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Bloomberg: Offshore is ready for the limelight again.
After years in the shadow of the U.S. shale patch, deep-water explorers from Royal Dutch Shell Plc to Talos Energy Inc., along with contractors such as Ensco Plc and TechnipFMC Plc, told investors at the Scotia Howard Weil Energy Conference in New Orleans this week they see a revival coming. That was a stark contrast to a subdued outlook for shale at the event.
“The offshore recovery is under way today,†Jon Baksht, chief financial officer at Ensco, told investors Tuesday at the conference. “This isn’t something that we’re waiting for.â€
While U.S. shale remains a global hot spot, with multibillion-dollar investment plans from supermajors Exxon Mobil Corp. and Chevron Corp., independent producers have been under pressure from investors to focus on delivering returns rather than ambitious growth plans. At the same time, after nearly half a decade of consecutive spending cuts, the offshore industry is expected to finally boost spending again to develop higher-gushing oil wells.
Hess Corp., which has assets in shale and in offshore, made the starkest contrast between the two basins during the conference when Chief Executive Officer John Hess showed a slide about what it would take to get the same amount of oil from the world’s busiest shale patch, the Permian Basin of West Texas and New Mexico, versus Guyana, one of the biggest discoveries of its kind offshore.
To suck out the equivalent of 120,000 barrels of oil a day, the Permian Basin would need a $12.8 billion investment compared to $3.7 billion for the first phase of the Liza section of the Guyana project, in which Hess is teaming up with Exxon.
Offshore capital spending has been cut in half since oil prices first started to fall in 2014. This year explorers and producers are expected to boost offshore spending 3 percent to $155 billion and another 10 percent next year, according to Ensco slides on Tuesday. That compares to a double-digit drop in spending in North American land this year, Schlumberger Ltd. and Halliburton Co., two of the biggest providers of oil services, told investors on Monday.
Tim Duncan, CEO of deep-water explorer Talos Energy Inc., considers himself a contrarian for wading farther into the Gulf of Mexico when others were flocking to the Permian, which straddles Texas and New Mexico.
“Investors are thinking about being basin-agnostic again, and that at least gives us the opportunity to reintroduce the Gulf of Mexico,†Duncan said Tuesday in an interview in New Orleans. “It’s allowing investors to just rethink under a new lens how they view offshore, and we have to take advantage of that opportunity.â€
Fracking shale rock for oil and gas can be done in a matter of months. But it may take years to develop a deep-water area, and before any rigs can start drilling, governments around the world need to auction exploration and production permits. Those auctions have been more frequent lately.
“Take a look back from when we were at this conference one year ago today and we’re up 25 percent just in terms of the number of open tenders that are out there year over year,†said Baksht of Ensco, which is poised to become the world’s biggest offshore rig contractor if its merger with Rowan Cos. closes later this year. “We are seeing that increase in spending and increased activity in the offshore space today.â€
So much so that for the first three months of this year, equipment maker TechnipFMC is expecting a quarterly record for inbound orders of subsea gear, an historical proxy for offshore activity because all wells away from land need the valves and pumps that sit on the seafloor.
The return to offshore activity is just a start, though. It’s not a full-fledged boom. There is still a glut of older, unused rigs keeping drilling contractors from having widespread pricing power for pushing up the rents on their vessels.
But for Diamond Offshore Drilling Inc. CEO Marc Edwards, simply hearing of spending hikes from other large explorers such as Equinor ASA and Petroleo Brasileiro SA was critical to realizing better days are ahead.
“Their exploration budgets are significantly moving north,†he said. “That’s the first sign of recovery we needed in the offshore space.â€
Photo used under CC 4.0 Author: Flerg
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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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