Analysis: Deepwater, Ultra-Deepwater Newbuilds for 2009 and Beyond



An emerging industry trend, many exploration and development projects have been put on the backburner as companies wait out the current economic downturn. Whether oil and gas companies can't get financing due to the credit crisis or the projects are no longer commercially viable because of the lower price per barrel, the immediate result is the same: some projects are being postponed – or even worse – cancelled.

Fortunately, deepwater and ultra-deepwater drilling projects have not been as affected as onshore drilling and other E&P arenas. A key reason for this is deepwater and ultra-deepwater projects require such long lead times to both obtain a rig and develop the project.

Deepwater, Ultra-Deepwater Newbuild Rigs

According to data gathered from RigLogix, there are currently 88 deepwater floaters that are being constructed for delivery after January 2009. All rigs in this category are rated for more than 6,500 feet of water, and some are being built to work in waters that measure up to 12,000 feet deep.

Of the 43 drillships either being built or on the books to be built, 27 have been contracted before construction has been completed. Furthermore, of the 45 newbuild semisubs, 36 have received contracts prior to completion.

Delineating deepwaters as those measuring between 4,000 and 7,000 feet deep and ultra-deepwaters as those measuring more than 7,000 feet deep, of the 88 there are only two newbuild floaters that are rated for only deepwaters. The other 86 newbuild floaters are capable of drilling in ultra-deepwaters.

Both of the deepwater newbuilds, the Norbe VI semisub and the Schahin I semisub, are being built for waters measuring 6,561 feet deep. Ordered in August 2006, the Norbe VI is due to be delivered in March 2010, and the Schahin I is due in September 2009. Both rigs are contracted to work for Petrobras in Brazil.

GRAPH WITH RIGS BROKEN UP BY TYPE AND CONTRACT YES/NO
SOURCE: RigLogix

Halted Construction, Financing Problems

Completion of two ultra-deepwater rigs, including one semisub and one drillship, has been stopped. Both of the rigs were contracted to Petrobras.

Construction of the MPF 01 drillship was stopped because the rig builder, MPF Corp. Ltd., filed for bankruptcy. Currently, three rig brokers are attempting to sell the partially built rig. Scheduled for completion in January 2010, the drillship has a three-year contract with Petrobras, and the contract has not yet been terminated.

Also Scorpion has scrapped the construction of a yet unnamed semisub rated for water depths of 7,873 feet. Despite the fact that an LOI exists on the rig with Petrobras, Scorpion could not obtain financing to build the semisub. Although steel has not yet been cut on the rig, the completion date for construction was originally slated for December 2012.

Additionally, Sevan Drilling is having problems financing two of its contracted semisubs. Construction of the Sevan semisub contracted to ONGC to work in India by October 2010 and the Sevan Brasil semisub contracted to work for Petrobras in the Gulf of Mexico by October 2011 has been delayed. According to Sevan's fourth quarter 2008 report, the company is not going to spend money on the construction of the two rigs until certain criteria is met, including a longer contract with ONGC, a later delivery date and 80% finance backing.

Delivery Dates

Currently, there are 101 drillships and semis worldwide that are capable of working in waters deeper than 4,000 feet; so the additional 88 newbuilds will change the offshore exploration and production playing field substantially. When can the market expect to see these rigs?

Most of the floater newbuilds being delivered after the start of 2009 were contracted in 2006, 2007 and 2008. In both 2006 and 2007, 25 semisubs and drillships were ordered; and in 2008, 33 ultra-deepwater newbuilds were ordered. No deepwater or ultra-deepwater rigs have been ordered yet in 2009.

Of this category of drilling rigs, there are 14 newbuilds scheduled to be delivered in the first half of 2009 and eight newbuild floaters expected to be completed in the second half of 2009. The most of any, the first half of 2010 should see 17 newly built rigs hitting the market, and an additional 11 rigs will be delivered in the second half of 2010. Fourteen newbuilds are being delivered in the first half of 2011, and 11 rigs are scheduled to finish construction in the second half of 2011. In 2012, there are 11 rigs scheduled to be delivered in the first half of the year and two rigs expected in the second half of the year.

More than half of the newbuild floaters are contracted. Sixty-three of the newbuild rigs are currently under contract, while 25 of the rigs being built have not yet been signed on for work.

PIE GRAPH OF NUMBER OF RIGS HITTING MARKET BY HALF YEAR
SOURCE: RigLogix

Geographic Hot Spots

Looking at the newbuild market of deepwater and ultra-deepwater floaters, obvious geographical hotspots emerge, namely offshore Brazil and the Gulf of Mexico.

Coinciding with Petrobras contracting the most deepwater and ultra-deepwater newbuild drilling rigs, Brazil is expecting the most newbuilds once construction is complete, with 27 of these rigs scheduled to start offshore the South American country. (An upcoming rig analysis piece will focus specifically on Petrobras' dominance in the deepwater and ultra-deepwater rig market – for both newbuilds and already existing rigs.)

Coming in second, the Gulf of Mexico is expecting 18 newbuild rigs, which includes 15 in the US GOM and three within the Mexican borders of the gulf. Newbuilds are also slated to be delivered to Angola, India, Australia, China, Norway and Russia.

Three contracted newbuilds have not yet been assigned a geographical region for work. Hess has not announced where the Stena Forth drillship will be working upon receipt of the rig. ExxonMobil has not yet announced where the Deepwater Champion will be working, and Shell has not announced where the Bully 2 will be drilling.

GRAPH OF GEOGRAPHIC BREAKDOWN
SOURCE: RigLogix


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