Market.
To remind, Danish shipping giant Maersk, the owner of Maersk Drilling, last February started a process to “demerge” the driller, living up to its August 2018 announcement it would split up with Maersk Drilling and list it as a standalone company.
Commenting on the driller’s listing on Thursday, Leslie Cook, Principal Analyst, Upstream Supply Chain, at global natural resources consultancy Wood Mackenzie, said: “In late 2017 we made the call that Maersk Drilling would be an acquisition target upon execution of their spin-off from AP Moller-Maersk.
“While only a few of the large drilling companies – Transocean, Ensco, and Seadrill – have elected to make acquisitions in the past two years, we believe that TDC 1972 will be part of the consolidation narrative in the near term.”
Cook added that the offshore rig market continues to face challenges with over-supply and tempered demand. Despite some recovery in the offshore rig market last year, Wood Mackenzie firmly believes more consolidation is needed before any meaningful movement in utilization occurs.
She added: “The newly independent TDC 1972 is the strongest competitor among their mid-sized peers. Their floating rig utilization is 75% (with six of their eight rigs working), while industry average for all floaters remains below 70%.
“The company also holds a leading position in the ever-growing harsh environment jack-up market. Over 50% of their jack-ups are rated for harsh environment and they have more harsh environment jack-ups in their fleet than any other company,” Cook said.
Offshore Energy Today, established in 2010, is read by over 10,000 industry professionals daily. We had nearly 9 million page views in 2018, with 2.4 million new users. This makes us one of the world’s most attractive online platforms in the space of offshore oil and gas and allows our partners to get maximum exposure for their online campaigns.
Danish offshore driller Maersk Drilling returned to profit in 2018 from a loss in 2017 while its revenues decreased due to lower day rates. The driller has said in its annual report for 2018 it is seeing signs of continued recovery in the offshore drilling market.
In 2018, Maersk Drilling’s revenue declined by 1% to $1.429 billion from $1.439 billion in 2017 due to lower average day rates across the fleet, partly offset by an increased number of contracted days. In 2016 and 2015 the driller’s revenues were $2.3 billion and $2.5 billion, respectively.
The driller’s profit for the year was $941 million compared to a loss of $1.5 billion in 2017. It is worth noting that Maersk Drilling’s profit in 2018 was the highest in five years. Namely, in 2016 Maersk Drilling had a loss of $790 million, in 2015 a profit of $601 million, and a profit of $468 million in 2014.
With an overall utilization of 69% in 2018 of the rig fleet, compared to 66% in 2017, Maersk Drilling has begun to see the effect of higher activity with an increased number of tenders and projects.
During the year, Maersk Drilling secured 12 new contracts and 13 contract extensions adding $503 million to the contract backlog. By the end of the year the revenue backlog amounted to $2.5 billion compared to $3.3 billion in 2017. Maersk Drilling has a forward contract coverage of 63% for 2019 providing a relatively high degree of visibility into 2019. The jack-up segment carries the highest forward contract coverage of 75% compared to 39% in the floater segment.
Maersk Drilling said it continues to see high demand for its ultra harsh environment jack-up rigs in the Norwegian sector. However, the market for floaters remains challenged with overcapacity and utilization at a level not yet able to support material pricing improvements.
As of December 31, 2018, Maersk Drilling had a net debt of $1.097 billion and liquidity reserves of $772 million.
Further, as part of the preparation for the separation, debt financing of $1.5 billion and a revolving credit facility of $400 million was secured in December 2018, from among others a consortium of international banks.
The process to establish a separate board of directors for Maersk Drilling, as well as an independent governance structure, was further progressed in January 2019 with the announcement of Kathleen McAllister, Robert Routs, and Robert M. Uggla as new board members joining Chairman Claus V. Hemmingsen, Martin N. Larsen and Mads Winther.
In 2019, capital expenditures are expected to be in the level of $300-350 million, an increase compared to 2018 due to the rig upgrades and yard stays.
Improving market fundamentals
According to Maersk Drilling, global offshore rig utilization levels continued to rise as a result of positive rig demand- and supply side factors.
