February 22, 2010

Rig Utilization

Mobile rig utilization in the Gulf of Mexico this week remained steady at 62.4 percent with 73 of the 117 mobile rigs in the Gulf under contract. Marketed utilization, which excludes those cold stacked and other non-marketed rigs, stood at 89 percent as 73 of the 82 marketed mobile rigs are under contract.

Currently 39 of 78 jackups (50 percent) are under contract, while marketed jackup utilization remains at 81.3 percent, with 39 of 48 rigs contracted. Since September 2009, the jackup market has enjoyed a 21-rig increase when the number of jackups under contract reached its low point of 18. More recently, the jackup count has increased by 12 over the average of 27 contracted jackups in January 2010. Floating rig utilization remains at 100 percent as the 26 semis and seven drillships are contracted. One semi, Diamond Offshore semi Ocean America, is not working, but it has a commitment in Australia starting in May. The rig is scheduled to depart the Gulf in early March.

A three-rig increase boosted platform rig fleet to 43.1 percent this week percent with 22 of 51 units under contract. The increase also pushed marketed utilization above 50 percent as 22 of the 40 marketed units are contracted. Finally, 25 of 58 inland barges are under contract for utilization of 43.1 percent. However, marketed utilization is a more respectable 69.4 percent with 25 of the 36 marketed units contracted.

Headline News

Schlumberger, Ltd. and Smith International, Inc. jointly announced that their Boards of Directors have unanimously approved a definitive merger agreement in which the companies would combine in a stock-for-stock transaction.  Under the terms of the agreement, Smith shareholders will receive 0.6966 shares of Schlumberger in exchange for each Smith share.

Operator News

Noble Energy, Inc. announced a capital budget of $2.5 billion. Major project investments are expected to be about $1 billion, with the majority of capital directed toward the development of Galapagos in the deepwater GOM.

Newfield Exploration reported its Fastball prospect, located at Viosca Knoll 1003, commenced production in the fourth quarter of 2009 and is currently producing 41 mmcf/d and 3,000 bopd.
 

Driller News

Newbuild jackup Rowan EXL-1 has a Letter of Intent in place with McMoRan for a one-well program in Eugene Island 223 in 42 feet of water.  Drilling is scheduled to begin in August and should last about 300 days ending in June 2011.  The rig, a LeTourneau Super 116-E design rated to drill in up to 350 feet of water, is scheduled for delivery from the Keppel Amfels yard in Brownsville on May 1.  Should Rowan secure an interim contract for the rig that takes it past August, the company will be able to substitute the Rowan EXL-2 newbuild, which is scheduled to be delivered in August, for the McMoRan contract.  Rowan further reports that jackup Cecil Provine has about seven days remaining on its current well with Apache in Grand Isle 41.  The rig will then skid to another well on the platform, after which it will likely be moved to another location in the Grand Isle area.  Apache will likely keep the rig for most --  if not all -- of 2010.

Hall-Houston has a contract in place to pick up jackup Hercules 200 for a 30-day well in Eugene Island 227 starting late February or early March after the rig completes its current well for Leed Petroleum in Ship Shoal 202.  ADTI will provide turnkey services for the drilling.  The work now pushes rig availability to around April 1.

ADTI has signed contracts with Atwood Oceanics and Hercules Offshore for two turnkey wells on behalf of Contango Operators.  First, the company will take the submersible Richmond to Eugene Island 10 starting in mid-March.  Drilling operations are scheduled to last 69 days with additional time if the well is completed.  The work will keep the rig busy until late April.  The unit is currently working for Helis O&G in Eugene Island 22.  Contango will also get jackup Hercules 253 for a 70-day well in Matagorda Island 617.  The rig completed a well for Hall Houston late last week in High Island 88 and is now moving onto Contango’s location.  The rig is now next available in early May.

Apache has exercised a 60-day option on platform rig Blake 14, now keeping the rig under contract to mid-May.  The unit is rigging down from its location in South Marsh Island 281 and will move to High Island A-376.  Blake 210 and Blake 1502 platform rigs are also working for Apache;  their contracts end in mid-April and late March, respectively.

Seahawk Drilling reports that jackup Seahawk 3000 will arrive in the U.S. Gulf on March 4, after which it will go directly to its 100-day contract with Hilcorp Energy in South Marsh Island 77.  The rig is under tow from Mexico where it recently completed a contract for Pemex.  The unit is next available in mid-June.

Nabors platform rig Super Sundowner XXII departed the U.S. Gulf earlier this month, headed for Israel where it has a 150-day contract with Noble Energy.  The rig is expected to begin work in the Mari-B field in the Mediterranean Sea in March and will be next available in August.  It is not known at this time if the rig will mobilize back to the Gulf on completion of the contract.

