Seadrill Limited has signed two new contracts for the construction of two high-specification jackup drilling rigs at Dalian Shipbuilding Industry Offshore Co. Ltd. in China. With a water depth capacity of 400 feet and a drilling depth of 30,000 feet, the two new units will be based on the F&G JU2000E design.
Delivery of the rigs is slated for the second and third quarters of 2016, with a price tag of $230 million per rig, which includes project management, capitalized interest, drilling and handling tools, spares and operation preparations, with tail-heavy payment terms, the company said in a release.
Seadrill now has 10 jackups under construction at DSIC Offshore with two expected for delivery in 2013, five in 2015 and three in 2016. The company’s construction program now totals 24 units, including nine drillships, two harsh environment semisubmersibles, and 13 high specification jackups.
“The Board of Seadrill is of the opinion that the premium jackup segment continues to provide a compelling investment thesis,” the company said in a statement. “The global jackup market is at an inflection point as approximately 60 percent of the global contracted fleet is built before 1993. Almost 100 newbuild jackups have been delivered since 2005. However in the last two years we have seen increased utilization and the number of stacked rigs decline to multi-year lows. Utilization rates have exceeded 90 percent while average dayrates, unmet demand and average contract lengths have all increased.”
“The offshore drilling industry has prospered over the past few years as the companies look to replace depleting reserves,” commented Ishtiaq Ahmed, an analyst at Motley Fool. “As a result of the increased focus on offshore drilling, the prospects for drilling companies like Seadrill … have become extremely bright. These companies have been growing at a phenomenal rate, and expected growth in the industry will help these companies maintain high growth.”
The current rig orderbook falls short of adequately supplying oil company needs going forward, Seadrill stated. With the rig orderbook currently standing at 115 units, around 50 percent are not competitive on a global basis. Tender activity continues to be robust, especially over the last six months, with increased inquiries coming primarily from Latin America, the Middle East and West Africa, the company said.
“The market for high specification jackup units is poised for a significant uplift in dayrates and we continue to invest in order to put Seadrill's shareholders in a prime position to benefit,” Per Wulf, CEO of Seadrill, said in a statement.
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