The ultra-deepwater rig market is maintaining its pace in terms of tendering and contracting activity, with no remaining newbuild capacity available in 2013 and availability of units in 2014 also already cut by half, according to Seadrill.

The Norwegian-based driller, which reported record profits for the second quarter of this year, said that for 2014 the number of available newbuilds has been reduced from 20 to 10, with a number of other awards still pending. “We are confident that the current newbuild order book will be effectively absorbed into the operating fleet,” it stated in its results.

In particular it high- lighted Africa as a strong contributing factor in the demand for ultra-deep- water rigs over the next few years. In Angola and Nigeria a backlog of exploration work and several large discoveries to be developed are expected to result in a sharp increase in drilling activity, it said. Seadrill also expects to see increasing activity in East Africa where Mozambique, Tanzania and Kenya are amongst the countries with active exploration programs under consideration.

In Brazil, “a desire by Petrobras to high grade their floater fleet leaves us confident that they will continue to require the services of at least their existing fleet of high specification floaters”. The driller pointed out that the first block auction in five years raised a record 2.8 billion Reais, with most of the blocks in frontier regions or unexplored areas. Together with recent exploration successes, these new block awards are expected to result in increased demand in the region, it said.

In the US GoM, meanwhile, there is an increasing amount of development work as the market returns to normal operating conditions following Macondo. Currently out of 33 ultra-deepwater rigs, 23 are working on exploration projects. “We expect development work to accelerate leading to longer duration drilling contracts,” it added.

The market for harsh environment drilling rigs remains very tight and increasing demand in Northern Norway, Russia and Arctic regions is likely to tighten this further. Seadrill’s floaters (drillships and semisubmersible rigs) achieved an economic utilisation rate of 94% in the second quarter, compared to 92% in the first quarter.

The company also recently sold its tender rig business, comprising 18 units, to Malaysia’s SapuraKencana in a US $2.83 billion deal. The company booked a gain on the sale of $1.26 billion, which helped it push up net profit in the second quarter from $554 million a year ago to $1.75 billion this year. A rise in revenues from $1.12 billion to $1.27 billion on strong utilisation also added to the profit level.

Highlights post quarter included securing a 3-year contract for the newbuild drillship West Neptune with a total estimated revenue potential of $662 million, while also ordering in July four ultra-deep drillships from the Samsung and DSME yards for an estimated project price below $600 million per rig, with deliveries scheduled for the second half of 2015. It also secured a 180 day contract offshore China with Chevron for the newbuild ultra-deep drillship West Tellus with a total estimated revenue potential of $150 million, as well as subsidiary North Atlantic Drilling being awarded an extension of the current drilling contract with Shell, in addition to a new drilling contract, for the West Navigator, securing employment with first Shell and then Centrica to December 2014 with a total estimated revenue potential of $98 million.

It also took delivery in June on time and on budget of one ultra-deep newbuild drillship, the West Vela, from the Samsung shipyard in South Korea.

Its available units for 2014 include three ultra-deepwater newbuilds, the West Saturn, West Jupiter and West Carina. The West Tellus will complete its work for Chevron in 2Q 2014 and Seadrill says it is in advanced discussions for a follow on contract in West Africa. The average contract duration for its contracted deepwater units is 30 months.

Seadrill said in its results statement: “The fundamental outlook for the offshore drilling industry remains positive. The trend seen during the last few years in which the major oil companies focus their E&P investments to deepwater areas is likely to continue. At the same time oil and gas companies continue to demonstrate their preference for newer, more capable rigs. 6th generation ultra-deepwater floaters are preferred for their greater efficiencies, dual BOP capabilities, higher variable deckloads, and increased lifting capacities.”

It continued: “Over the long term we expect the market to increasingly demonstrate bifurcation in terms of both dayrate rate and utilisation for newer, more capable rigs over older commodity assets.”

Since January Seadrill has, including the acquisition of Sevan, added a total of nine deepwater assets to its fleet. 94% of its floater fleet is 6th generation ultra-deepwater.