| June 7, 2010
Rig Utilization Mobile rig utilization in the Gulf of Mexico was unchanged this week. Total fleet utilization is 61.0% with 75 of 123 mobile rigs under contract or committed for work. Marketed utilization, which excludes those cold stacked and other non-marketed rigs, is slightly higher at 89.3% with 75 of the 84 units under contract. Total jackup utilization is unchanged at 50% with 41 of 82 jackups under contract. One working unit was released due to permitting issues, and another jackup was cold stacked for yet to be determined reasons. Marketed utilization rose slightly to 83.7% with 41 of 49 rigs contracted. Floating rig fleet utilization for now remains at 94.2% with 33 of 35 floaters under contract, while marketed utilization also stays steady at 97.1% with 33 of 34 units under contract. Platform rig fleet remained at 41.2% with 21 of 51 rigs contracted, while marketed utilization is 55.3%, with 21 of 38 rigs under contract. Finally, inland barge fleet utilization rose to 48.3% with 28 of 58 units under contract, while marketed utilization jumped to 70% with 28 of 40 units under contract. Headline News The shallow water Gulf of Mexico drilling rig market appeared to get a bit of a reprieve last week when rumors that the deepwater drilling suspension had been extended to include water depths under 500 fsw were proven to be false. However, despite dodging that bullet, the market did not escape unscathed. In a June 2 news release, Bureau of Land Management Director Bob Abbey, who has also been put in as the Acting Director of the Minerals Management Service (MMS), announced that all new exploration or development drilling (APD's) in water depths under 500 fsw could continue, but that this drilling must be under a drilling plan that “includes information demonstrating compliance with the new safety standards”, referring to recommendations made in the Presidential Commission on the BP Deepwater Horizon Oil Spill report of May 27. As a result, a handful of previously approved permits have already been rescinded and must be refilled. The bottom line is that some jackups will undoubtedly see some idle time. On the surface, it would seem to be just a minor inconvenience. However, if the suggestion from the proposed May 12 oil spill response legislation is enacted, the time the MMS has to approve exploration plans will increase from 30 to 90 days. Should this occur, the pain level for rig owners will increase greatly as the number of idle units will go up as will the amount of time they remain idle. The one saving grace is that all sidetrack and non-drilling operations (APM's) are still allowed to proceed, which will keep some rigs busy. Reports are that some operators have informed rig owners they will be able to shuffle schedules around and make sure work carries on uninterrupted. However, this is likely a relatively small group. There are several smaller operators with rig contracts that simply do not likely have the work readily available that would allow a rig to be retained. While this may ultimately impact mat jackup owners more since they tend to work for these operators more frequently, no one is immune to feeling some level of pain, but it remains to be seen how it will all play out. Operators and contractors are still waiting on a follow-up Notice to Lessees (NTL) that will further establish the specific requirements for shelf plans. Anadarko has declared force majeure on two of its deepwater rigs, and the company has said it will maintain a third rig currently under contract. The company said it would attempt to terminate the contracts on the Noble Amos Runner semi and Transocean drillship Discoverer Spirit, but would keep its contract on the ENSCO 8500 semi in effect. Since that announcement, however, Noble Drilling released a statement saying it believes the deepwater drilling suspension does not constitute force majeure as it does not prohibit Anadarko from using the rig on a variety of non-drilling activities in addition to the operator’s “deep and diverse portfolio of international properties”. Meanwhile, the Discoverer Spirit move was considered somewhat of a surprise as the rig was rumored as a potential candidate to move to West Africa for an Anadarko drilling program there. Speculation as to why Anadarko would terminate the Transocean rig and not the ENSCO semi centers around the day rates of each rig. The Discoverer Spirit is getting $500,000/day while the ENSCO 8500 rate is only $298,000. It was also rumored that the ENSCO rig was built with a firm contract in place, meaning Anadarko has a “take or pay” provision where it would have to pay out all of or a large portion of the remainder of the contract if it was canceled. While it is not known why any of these specific rig decisions were made, the Anadarko announcement is the first direct force majeure declaration to take place since the drilling ban was announced. Cobalt International recently declared force majeure on Diamond Offshore semi Ocean Monarch, but the company had the rig on a sublet from Anadarko, so the final disposition of that contract as well as the two announced recently are still up in the air. Clearly, this will not be the last force majeure announcement made. In fact, rumors are that at least 3 other operators have or shortly will claim force majeure on their contracts, but so far this cannot be confirmed. However, even if it they have occurred, it is still far too early to know the ultimate outcome. In general, the eventual impact on drilling contractors will likely involve several stages. First, there is the drilling moratorium itself. This is clearly the most important factor that will determine the decisions operators make and their effect on rig owners. Assuming those issues are settled, then there are the coming safety requirements for rigs and what those will entail. If, for instance, contractors are allowed to continue operating while whatever equipment required is on order, then they can survive that. If, however, they are not allowed to work until the upgrades are completed, as one source put it, "we may be dead in the water". The bottom line is that it remains far too early in the process to know what is going to happen. Nevertheless, if Noble's response to Anadarko is any indication, the coming weeks and months, needless to say, will be very interesting.