Service/Supply News

International Offshore Services, LLC (IOS) has completed the acquisition of 13 boats from Graham Gulf, Inc.  The sale consisted of six 145-ft crew boats and seven utility/supply boats.  With the sale, IOS now owns a fleet of 66 vessels.  In addition, the company owns three construction barges.

February 15, 2010

Rig Utilization

Mobile rig utilization in the Gulf of Mexico this week rose slightly to 62.4 percent with 73 of the 117 mobile rigs in the Gulf under contract.  Marketed utilization, which excludes those cold stacked and other non-marketed rigs, was 89 percent as 73 of 82 marketed mobile rigs are under contract. 

The jackup fleet accounted for the one-rig increase as a previously cold stacked unit, ENSCO 90, was contracted by Stone Energy.  Currently 39 of 78 jackups (50 percent) are under contract, while marketed jackup utilization, stands at 81.3 percent, with 39 of 48 rigs contracted.  If the six marketed, non-contracted workover units are removed from the figures, marketed jackup utilization jumps to 92.8 percent.  Floating rig utilization remains at 100 percent as the 26 semis and seven drillships are contracted.

Platform rig fleet utilization is currently 37.2 percent with 19 of 51 units under contract.  Marketed utilization is also under 50 percent, albeit slightly higher at 48.7 percent as 19 of 39 units are contracted.

Headline News

The Minerals Management Service (MMS) has issued the final notice for a lease sale in the Central Gulf of Mexico. Sale 213 will be held March 17 in New Orleans and encompasses 6,958 unleased blocks covering 36.9 million acres offshore Louisiana, Mississippi, and Alabama. For this sale, there will be changes in initial lease periods for leases in water depths of 1,312 feet to less than 5,249 feet.

Operator News

Devon Energy Corporation announced that Maersk Oil has purchased Devon's 25% working interest in the Jack Lower Tertiary development project. In December 2009, Devon announced an agreement with Maersk Oil to purchase Devon's interests in three Lower Tertiary projects. Subsequently, other working interest owners in the St. Malo and Cascade projects exercised preferential rights to purchase Devon's interests.

Endeavour International Corporation announced that Sheldon R. Erikson has been appointed to a position on the company's Board of Directors.

Driller News

Seahawk Drilling’s previously awarded contract from Energy XXI has been switched from jackup Seahawk 2500 to Seahawk 2001.  Reports indicate that the 2500 was unable to get on the location, thereby prompting the switch.  The Seahawk 2001 has been idle in Matagorda Island 721 since July 2009 and is scheduled to begin the one-well, 45 day contract in early March.  Meanwhile, the Seahawk 2500 is now available in South Timbalier 56.

ENSCO announced that commencement of operations for semi ENSCO 8502 would be delayed from the second to third quarter 2010 due to a fire in a portion of the engine room.  The blaze was contained and no one was injured.  The rig was delivered from the Keppel FELS yard in Singapore in January and is undergoing final preparations before being mobilized to the Gulf of Mexico where ENSCO will deploy the rig on what is currently a two-year contract with Nexen Petroleum.  The term can be extended to either three or four years at Nexen’s discretion.

ENSCO has received a 120-day contract from Stone Energy that will result in the contractor bringing previously cold-stacked jackup ENSCO 90 back into service.  The program in Vermilion 267 will begin this week with the rig currently moving to location.  Prior to the award, the rig had not worked since March 2009.

Rigs on the Move…            

Diamond Offshore jackups Ocean Spartan and Ocean Scepter moved to locations to begin recently awarded contracts.  The Spartan is now on location in Brazos A-19 for the start of a two-well, 80 day contract with Shell, while the Scepter is about to begin a six-well contract with Arena Energy in High Island A-547.  Both rigs had been waiting on weather to move last week.  Seahawk Drilling jackup Seahawk 2007 completed work for Arena Energy in Eugene Island 100 and is now on location in South Marsh Island 11 for a 30-day well with Mariner Energy.  Also, jackup Seahawk 2601 finished up work for Castex Energy in Eugene Island 224 over the weekend and is now on location in Ship Shoal 189 for the start of a 90-day contract with Walter O&G. Finally, jackup Seahawk 2600 moved from Ship Shoal 190 to West Delta 68.  The rig is working for Apache to late April with a 90-day option remaining.

Service/Supply News

Geokinetics, Inc. has completed its acquisition of Petroleum Geo-Services onshore seismic data acquisition and multi-client data library business.

FMC Technologies, Inc. has signed a multi-year frame agreement with Cobalt International Energy to provide subsea systems, including production trees, manifold hardware and distribution systems.

