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Saudi Arabia and other Gulf suppliers may have agreed to cut oil production again starting next month, but by all indications the taps are set to remain wide open until then — swelling crude stockpiles for at least a few more weeks.
The kingdom’s crude exports so far in April stand at 9.3 million barrels a day, according to tanker-tracking data compiled by Bloomberg. That compares with 6.8 million barrels a day through the first two weeks of March. What’s more, there are at least 10 supertankers with the capacity to haul a combined 20 million barrels of oil waiting to load at the Saudi port of Ras Tanura in the coming days.
State-owned oil company Saudi Aramco pledged to boost output to 12.3 million barrels a day in April as it slashed prices in a battle for market share, following the collapse of the three-year old OPEC+ pact in March. As the coronavirus spread across the globe, governments imposed restrictions on movement and demand collapsed further, as did prices.
Following marathon international talks this past weekend, there’s now a new global deal to limit output, with Saudi Arabia agreeing to trim production to 8.5 million barrels a day in May and June. There’s been no indication that any producer will close the taps before May, meaning millions of barrels a day of crude entering the market that aren’t needed.
“The arrangement is from May,†Prince Abdulaziz bin Salman, the Saudi oil minister, told reporters on a conference call on Monday in reference to the OPEC+ agreement. “All of April was sold.â€
In other words, the price war is still on for now. So far, the market hasn’t been impressed. Global benchmark Brent crude was down 5.4% at around $30 a barrel, by 5:50 p.m. in London on Tuesday. On Monday, the first day following the new agreement, futures rose by a meager 0.8%.
Another measure — the official selling prices that traders pay for actual barrels of crude in the physical market — indicates that Saudi Arabia is still looking to gain market share. The so-called OSPs for April were already at their lowest in at least three decades. The kingdom released May’s prices yesterday, deepening the discounts to most markets, especially Asia, where the cut was greater than expected.
Traders are awaiting similar figures from other Gulf producers like the United Arab Emirates and Kuwait, which generally follow the Saudi lead on pricing and production. They also have little incentive to cut output sooner than required.
U.A.E. Energy Minister Suhail Al Mazrouei said on his Twitter account after the meeting that the country “is committed to reducing production from its current production level of 4.1m†barrels a day. That’s at least 1 million barrels a day higher than it pumped in March, according to Bloomberg estimates.
All of that oil has to go somewhere, and with demand decimated, there’s only one obvious destination — storage. With cargo nominations already set for this month, Saudi Arabia isn’t likely to reduce shipments to its customers. But it could trim volumes it’s sending to storage tanks in Egypt, Rotterdam and Japan. Without any reduction in those flows, though, stockpiles will continue to build through the remainder of April.
Source: Bloomberg
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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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