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With the recent dip in oil prices, like many drilling contractors, ship owners have had to stack or Layup vessels.
It is always a big decision to layup a vessel. But with recent market conditions many oil exploration companies with marine fleets have had to Layup vessels until the market improves.
“Laidup” or “Layup” of a ship technically means the ship will be taken out of service.
The reasoning behind a layup can be to reduce costs. These costs include wear and tear, staffing, fuel, and insurance costs during the non-profitable time.
Another reason to Layup a vessel is due to an oversupply of available ships with the intention of waiting to a period of increased demand. These Layup periods can last for a few weeks to over five years.
Layup options fall in to four separate categories:
|
Hot |
up to 3 months |
(H) |
|
Warm |
up to 12 months |
(W) |
|
Cold |
up to 5 years |
(C) |
|
Long term |
5 plus years |
(L) |
Hot Layup (24-hour reactivation)
This Layup condition is suitable for up to a month out of service. In this condition, the vessel is held within Classification and Flag State requirements, although crew numbers may be reduced to certified minimum safety crewing limits. Machinery is kept operational, but economies are made. The vessel is located in an area close to potential cargo trade routes.
Warm Layup (one-week reactivation)
Suitable for up to 12 months out of service. In this condition, vessel crewing is reduced to below the trading limit and in agreement with the Flag State, Classification Society, insurers and local authorities. Most ports will only grant a temporary permit to Layup a vessel in this condition in port, provided that Class and Flag surveys are conducted. There may be local restrictions on vessels operations such as restrictions on the transfer of oily bilge water.
Cold Layup (three-week reactivation)
Suitable for up to five years out of service. In this condition, vessel crewing is in line with emergency requirements to deal with fire, flooding, mooring and security watch. Cold ship Layup locations are generally remote so access to the vessel can be limited. Upon reactivation, the vessel may need to go direct to dry dock before trading, depending on the extent of any hull marine growth. It is imperative that all preparations and processes during cold layup are well documented as crew changes may be significant.
Long-term Layup (three-month reactivation)
Suitable for up to more than five years out of service. In this extended condition, preparations are comprehensive as original manufacturers are consulted for critical equipment, any remedial work done on reactivation is likely to be extensive and unpredictable, such as renewal of alarm systems that may have become obsolete. For long-term Layups, several vessels are Laidup side-by-side to minimize supervision costs.
Sites are chosen on the basis of:
Shelter from the open seas, winds and weather.
Security
Proximity to active marine areas for quick reactivation from Hot Layup periods.
Availability of repair facilities.
Availability of services such as water, provisions and fuel.
Workable Port, Anchorage and Wharf dues/fees.
Anchored water depth needs to be sufficient with good holding ground.
Availability of ship agents to handle port documentation and crew changes.
Vessels that are Laidup are deemed to be unprofitable for certain companies and sometimes show a negative value of it’s assets. When a vessel is unprofitable it is the Company’s decision to enable ships to Layup. But, no matter how bad the business is, it is just a matter of time before the company gets back to profit making.
Sources:
https://www.mekurteguh.com/shipcare
https://www.marineinsight.com/guidelines/important-points-to-note-while-preparing-ships-for-lay-up/
https://gcaptain.com/the-unwanted-ships-how-to-lay-up-a-vessel/
Curated by Tom Shrader
Tom has been in oilfield and marine equipment sales for over 20 years, he is currently the Business Development Manager for Rig Lynx, an oil and gas social network where he manages client expectations and creates intuitive ways to drive traffic to their digital front door.
You can contact Tom for any other information about this article or just to have a chat by downloading Rig Lynx on your iOS or Android device and connecting with him today!
Valaris Limited announced new contracts awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2023. Three-year contract with Petrobras for drillship VALARIS DS-8. The rig will be reactivated for this contract. The total contract value is approximately $500 million, including a $30 million mobilization fee. 100-day contract with a TotalEnergies affiliate for drillship VALARIS DS-12. The contract is expected to commence in second quarter 2023. 70-day contract with Beach Energy offshore New Zealand for heavy duty modern jackup VALARIS 107. The contract is expected to commence in third quarter 2023. The total contract value is approximately $26 million. President and Chief Executive Officer Anton Dibowitz said, “We are particularly pleased to have secured the award for preservation stacked drillship VALARIS DS-8, for a contract that is expected to generate a meaningful return over the firm contract term, and we remain focused on exercising our operational leverage in a disciplined manner. This most recent award represents the sixth contract awarded to one of our high-quality stacked floaters since mid-2021, and speaks volumes about our demonstrated track record of project execution when reactivating rigs.” Dibowitz added, “Following the reactivation of VALARIS DS-17 and DS-8, we will have ten floaters working across the golden triangle, including four drillships in Brazil, a market where we expect to see continued growth over the next several years.” Updated Guidance As a result of the contract awarded to VALARIS DS-8, which will require the rig to be reactivated from preservation stack, we are updating our first quarter 2023 and full-year 2023 guidance provided on our fourth quarter 2022 conference call on February 21, 2023. First Quarter 2023 Contract drilling expense is expected to increase by approximately $5 million to $385 million to $395 million. Adjusted EBITDA is expected to decrease by approximately $5 million to negative $5 million to breakeven. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $25 million to $30 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Full-Year 2023 Revenues are anticipated to be $1.8 billion to $1.9 billion, unchanged from the guidance provided on our fourth quarter 2022 conference call. Contract drilling expense is expected to increase by approximately $60 million to $1.49 billion to $1.59 billion. Adjusted EBITDA is expected to decrease by approximately $60 million to $180 million to $220 million. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $280 million to $320 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Capital expenditures are expected to increase by $60 million to $320 million to $360 million. Source: Valaris Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Seadrill Limited announced that the West Neptune has executed approximately six months of term extensions with LLOG Exploration Offshore, L.L.C in the US Gulf of Mexico. The extensions will commence in direct continuation of the existing term, and will keep the rig busy until Q3 2024, furthering Seadrill and LLOG’s long-term association. Total contract value for the extension is approximately $79 million. Source: Seadrill Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Semisub rig owner Dolphin Drilling has inked a new contract with Peak Petroleum in Nigeria for its 1974-built Blackford Dolphin. The firm contract, which follows the letter of award in January, gives the Euronext Growth-listed owner of three rigs the potential to extend the unit’s backlog by a minimum of 120 days and up to 485 days. The deal adds to and will be a direct continuation of the previously announced 12-month contract with General Hydrocarbon Limited (GHL). Øystein Stray Spetalen-backed company said the effective dayrate associated with the minimum firm period of the contract is $325,000, including the mobilisation fee. “The final award of the contract for Blackford Dolphin shows the opportunities in Nigeria at a strong dayrate, in addition to building on the backlog for the rig. It also underlines the attractiveness of our assets, and we look forward to returning to revenue-generating operations in 2023,” noted Bjørnar Iversen, CEO of Dolphin Drilling. Source: Dolphin Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
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