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Seadrill Expects High Rig Rates In African Contracts

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Seadrill is likely to get higher-than-expected rig charter rates in forthcoming African contracts, even while rates fall across the industry, its CFO says.

Reuters

OSLO, March 4 (Reuters) - Seadrill, the world's biggest driller by market value, is likely to get higher-than-expected rig charter rates in forthcoming African contracts, even while rates fall across the industry, its chief financial officer said.

The rates for two of its new rigs, called Jupiter and Saturn, were negotiated months ago when the market was booming, and they are likely to be finalised at a high level soon, because reopening the tender process could delay projects by 18-24 months, CFO Rune Lundetrae said on Tuesday.

"These rates were negotiated in 2012, early 2013, when rates were in the range of $550,000-$650,000 (per day) and in West Africa were typically north of $600,000," Lundetrae told Reuters on the sidelines of a conference.

When asked whether it would be wrong to assume a deal around those levels, he said "no" but pointed out that contract duration would also impact rates.

"We are very confident that those contracts will be signed and that we will commence operation in West Africa, and that the day rates and terms will surprise the market," he said.

Lundetrae did not name the countries or companies that will be signing the contracts.

Drilling rig rates have declined sharply in recent months, and market players expect a soft market for the next 18-24 months as oil companies cut back on spending to save cash for dividends and drillers take delivery of a slew of new vessels.

Rates in the ultradeep market, the most lucrative segment, peaked close to $625,000 a day last year but are down to around $575,000 per day this year for the so-called 6th generation rigs. Analysts see it falling to between $525,000 and $475,000 while.

Lundetrae said rates across the industry would continue to fall, even if the west African deals surprised, but the difference between old and new rigs would continue to widen, favouring newer vessels.

"I think we will see day rates also for new equipment coming down in this market," Lundetrae said. "No one is immune."

The Saturn and Jupiter rigs, under construction by Samsung Heavy Industries, are set to enter the market in the second and third quarters.

(Reporting by Balazs Koranyi and Joachim Dagenborg; editing by Jane Baird)

Copyright 2014 Thomson Reuters. Click for Restrictions.

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