Drillship deal a $3.5Bn vote of confidence

Drillship deal a $3.5Bn vote of confidence

Offshore drilling fleet giant Transocean has placed orders worth a potential US$3.5Bn for construction of new Ultra-Deepwater drillships at the same time as predicting that demand for drilling will take another two years to recover.

 

Transocean, owner of the world’s biggest drilling fleet, says demand is falling due to major oil companies cutting exploration and production budgets as they give in to pressure to increase shareholder returns rather than make new investments.

 

Placing the orders, with Sembcorp Marine’s subsidiary Jurong Shipyard in Singapore, is seen as a bold move against a tight market background and a big vote of confidence in the future for oil and gas. Transocean itself announced a near 50% fall in profits this week, due to weak demand for its rigs, and said 19 of its deepwater and ultra deepwater rigs will be out of contract this year.

 

The two new rigs will be delivered in 2017 and 2018 and Transocean say they have secured ‘very favourable’ payment terms for their $1.4Bn cost. The deal also gives Transocean an option to order another three drillships of the same design and specification on similar terms; with the first option having to be exercised within one year, the second within 18 months and the third within two years.

 

Transocean specialises in drilling in harsh and technically challenging environments with a fleet of 79 mobile offshore drilling units. Transocean now has nine ultra deepwater drillships under construction as well as five high specification jackups.

 

The company also says it might put some of its North Sea mid-water rigs up for sale, along with other assets that might be regarded as non core or ageing; the age profile of Transocean’s fleet is said to be older than that of near rivals.

 

Photo: courtesy of US Coast Guard - taken by Tiffany Carvalho

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