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Oilprice.com – Mar 29, 2018, 4:00 PM CDT
Following a record year for production, deepwater drilling may be bound for another round of investment. All the oil and gas exploration financed in the decade of high prices that culminated in 2009’s $100 per barrel prices, has come into production or is soon to come online. From here, without further investment, the major oil companies will be looking at declining output. These big companies, the household names such as Exxon and BP, play the long game when it comes to oil production. They are, for all intents and purposes, the only players in deepwater drilling and must commit to investment soon if they want to avoid production declines.
Oil prices have now been above sixty dollars a barrel for over a full quarter. Not only are prices higher but deepwater drillers have slimmed down production, looking at lean and efficient plays rather than focusing on volume. Whereas the former price point for profitable deepwater drilling may have been in the seventy dollar a barrel range, the oil price crash forced companies to lower profitable production to fifty dollars per barrel, going as low as thirty-five dollars per barrel in some cases. Based on the recent price stability and with the possibility of prices going even higher with geopolitical flashpoints such as Venezuela and Iran, it might be time to go back to the “bad old days†of big fields and volume plays.
Shell, the deepwater leader, seems to have a coherent plan, bidding for deepwater leases in an area contiguous with its Perdido Basin leases all the way to and beyond the undersea border with Mexico, where it has snapped up newly opened leases potentially worth billions. Much of the reason for Mexico opening leasing to foreign companies was national oil company Pemex’s lack of deepwater expertise. But is Mexico ready for deepwater drilling? Political roadblocks could come up as soon as July, as the leading candidate in this year’s presidential race is Andres-Manuel Obrador, the perennial also ran who may finally have such an overwhelming lead that he will end up in Los Pinos, and complicate deepwater drilling by restrictions on foreign companies.
In contrast to Mexico, Brazil has long been a leader in deepwater development. However, it only opened up to independent foreign oilfield development in 2016. The past year has seen bidding from twenty companies on leases in the Copacabana waters, with Exxon the big winner, and over a billion dollars put into Brazilian government coffers. Each of the sixteen big blocks are estimated to contain over a billion barrels of recoverable oil.
Norway’s national petroleum company, Statoil, partnered with Exxon in many of its Brazilian bids, but deepwater drilling could not be more complicated than in Norway’s Statoil’s last Great Hope at home, Johan Castberg, the largest untapped field in Norway. The field is north of the Arctic Circle, in depths of up to 400 meters, and situated adjacent to the cod breeding grounds, Norway’s leading fishery, and a powerful lobby who will be sure to make sure the drilling is done with heavy safety oversight or not at all.
The majors may be looking in another direction, seeking to diversify, but ignoring the deepwater sector could be a grave error. The two top players, Shell and Exxonmobil, have both been making moves into alternative energy and electric cars. The question is whether they will continue hedging their bets with further investments into alternative energy or whether high oil prices will give them confidence to put money on what is the most challenging play in the petroleum field, deepwater exploration and development.
By Jon Sterling – Mar 29, 2018, 4:00 PM CDT
Brought to you by OutPut
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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