Correction:  Last week, it was erroneously reported that Diamond Offshore’s contract with Shell for jackup Ocean Spartan was for 160 days.  The contract term is actually two wells for 80-85 days.  We apologize for the error.

February 8, 2010

Rig Utilization

Mobile rig utilization in the Gulf of Mexico this week stands at 61.5 percent, with 72 of 117 units under contract.  Floating rig utilization remains at 100 percent with all 26 semisubmersibles and seven drillships under contract, while only 38 of 78 jackups had contracts in place for utilization of just 48.7 percent.  Marketed fleet utilization, which excludes those cold stacked and other non-marketed rigs, is a respectable 88.9 percent with 72 of 81 units under contract.  For jackups, marketed utilization is 80.9 percent, with 38 of 47 units contracted.

Two previously idle jackups received contracts last week.  Diamond Offshore’s Ocean Spartan was briefly idle before being signed up for a 160-day contract with Shell, while the Spartan 202 got a 21-day contract with W&T Offshore.  A third new contract was awarded when Hilcorp Energy signed up the Seahawk 3000 for a 100-day term starting in early March.  The rig began mobilization today from Mexico and should arrive here around the middle of February.  One floating rig received a new contract; Diamond Offshore semi Ocean Voyager was awarded a two-well, 120-day contract with Walter O&G.  The rig will begin work around the end of the month.  The rig will begin mobilization to the US Gulf from Mexico this week.

Headline News

President Obama has proposed $364.8 million in funding for the Minerals Management Service (MMS) in 2011. This represents an increase of $16.5 million from the 2010 level. The 2011 budget includes a program increase of $3.5 million to continue developing the MMS Renewable Energy program.  The increase builds on the $24 million in additional funding for 2010 renewable energy development. provided by the Congress in FY 2010.

Operator News

PetroQuest Energy, Inc. ended 2009 with approximately 179 BCFe of proved oil and gas reserves.  The company's capital budget for 2010 is approximately $120 to $140 million, a 124% increase from 2009.

Newfield Exploration Company’s Board of Directors has named Lee K. Boothby to the additional role of Chairman of the Board. Boothby will add the additional responsibilities of Chairman to his current position as President and Chief Executive Officer.

Marathon Oil Corporation announced a $5.1 billion capital, investment and exploration budget for 2010, a 17% decrease from 2009 capital spending.

Driller News

Seahawk Drilling has secured a 100-day contract in the U.S. Gulf for jackup Seahawk 3000 starting March 1.  Work for Hilcorp Energy will keep the rig busy to mid-June.  The rig completed its long-term contract with Pemex on February 6 and is departing Mexico today.  The rig, the only existing 300-ft mat, cantilever unit in the world, had worked for Pemex since September 2003.

Spartan Offshore has received a 21-day contract from W&T Offshore for previously idle jackup Spartan 202.  The rig is now waiting on weather to move to location in Main Pass 108 to begin work.  With the award, Spartan now has all four of its jackups under contract.

Atwood Oceanics, Inc. announced that the company earned net income of $66,984,000 or $1.03 per diluted share, on revenues of $164,243,000 for the quarter ended December 31, 2009 compared to net income of $78,363,000 or $1.22 per diluted share, on revenues of $165,504,000 for the quarter ended December 31, 2008.

Diamond Offshore reports fourth quarter 2009 net income of $276.1 million on revenues of $890.8 million.  This compares of fourth quarter 2008 net income of $293.3 million on revenues of $903.2 million.  For the year ended December 31, 2009, the company reported net income of $1.4 billion on revenues of $3.6 billion compared to net income of $1.3 billion on revenues of $3.5 billion for 2008. The company also reports that ANKOR Energy has exercised its 90-day option on jackup Ocean Titan, now keeping it busy to mid-June.  The rig has been working for ANKOR since August 2009.  Jackup Ocean Scepter has arrived from Uruguay and will begin its six-well contract with Arena Energy in the High Island area shortly.  The rig will next be available in early July.  Jackup Ocean Spartan completed its one-well contract with Samson Contour Energy, and was temporarily idle, but Diamond now has a two-well contract in place for the rig with Shell.  The rig's first location will be an 80-day well in Brazos A-19, followed by another 80-day well in the Mobile Bay area.  The 160-day contract will keep the rig busy into July.

