Rowan to Add Fourth Ultra-Deepwater Drillship to Fleet

Houston-based drilling contractor Rowan Companies plc will add a fourth ultra-deepwater drillship to its fleet to meet growing customer demand for ultra-deepwater rigs.

The company said Monday it has exercised an option for the GustoMSC P10,000 design, which will be constructed at Hyundai Heavy Industries in South Korea and is scheduled for delivery in March 2015.

The cost of the rig is estimated at approximately $620 million, including commissioning, project management and spares, but excluding capitalized interest.

Rowan plans to equip the drillships with 2,000 feet of additional riser to enable operations in water depths of up to 12,000 feet upon delivery.

Each drillship will also be equipped with a second blowout preventer (BOP) for minimizing non-productive time, the company said in a statement.

The company said it would incur operational training and personnel ramp-up costs in readying the drillships to commence well operations. Expected costs for the additional riser and BOP, as well as training and ramp-up costs, will be approximately $75 million.

Total cost for the company's fourth drillship will be approximately 6 percent higher than the first three drillships, primarily due to equipment price increases and projected labor cost increases.

Rowan has an option agreement with Hyundai Heavy Industries for a similar fifth drillship exercisable in the fourth quarter of 2012, for delivery in the third quarter of 2015.

The company recently inked a three-year contract for its first ultra-deepwater drillship, the Rowan Renaissance (UDW drillship). The rig is under construction at Hyundai Heavy Industries and is scheduled for delivery in late 2013. The second and third drillships are expected to be delivered in the second and fourth quarters of 2014, respectively.

The contract, coupled with strong customer enthusiasm for Rowan's history of operational excellence, high-specification drillship design and experienced deepwater team, "reaffirms our confidence in our expansion into the ultra-deepwater market," said Rowan President and Chief Executive Officer Matt Ralls in a statement.

The decision is not much of a surprise following the confirmation of the Rowan Renaissance contract, according to a Sept. 10 analyst note from GHS Research.

"We believe RDC can fund the rig internally and drawing on its existing credit facility," according to the analysts note.
The announcement is also positive for National Oilwell Varco, which will win the rig kit, and Cameron for the riser and BOP.

The company's management anticipates that dual-stack BOPs will likely become standard in the coming years, and lead times for stacks will likely lengthen as dual-stacks become more standards, said Barclays Analyst James C. West in a research note, offering feedback on Rowan's presentation at the Barclays CEO Energy Power Conference in New York last week.

Rowan is tracking roughly 16 opportunities for its remaining two uncontracted drillships, with a focus on West Africa and the U.S. Gulf of Mexico, followed by East Africa, West noted.

Drilling contractors last week reported seeing robust demand for ultra-deepwater drilling rigs at the Barclays conference last week.


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