VesselsValue: Ocean Rig’s fleet value fell 40% in one year

Following a bankruptcy protection filing by the offshore driller Ocean Rig, VesselsValue (VV) has provided its valuation of the driller’s rig fleet. According to VV, the driller’s fleet value took a massive hit the last twelve months, dropping some 40 percent.

In order to deal with insolvency cases involving debtors, assets, claimants, and other parties of interest involving more than one country, the driller on Tuesday said it had filed for a Chapter 15.

The company, headed up by shipping magnate George Economou, has been suffering from heavy debt amid one of the worst downturns in the offshore drilling industry. The driller had $3.25 billion in debt at the end of December 2016, Reuters reported.

Ocean Rig currently owns a fleet of 14 rigs, which consists of nine modern drillships built at Samsung and two semi-submersible drilling rigs built between 2002 and 2001, with three drillships under construction.

To remind, Ocean Rig in August 2016 reached an agreement with Samsung Heavy Industries to postpone drillship deliveries and reschedule certain installments for the rigs  being built in South Korea. The driller then said the deal made with the Koreans provided for the delay of deliveries of two of three drillships under construction and the amendment of certain other terms – including the contract price. Three drillships Samsung is due to deliver are: Ocean Rig Santorini, Ocean Rig Crete, and Ocean Rig Amorgos.

According to William Bennett, a senior analyst at VesselsValue, the driller’s live fleet – 11 rigs – is worth $1.64 billion. Out of the 11 active rigs, five are without a contract.

As for the three drillships still on order at Samsung, Bennett says their worth is around $1.24 billion.

Commenting on the newbuilds status, he said: “It is quite possible that these drillships are delayed as has been the case for newbuildings across the offshore industry.”

The combined values of the live fleet and the newbuilds gives Ocean Rig’s fleet a value of around $2.89 billion. For comparison, back in January 2014 and before the downturn, when Ocean Rig had only ten rigs, the value of its entire fleet was $7.2 billion.

In the last 12 months the value of the fleet has fallen by 40%, putting significant strain on Ocean Rig management, Bennet said. According to VesselsValue, Ocean Rig’s fleet value was around $5 billion in late March 2016.

Bennett concluded that many offshore drilling companies are facing a similar situation to Ocean Rig and it is likely that more will follow suit. So far, the difficult conditions have seen Hercules offshore go bankrupt and also a number of scares, in particular involving John Fredriksen’s Seadrill.

Article prepared by Nermina Kulović and Bartolomej Tomić

Images source: Ocean Rig / Data source: VesselsValue