The driller said that operator demand for offshore drilling rigs rose to approximately 480 rig years in 2018, representing an increase of approximately 2.5% when compared to the previous year. This moderate increase in rig demand was entirely driven by growth in demand for jack-up rigs of more than 4%, as the demand for floaters decreased by approximately 2% in 2018. Contractors continued to reduce offshore drilling rig supply, as 37 jack-ups and 20 floaters were scrapped during the year.
Leading indicators continued to provide support for future drilling activity, as increased tendering activity translated into more awarded contracts throughout the year. Contracting activity also exhibited an element of direct awards, where operators, either through alliances or directly with selected drilling contractors, bypassed the tendering process.
For the year ended December 31, 2018, total utilization levels for the global fleet stood at approximately 63% for jack-ups and 58% for floaters. This represents approximately a 4%-point increase compared to 2017.
Despite improved utilization indicators for the offshore drilling market, the global jack-up and floater markets continued to suffer from overcapacity.
The harsh environment segment, particularly in Norway, has benefited from limited supply of rigs resulting in increasing utilization as well as increasing day rates. The harsh environment segments are characterized by relatively higher barriers to entry and have exhibited above-average rig utilization and day rate levels over the course of the cycle compared with other more commoditized segments.
The industry continues to target cost reduction through operational efficiency improvements, integrated alliances and partnerships. A series of mergers and acquisitions amongst offshore drilling contractors also featured throughout the year. Altogether, this conveys a signal of continued recovery in the offshore drilling market, Maersk Drilling concluded.
The Norwegian offshore safety authority has given Maersk Drilling and Spirit Energy a deadline to rectify irregularities spotted during an audit in August related to drilling plans at the Oda field offshore Norway.
The Petroleum Safety Authority on Friday said it had found one non-conformity linked to the deficient management of tasks in the central control room on the Maersk Interceptor jack-up rig, during the audit conducted on August 21 and 22.
Apart from this, improvement points were identified in connection with deficient training, practicing and definition of organizational and operational barriers within well control, temporary plugback without sufficiently robust barriers as well as training and involvement of the safety service.
The companies were given a deadline of December 14, 2018, to report on how the non-conformity and improvement points would be addressed.
The objective of the audit was to follow up how the operator Spirit Energy and drilling contractor Maersk Drilling, together with the service companies, are meeting the regulatory requirements for planning, risk assessment, and execution of drilling and well operations on the Oda field.
The Oda field is Spirit Energy first development project on the Norwegian Continental Shelf. It is located in the southern part of the Norwegian sector of the North Sea, 10 kilometers east of Ula.
The field is in development and will use a subsea template with two production wells tied back to the Ula field and an injection well for pressure support.
The field development will include a four-slot seabed template with two production wells, and one water injection well, which will tie back to the Ula platform. The oil will be exported via Ekofisk to Teesside terminal in the UK while the gas will be sold at the platform to Ula for re-injection into the Ula reservoir to improve recovery.
The production is scheduled to start in August 2019, and it is expected to last for ten years.
As for the Maersk Interceptor, the Norwegian authorities recently gave approvals for the rig to be used for drilling of wells at Spirit Energy’s Cassidy prospect. The Cassidy sits about five kilometers north of the Oda field. Per available info, drilling of the Cassidy wells was expected to start on November 10 with a scheduled duration of 162 days.
Danish offshore driller Maersk Drilling has said it has entered into an agreement to sell the jack-up rig Mærsk Giant to an Australasian-based independent O&G operator.
Mærsk Giant was delivered in 1986, and upgraded in 2012. The rig is currently stacked in Esbjerg, Denmark. The new owners expect to use the rig for their Australasian operations, Maersk Drilling said.
Maersk Drilling did no say who the client was, nor what the value of the deal was. Bassoe Analytics puts the rig’s value between $4 million and $6 million. Prior to the sale, VesselsValue had the rig valued at $2 million.
“The sale is part of our fleet optimization in line with our strategic priority of maintaining a fleet of modern, high-quality assets. Given the limited prospects for Mærsk Giant, we believe a sale creates the highest shareholder value”, says Jesper Ridder Olsen, CFO of Maersk Drilling.
