Rig specialist Seadrill has reported its best set of quarterly operating results ever, and says that demand for high-specification deep and ultra-deepwater drilling units will continue to drive the market going forwards for the foreseeable future.
The Norwegian player generated Q1 2013 EBITDA of US $713m and net income of $440m, and stated that the fundamentals are still in place for a strong offshore drilling mar- ket. “Ultra-deepwater production is estimated to increase from approximately 1 MM b/d currently to approximately 5 MM b/d in 2020.
“Strong production growth is likely to spur an increase in development drilling programs. Calculations by the independent energy advisor Rystad show that another 185 new units are needed by 2020 in order to meet the demand. In these numbers no additional supply is assumed to replace the 95 units that are older than 30 years.”
Specifically in the ultra-deepwater floating rig segment (more than 7,500 ft water depth capable), the utilisation rate for the global fleet remains at 100%, with a total of 21 new units to be delivered in 2013 and 21 units in 2014. “Only two newbuild units are available for 2013, while 15 of the newbuild units for 2014 are without a fixed contract. However, specific discussions are ongoing for most of the uncommitted units and it is likely that the fleet will remain 100% utilised,” it stated in its results outlook.
The fact that only 11 new units have been ordered for delivery in 2015, coupled with the schedule for significant new ultra-deepwater development drilling, may lead to a tighter market, it added. While Africa and the US Gulf were the predominant regions for ultra- deep contracts during Q1 2013, with that trend expected to continue, Seadrill said that incremental demand from Asia, Brazil and the Mexican GoM is likely to further diversify and tighten the supply demand balance.
“We anticipate an increasing diversity of contract terms in the ultra-deepwater market with relatively short-term contracts being related to exploration drilling and activity from small and mid-sized independent oil companies. This customer segment is counter-balanced by long-term drilling campaigns underwritten by development drilling programs and major international oil companies’ exploration needs.”
The company went on to add that the investment case for 6th and 7th generation ultra-deep drilling units is further supported by the fact that several operators are replacing 4th and 5th generation deepwater units with modern equipment in order to meet new requirements and add additional safety mar- gins to their operation.
“Oil companies continue to increase their budgets and spending for ultra-deepwater investments by double-digit numbers; a strong trend that clearly supports deep-water drilling,” it added.
In April this year Seadrill took delivery of its ultra-deepwater newbuild drillship, the West Auriga, on time and on budget from Samsung in South Korea. Later this year it will take delivery of two more ultra-deep drillships, as well as five jackups, one tender rig and one harsh environment jackup. In 2014 it has four ultra-deep drillships due for delivery from Samsung, while in 2015 it will receive two harsh environment semisubmersible rigs and four jackups.
It currently has its ultra-deep West Tellus unit available in 2013, and three uncontracted ultra-deep units under construction, as well as the West Navigator coming off contract in June 2014. “Discussions with clients are ongoing for all these units and we do expect to announce new contracts for most of these units within the next six months. The average contract duration for our contracted deepwater units is 44 months,” it said.