NADL: Statoil ends West Venture rig contract after 15 years

West Venture, a semi-submersible drilling rig, has ended its adventure with Norway’s largest oil company Statoil, after fifteen years in service.

The owner of the rig, North Atlantic Drilling Limited (NADL), said on Thursday the rig had completed its contract. The rig, built in 2000, is now undergoing preparations to remain idle in Norway with a reduced crew and will continue to be actively marketed for employment.

Furthermore, the company provided an update on its new build program. The construction of the harsh environment semi-submersible drilling rig the West Rigel is ongoing at Jurong Shipyard in Singapore. NADL says that delivery from the yard is expected during the fourth quarter of 2015, even though the rig was previously scheduled to be delivered in the second quarter of 2015. The final yard installment due upon delivery is approximately $455 million.

Profit drops in 2Q

NADL reported a profit of $44.2 million in 2Q 2015, as opposed to a profit of $59.7 in the 2Q 2014.

The company’s total operating revenues for the second quarter 2015 were $210.7 million compared to $342.6 million for the same period last year, and compared to $192 million for the first quarter of 2015. The primary reason for the increase is the West Phoenix having less downtime in Q2 compared to Q1, due to BOP repairs.

Operating income for the second quarter was $64.5 million, an increase of $27.6 million compared to the first quarter operating income of $36.9 million, but a decrease compared to $104.8 million in the second quarter of 2014. The increase is primarily due to the West Phoenix, combined with lower operating costs as the West Navigator is now off contract and stacked.

New work not likely in 2015

According to its report, North Atlantic Drilling continues to believe the market will remain challenging through 2016 with visibility for 2017 and beyond is dependent upon commodity price stability, oil companies realizing the benefits of their capital spending rationalization programs and continued fleet attrition.

“With the exception of some contract roll-overs, we do not expect to see new tender awards for work commencing in 2015,” NADL said.

The few tenders that are active have start dates after the next winter season and into the second half of 2016 and beyond.

NADL notes that customer conversations continue to be focused on the renegotiation of existing contracts, often in exchange for an extended term.

Stacking & scrapping

The company further elaborated: “We expect stacking and scrapping activity to continue through the second half of 2015 and well into 2016. Scrapping activity has continued in the second quarter with an incremental 14 floaters designated for retirement and currently 28 cold stacked units. While the premium jack-up market has yet to see the same levels of stacking and scrapping, there are approximately 50 idle units out of a total marketed fleet of 480 that are older than 30 years.

“Additionally there are 100 units that are rolling off contracts by the end of 2016, which are also older than 30 years. Together, these 150 rigs, or 30% of the total fleet, represent prime candidates for retirement.”

According to NADL, the total marketed supply of floaters in UK and Norway currently stands at approximately 43 units and 29 idle by the end of 2016.

“We continue to expect further units to become idle or scrapped over the next two years. A significant number of units rolling off contract are 25 years or older, and although stacking costs are proving to be lower than expected, many of these rigs need to complete an SPS and/or repair and upgrades in order to reenter operation,” the company said.

Further, there is a high likelihood that a number of these units will exit the North Sea market or either be scrapped or cold-stacked with limited reactivation incentive, leading to limited fleet growth. NADL concluded that the potential reductions to active supply combined with significant barriers to entry in the harsh environment regions could lead to increased supply constraints in the eventual recovery.

NYSE delisting threat

On August 20, 2015, the company received notice from the New York Stock Exchange (NYSE) that it is no longer in compliance with NYSE’s continued listing standards because the average closing share price of the company’s common stock for the consecutive 30 trading-day period ending on August 17, 2015, has fallen below the requirement to be at least $1.00 per share. NADL says that this notice does not have an immediate effect on the NYSE listing of its common shares.

Subject to the NYSE’s rules, NADL has until February 20, 2016 to regain compliance with the minimum share price rule. The company can regain compliance at any time during the six-month cure period ending on February 20, 2016 if on the last trading day of any calendar month during the cure period the company’s common shares have a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of such month.

NADL says it intends to comply with the NYSE listing rules and regulations within the six-month cure period and is considering all of its alternatives.

Offshore Energy Today Staff

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