Pacific Drilling: Three out of seven drillships out of work

Pacific Drilling, an offshore drilling contractor headquartered in Luxembourg, informed on Monday that its ultra-deepwater drillship Pacific Khamsin is now without employment after completing its contract with Chevron in Nigeria. 

This means that three out of Pacific Drilling’s seven drillships are now without a contract. Apart from Pacific Khamsin, the driller’s other drillships without a job are Pacific Mistral and Pacific Meltem.

To remind, in June 2015, the driller’s largest customer, Chevron, cancelled a Gulf of Mexico rig tender for which the Pacific Drilling was the likely winner leaving Pacific Meltem without a potential gig. The 2014-built drillship Pacific Meltem is still idle and located in Aruba as well as the 2011-built Pacific Mistral.

When it comes to Pacific Khamsin, the drillship was working for Chevron offshore Nigeria since the delivery in 2013. The two-year contract started in December 2013, and the drillship completed its drilling operations for the oil major on December 17, 2015.

According to the offshore driller’s February fleet status report, Pacific Khamsin is currently located in Tenerife, Spain.

Pacific Khamsin was delivered to the owner in September 2013 from Samsung Heavy Industries in South Korea. The drillship is capable of operating in water depths of up to 12,000 feet and drilling wells up to 40,000 feet deep. It can accommodate 200 persons.

Pacific Drilling has three more drillships under contracts with Chevron, two of those in the Gulf of Mexico and one in Nigeria. The company’s fourth drillship, under contract with french Total, is also operating in Nigeria.

The company owns a fleet of seven ultra-deepwater drillships as it recently abolished a deal with a South Korean shipyard for the drillship Pacific Zonda that was supposed to be its eighth drillship.

A lot of idle rigs competing for limited jobs

When asked about the employment prospects for Pacific Drilling’s drillships in the current low oil price environment, a Credit Suisse’s analyst, Gregory Lewis, commented: “Given the slowdown in offshore tendering activity the prospects for finding work have become increasingly challenging. Just last night Anadarko guided to a CAPEX reductions of 50% Y-Y.”

Lewis added: “Not surprisingly tendering activity for rigs has been limited and working rig utilization is estimated in the high 60% range so there are a lot of idle rigs competing for limited jobs.”

Offshore Energy Today also asked Lewis to comment on Pacific Drilling being considered a potential takeover candidate by its larger peers. Lewis said: “PACD is primarily owned by the sponsor which owns 70% of the company – any sale would have to be cleared through them.”

Since Pacific Drilling’s fleet is relatively young, with its oldest drillship delivered in 2010, and the youngest one in 2014, Lewis explained the appeal of this offshore driller as a takeover candidate: “PACD does have a premium UDW fleet which would look pretty good in someone else’s fleet when the market eventually recovers, that is why the company has come up in the past as a potential takeover target.

“However, with the bonds trading well below PAR value any buyer would have to make the bond holders whole.”

Pacific Drilling is not the only offshore drilling contractor facing challenges in the current low oil price environment as its peer Ocean Rig on Monday received a notice of breach of material obligations from Premier Oil under the drilling contract for the Eirik Raude rig, which comes only weeks after the driller lost a contract with Italian oil company, Eni.

The article has been updated to include a statement by the Credit Suisse’s analyst.

Offshore Energy Today Staff