On the floating rig front, as suggested in last week’s Offshore Activity Report, semi Ocean Voyager has secured a 120-day contract in the U.S. Gulf with Walter O&G.  The two-well contract will begin in late February.  The rig recently completed its contract with Pemex and is preparing for tow from Mexico, expected to commence this week.  After it arrives, it will undergo a short period of inspection and maintenance before beginning the Walter work.  Market rumors indicate that semi Ocean Courage, scheduled to begin a four-year contract with Petrobras America in mid-February, will be mobilized out of the Gulf for the first year of the term.  While no formal decision has been made, it is believed the rig will go to Brazil for up to one year initially.  Diamond is now completing commissioning work on the rig, with acceptance testing to begin around February 15.  However, that is expected to be completed within a matter of days, with the rig leaving around the end of the month.

Service/Supply News

FMC Technologies, Inc. has signed a four-year subsea tree frame agreement with Petrobras.

February 1, 2010

Rig Utilization

As of February 1, The US Gulf of Mexico floating rig fleet is currently made up of 33 rigs, 26 semisubmersibles and seven drillships.  Included in these numbers are two newbuilds, Transocean’s Discoverer Inspiration and Diamond Offshore’s Ocean Courage, both of which will begin contracts this month.  Also included is Diamond Offshore’s semi Ocean Voyager, which will arrive in the US Gulf from Mexico by mid-February.  On the flip side, semis Ocean America and Cajun Express are not included in the count as they will be leaving the Gulf within the next few months.  Currently, 14 of the 33 rigs (42.4%) are rated to drill in at least 10,000 feet of water; four of the 14 are rated to operate in 12,000-ft water depths.  In addition, another nine units (27.2%) can drill in at least 7,500 feet of water.

Utilization currently stands at 96.9 percent, with 32 of the 33 units under contract.  However, the lone non-contracted unit, the aforementioned Ocean Voyager, is rumored to have a deal in place, so once the details of that emerge, utilization will return to 100 percent.  Better yet, only two rigs are slated to complete contracts in 2010 and have no follow-up work secured. 

Diamond Offshore’s Ocean Baroness will finish up work for Hess in mid-April, while the Noble Paul Romano is scheduled to complete its contract with Marathon Oil in July.  In 2011, however, 10 rigs are due to come off contract.  Eight of the 10 will be over by the end of June with the other two finishing up in the fourth quarter.  Clearly, some of these contracts will be extended and other rigs will secure new deals, but whether demand will completely absorb all these rigs remains a question.

One factor that will definitely continue to impact the market is operator available slots on existing contracts.  Some estimates are that there will be as many as 10-12 contract slots available each year through 2011.  Currently, there are six floaters in the Gulf working under sublet agreements.  To this point, demand has been high enough to keep these slots filled; but in the future opportunities for rigs coming off contract will be reduced if the level of available slots remains high.

As for new construction, four rigs will enter the U.S. Gulf this year.  Two of the four were noted above.  The other two units, Pride’s Deepwater Ascension and the Noble Jim Day, will begin four and five-year contracts in the third quarter.  While these newbuilds may be used for work that could be done by existing rigs, they should have little overall effect on contractors’ abilities to find follow-on work for any rigs coming off contract in the future.In regards to day rates, the long-term contract signings that are now prevalent in the Gulf have resulted in no new fixtures for quite awhile.  In 2008, when several new deals were done, rates of over $500,000/day for deepwater and ultra-deepwater units were routine.  The high of $650,000/day was attained in July with Eni’s signing of Transocean’s drillship Deepwater Pathfinder.

Since 2008, the closest thing to a new fixture was in September 2009 when Petrobras America signed up Diamond Offshore’s 10,000-ft rated semi Ocean Courage at $410,000/day.  Petrobras had contracted the rig at the same rate with the previous owner, but the shipyard seized the rig after the company defaulted on a shipyard payment. 

Diamond purchased the rig from the shipyard in June 2009 and came to agreement with Petrobras in September, opting to honor the rate of the prior contract.  In 2008, that same rig would have likely been signed for $500,000/day or above.

As for the current market, the consensus is that rates agreed to today would be as much as $150,000/day lower than those signed in 2008.  While a few are still somewhat bullish, it seems clear that there is a downward pressure on rates, and any contracts signed this year will reflect that.  Nevertheless, despite the inevitable drop in rates that will likely occur, contractors will continue to make money and operators will no doubt welcome the relief.

Headline News

Anadarko Petroleum Corporation announced the Lucius sidetrack appraisal well, located in 7,100 feet of water in Keathley Canyon 875, encountered almost 600 net feet of high-quality oil pay with additional gas-condensate pay in thick subsalt Pliocene and Miocene sands. The Lucius appraisal well was drilled to TD 20,600 feet.  Partners include Plains Exploration & Production Company and Mariner Energy.

