Offshore drilling contractor Noble Corp. executives said last week the U.S. Gulf of Mexico (GOM) deepwater market is poised to grow “substantially” in the coming years, as exploration and production (E&P) companies develop a portfolio of highly touted prospects.
The GOM accounted for nearly one-third of Noble’s contract drilling services revenues in the first three months of this year, with four of its seven active rigs experiencing improved operating performance, CEO David Williams told investors during a conference call to discuss 1Q2013 performance.
“Contract opportunities remain strong, especially for rigs addressing customer needs in deepwater, as evidenced by the recent two-year contract extension for the semisubmersible Noble Amos Runner at a dayrate of $450,000,” he said. “We are increasingly confident that key fundamental factors in our business will remain in place, supporting robust deep and shallow water drilling activity beyond 2013.”
As if to prove the point, the company on Thursday secured two three-year term drilling contracts with Plains Exploration & Production Co. for two new ultra-deepwater drillships now being built in South Korea. The Plains award carries a rate of $632,000/day for each rig, with an aggregate worth of more than $1.3 billion in total potential backlog.
“This further diversifies our customer base,” which will “extend into the decade,” said Senior Vice President Roger Hunt, who is in charge of marketing and contracts. The new drillships would give Noble “one of the youngest, most versatile fleets in the Gulf of Mexico.” The Sam Croft drillship is set to be delivered in the first half of 2014, with the Tom Madden drillship in the last half of next year.
“Revenues to be generated over the three-year terms are expected to total approximately $693 million per rig, including mobilization fees,” CFO James MacLennan said. With the latest contracts, Noble now has four ultra-deepwater drillships under construction in South Korean shipyards.
“With the addition of these units to our U.S. Gulf of Mexico fleet, Noble will have one of the most modern and capable fleets in the region, a fact that demonstrates the fundamental change going on across the company,” said Williams. “At the same time, these contracts provide us with significant additional backlog, while expanding and diversifying our customer base as we grow our relationship with an important new customer.”
The Noble drillships being built for Plains would be equipped to operate in up to 10,000 feet of water, with two complete six-ram blowout preventer (BOP) systems, and able to accommodate up to 210 personnel.
“Successful deepwater results are driving a backlog of orders, with customers contracting beyond their current needs,” said Hunt.
Before the Plains contract, Noble had a backlog estimated at around $14 billion, with more than 80% for semisubmersibles and the rest for jackups. With the Plains award, “it increases the backlog to $15.6 billion,” MacLennan said. Total backlog at the end of March was down from $14.3 billion at the end of 2012. Close to three-quarters of its available rig operating days were committed for the remainder of 2013, including 79% of the floating rig days and 76% of the jackup rig days. For 2014, an estimated 55% of the available rig operating days have been committed, including 71% and 50% of the floating and jackup rig days, respectively.
Noble earned $150 million (59 cents/share) in 1Q2013, compared with $120.2 million (47 cents) in the year-ago period. Revenues totaled $971 million, up from $798 million.
“While our performance improved in the quarter, achieving further reductions in downtime and improving operational performance remain key objectives for the company,” said Williams. The Swiss-based drilling operator has a fleet of 79 offshore drilling units, including five ultra-deepwater drillships and six high-specification jackup drilling rigs that are currently under construction.
In related news, Bermuda-based Seadrill last week signed a contract with explorer LLOG Bluewater Holdings LLC to use newbuild drillship West Neptune for at least three years in the GOM deepwater. Potential revenue over the contract term is estimated at $662 million.
The dayrate for West Neptune, which is set to be delivered from a South Korean shipyard in June 2014, is estimated at around $600,000/day. It would be outfitted to work in waters up to 10,000 feet deep, water depths up to 12,000 feet and drilling depths up to 37,000 feet.
The contract complements Seadrill’s expanding deepwater operations, with the fleet “growing to six ultra-deepwater units within the U.S. and Mexican Gulf of Mexico over the next 18 months,” noted CEO Fredrik Halvorsen. With the latest signing, the order backlog now stands at $20.9 billion. It has 10 ultra-deepwater semisubmersibles and 10 drillships in operation; five more are to be completed by the end of 2014.
“The West Neptune will be the first dual BOP rig in the Gulf of Mexico for LLOG,” said CEO Scott Gutterman. “Having two BOPs will allow LLOG to complete our wells efficiently, saving up to 12 days per completion.”
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