Ocean Rig says rig demand picking up. Announces new deals

Market demand in the offshore floating rig sector is looking up, offshore driller Ocean Rig’s CEO said on Monday, revealing new contracts for its fleet.

Leiv Eiriksson semi-sumbersible drilling rig. Image source: Lundin Petroleum

Ocean rig on Monday said it had entered into a new drilling contract with Chariot Oil & Gas for a one-well drilling program, for drilling offshore Namibia using Ocean Rig Poseidon drillship.

The contract is expected to start in direct continuation of the previously announced program with Tullow in the third quarter of 2018.

Also, Ocean Rig said it had entered into a Letter of Intent (“LOI”) with a European major oil company for a firm two-wells program plus two optional wells, for drilling offshore West Africa.

The contract is expected to start in direct continuation of the program with Chariot Oil & Gas Limited in the fourth quarter of 2018 and will also be performed by the Ocean Rig Poseidon. Ocean Rig, which did not say anything on the dayrates, said the contract was subject to the negotiation and execution of definitive documentation and other approvals.

Furthermore, Swedish operator Lundin Petroleum, via its subsidiary Lundin Norway, declared its seventh option to extend the existing contract of the Leiv Eiriksson semi-submersible drilling rig.

$573,000/day with Total

The Leiv Eiriksson is now expected to have firm employment secured until December 2018. If Lundin exercises its remaining five one-well options, the rig could potentially be employed until the third quarter of 2019. Ocean Rig did not talk about the rig’s dayrate however, the rig previously had a dayrate of around $150000.

The last but not least, Ocean Rig said its previously announced discussions with Total E&P Angola Block 32 for the Ocean Rig Skyros drillship contract have now been concluded.

The result is an amendment to the existing drilling contract that includes a provision that the day rate will remain fixed for the remaining duration of the contract at approximately $573,000/day.

The deal with Total is the most important one, as it keeps the rig working at a substantial dayrate for a longer time. While Ocean Rig this time did not talk about the duration of the Ocean Rig Skyros contract, information found on its website shows the rig as expected to work for Total till mid-2021.

Pankaj Khanna, President and Chief Executive Officer of the Company, commented: “We are pleased with the progress of the floater market and expect further developments in the coming months that may increase the utilization of the company’s drilling units into 2019. The conclusion of the Skyros discussions removes any uncertainties with respect to the company’s estimated contract backlog and solidifies our strategic relationship with Total.

“We currently see higher levels of inquiry in the market that we expect will translate into higher utilization in the coming months for the overall floater fleet.”

Ocean Rig Fleet Status (Data from Bassoe Analytics)

While the demand might be picking up, the levels are still far from strong. This has been shown recently by Ocean Rig itself which in June chose to postpone the delivery of an 8th generation newbuilding drillship.

The drilling company agreed with Samsung Heavy Industry to postpone the delivery of the Ocean Rig Crete, from the first quarter 2019 to September 2020, with an option to bring the date forward at the option of Ocean Rig.

According to data form Bassoe Analytics, Ocean Rig has only two rigs actually drilling – Leiv Eiriksson, and Ocean Rig Skyros.

Apart from these rigs, Ocean Rig has 11 more rigs of which two are under construction, six cold-stacked, and three warm-stacked (including the Poseidon). As said above, the Poseidon is soon going to start drilling for Tullow, after which it will drill for Chariot in Namibia.