Operator News Pemex reports that between 2010 and 2024 it plans an average annual investment of $22.9 billion (369 billion pesos) in its energy industry. Of the annual expenditures, approximately $16.9 billion will be spent in the exploration and production sector, with the remainder going toward the gas and petrochemical industry. The company’s goal is to produce 2.7 Mb/d of oil and 6.3 Bcf/d of natural gas in 2012, increasing that to 3.3 Mb/d oil and 8.0 Bcf/d of natural gas by 2024. BP advises that the lower marine riser package (LMRP) containment cap, installed on June 3, continues to collect oil and gas flowing from the well and transport it to the Discoverer Enterprise drillship on the surface. On June 5, a total of 10,500 barrels of oil was collected and 22 mmcf of natural gas was flared. From June 3-5, the volume of oil collected was 16,600 barrels and 32.7 mmcf of natural gas was flared. Driller News Nabors Offshore platform rigs Super Sundowner XXI is now hot stacked in New Iberia after wrapping up operations for Anadarko in Green Canyon 608. The rig had been working on a two-well contract since last December. Chevron also finished up with workover unit Sundowner IV and that rig is now too hot stacked in New Iberia. Finally, the MODS 150 workover unit will finish up in Garden Banks 668 with Anadarko later this week and also will be mobilized to Nabors facility in New Iberia. However, the rig will return to the location for an additional well at the end of hurricane season. Finally, Nabors has secured a four-well plus options contract (pending permit approvals) with Chevron for workover jackup Dolphin 106. The firm portion of the program should keep the rig busy for around 60 days to late July. Prior to the contract award, the rig had been idle since March 2009. Spartan Offshore has completed its contract with Mariner Energy and the rig is now hot stacked on location in Eugene Island 53. The rig was supposed to go next to West Cameron 269 for a 60-day program with Phoenix Exploration, but the permit was rescinded and will now be refiled, so the rig will be idle in the meantime. The company has a 30-day well for Century Offshore scheduled for the rig, but it is understood the company will not be ready to begin for awhile yet. Meanwhile, the Spartan 202 is now moving to Eugene Island 123 for a 20-30 day program with Marlin Energy. The rig just completed a workover for Pisces Energy in South Timbalier 204. Hilcorp Energy has picked up the Spartan 208 for a two-well deal in Vermilion 39. The first well is due to last around 30 days, and while the second location does not yet have an approved permit, it is believed that will occur by the time the rig is ready to move. Finally, the Spartan 303 will wrap up its contract in West Cameron 132 with Marlin Energy this week. Spartan is talking to multiple operators about follow-up work, but reports are that none have permits in place, meaning the rig may very well see a bit of idle time until work is secured. Diamond Offshore jackup Ocean Spartan moved to location in South Timbalier 179 over the weekend for the start of a newly awarded four-well contract with Nippon Oil. The rig had been scheduled to drill the second of a two-well contract for Shell in the Mobile Bay area, but was hot stacked in West Cameron 184 after the operator opted not to proceed. The new deal should keep the rig busy for about 60 days to early August. Jackup ENSCO 99 completed its contract with ExxonMobil in Grand Isle 16 and moved late last week to its next contract, Nexen Petroleum's location in West Delta 45 for a 30-45 day sidetrack well. While rigging up on location, however, Nexen's previously approved well permit was rescinded, leaving the operator scrambling. At press time, no decisions regarding what the rig will do had been made and it is currently waiting on location while a solution is found. Rowan reports that the Rowan Louisiana has been cold stacked in Sabine Pass after it finished its one-well program for ERT in Eugene Island 302. The rig was next scheduled to work for McMoRan Exploration in Eugene Island 26, but it is unclear whether permitting or other issues has caused the rig to go idle. The rig joins the Rowan Juneau and the Rowan Alaska as cold stacked in the U.S. Gulf. Service/Supply News Bollinger Shipyards, Inc. has received safety awards from the Shipbuilders Council of America and the National Safety Council. The Gas Technology Institute awarded George P. Mitchell, former Chairman of Mitchell Energy & Development Corporation, with a lifetime achievement award for pioneering drilling and completion technologies that revolutionized drilling in gas shales. |