In 2015, Maersk Drilling decommissioned the jack-up Maersk Endurer (delivered in 1984), and in 2016, Maersk Drilling converted the jack-up Maersk Guardian (delivered in 1986) from a drilling rig to an accommodation rig.
The Mærsk Giant is one of the ultra-harsh environment jack-ups in Maersk Drilling’s fleet. The rig is fully equipped for high pressure/high temperature (HP/HT) drilling and is designed for year-round operation in the North Sea, in water depths up to 107 m (350 ft) with an available leg length below the hull of 132 m (435 ft).
Last time Offshore Energy Today reported on the Maersk Giant was back in late 2016 when the rig returned from its last gig with the company that was at the time known as Dong Energy. The rig apparently hasn’t worked since, and Dong Energy has in the meantime sold its oil and gas business to focus on offshore wind under the name Ørsted.
Prior to this, the rig worked for Talisman Energy. The Canada-based operator, which no longer exists as it was bought by Spain’s Repsol, used the Maersk Giant for several well plugging operations on the Varg field in the Norwegian section of the North Sea.
Maersk Intrepid rig and Martin Linge jacket; Image source: Total Norway
Offshore driller Maersk Drilling has been awarded a contract extension for the jack-up rig Maersk Intrepid by Total in Norway.
The rig has been on contract for Total on the Martin Linge field in the Norwegian part of the North Sea since 2014 and this contract has now been extended for another firm 196 days with options for additional 61 days, the driller informed on Tuesday.
The contract extension will start in September 2018 in direct continuation of the current contract and covers accommodation work for hook-up and commissioning of the Martin Linge production topside as well as potential drilling operations.
Lars Østergaard, Chief Commercial Officer of Maersk Drilling said: “It is very rewarding that we are able to secure an extension of a long term contract in a strategically important market.”
He added: “With this extension we are securing work for the rig all the way to Q2 2019.”
The Martin Linge oil and gas field is located in the North Sea approximately 180 kilometers west of Bergen. The field’s development plan includes integrated wellhead, production, and accommodation platform with a jacket, in addition to a floating, storage and offloading (FSO) vessel used for oil storage.
The jacket substructure is already installed on location in the North Sea, while the topside is being completed at the Samsung yard in South-Korea and will be transported to Norway in early 2018. The project has experienced schedule delays and cost increases due to delayed topside engineering, construction and currency impact.
The project was also hit by a fatal accident at the Korean yard in May 2017, when six people died, forcing Total to delay production start for the first half of 2019.
Danish offshore driller Maersk Drilling does not expect to see financial improvements from an increase in offshore rig demand until the market reaches a stable oil price above $60 per barrel or until industry cost levels adjust further to a lower oil price.
The current oil price remains below levels required to support sustainable economic returns for the offshore drilling market, the driller’s parent group, Maersk, said on Wednesday in its financial report for the offshore drilling part of business.
The offshore drilling sector continues to hold significant excess capacity, as approximately 130 floaters and 220 jack-up rigs remain stacked, while the newbuild order book still comprises approximately 40 floaters and 100 jack-up rigs, the clear majority of which do not have contracts. Approximately half of the idle floater rigs and one-third of the idle jack-up rigs are cold stacked with limited contracting ability, the company said.
The offshore drilling market showed continued signs of a marginal recovery in jack-up rig demand during 2Q 2017, buoyed by an increase in tendering and contracting activity toward the end of 2016. Tendering activity for floater rigs improved moderately, and further moderate market recovery is expected in the next 6 to 12 months.
According to the company, dayrates are expected to remain soft due to the significant excess supply of drilling rigs. The dayrates currently being tendered are typically close to or below operating cost. Furthermore, the contracts are short in length, leading to idle periods between contracts and higher operating costs due to repeated mobilization, start-up and ramp-down.
The industry continues to reduce costs while engaging in refinancing through equity offerings and demonstrating flexibility with creditors and shipyards. Consensus of reaching or approaching the bottom of the market has led to further M&A transactions for rigs during the second quarter. Moreover, the industry is showing increased interest in integrated alliances and partnerships as a means for differentiation and cost saving synergies.