Operator News

Market rumors continue to persist that Pemex will tender for up to five jackups in March.  Reports indicate the tenders will include 250-ft, 300-ft and 350-ft jackups that are 10 years of age or less with work starting in the late second and third quarters.  The tender is not believed to be for incremental demand, meaning the rigs would replace existing units.  Of 29 jackups currently operating in Mexico, contracts for 14 of those are scheduled to end by June 30.

Bids are due to BP around mid-February for a 15K BOP jackup requirement off Trinidad.  The program is believed to be for three years with two additional one-year options.  It is understood drilling is scheduled to begin in October.  Further details will be reported as they become available.

Cobalt International has approved a 2010 capital program of $430 million. In the Gulf of Mexico, this program includes the commencement of three Cobalt-operated exploratory wells (North Platte, Aegean and Ligurian), three partner-operated exploratory wells (including Firefox) and one partner-operated appraisal well -- Heidelberg #2.

Petrohawk Energy announced its proved oil and gas reserves at December 31, 2009 are estimated at 2.75 TCFe.  Proved reserves increased over 1.5 TCFe over year-end 2008.

Driller News

Formerly idle jackup Rowan Louisiana is under tow to Eugene Island 337 to start a 60-75 day contract with Devon Energy.  The rig had been idle since the end of June. It is believed the term will be used to further reduce Devon’s contract with the Rowan Gorilla II jackup, now scheduled to end around August.  With the contract, Rowan’s marketed Gulf jackup fleet is 100% utilized, with the cold stacked Rowan Juneau the only idle unit.

Seahawk Drilling has received a one-well plus one option contract from Energy XXI for jackup Seahawk 2500.  Work in South Timbalier 21 is scheduled to begin by February 15 and is expected to last about 45 days.  The rig is preparing for the work in South Timbalier 56 where it was stacked. Meanwhile, jackup Seahawk 2505 arrived in the U.S. Gulf on January 27 and is now idle in West Cameron 38.  With the rig’s departure, the Seahawk 3000 is the only remaining jackup the company has operating in Mexico.  The contract is due to end February 6, and while no decision has been finalized, the rig likely will be mobilized to the U.S. Gulf.  Finally, the Seahawk 2600 completed its contract with Walter Oil &Gas and is now on location in Ship Shoal 190 for the start of a 90-day plus 90-day option with Apache. Jackup Seahawk 2601 still has about a week left on its contract with Castex Energy, after which it will mobilize to Walter Oil & Gas for a 90-day contract. 

Diamond Offshore semi Ocean Voyager is now pulling anchors and will mobilize from Mexico back to the U.S. Gulf shortly.  The rig had been under contract with Pemex since November 2007.  Rumors are that Diamond has a contract pending for the rig upon arrival, but details are not yet known.  The move will leave Diamond with one semi in Mexico.  The Ocean New Era’s contract with Pemex is due to end February 15.  However, market reports are that Diamond will receive a contract extension from Pemex.  Should that materialize, details will be reported as they become available.

ENSCO reports that work for ExxonMobil Production (EMPC) will now run to around mid-March, extending past the original end date of mid-February.  It is expected that ENSCO will have a follow-up contract in place for the rig later this month.

Spartan Offshore has secured new contracts for its rig fleet.  Spartan 208, currently working for Tarpon Operating in East Cameron 266, has inked a deal for a 30 day ADTI turnkey well for Northstar GOM.  The new contract keeps the rig busy to late April.  Meanwhile, Spartan 151 is starting its contract with Maritech Resources in East Cameron 195 and will follow that work up with a 30-day deal with Mariner Energy in Eugene Island 53.  The two contracts will stretch rig availability through the end of March.  The contractor’s only idle rig, the Spartan 202, is rumored to be starting a short contract next week.  Once signed, Spartan will have its four-rig jackup fleet 100% utilized.

Sources indicate that Scorpion Offshore newbuild jackup Offshore Mischief has been awarded a three-well contract for work off Brazil.  Reportedly, the consortium of Anadarko, Starfish Oil & Gas and Queiroz Galvao each have 165-240 day wells to drill, making the contract term a minimum of 495 days.  It is anticipated that work will begin in the second quarter.  The LeTourneau Super 116-E design rig is being built at Lamprell Shipyard in Dubai and is scheduled for completion in April.  It is rated to drill in up to 350-ft of water, although leg extensions can extend the capability to 400 feet.

Service/Supply News

Global Industries, Ltd. announced that Trudy P. McConnaughhay has been appointed Vice President & Controller. 

AMEC been selected by Brazilian company Quip to perform basic engineering services for the topsides of the P-63 floating production, storage and offloading (FPSO) vessel, to be operated on behalf of Petrobras.