Transocean Sees First 20,000-psi Rig Delivery by Year End

Transocean Sees First 20,000-psi Rig Delivery by Year End
The revised deals improve liquidity by $450 million-plus, says president and CEO.

Transocean Ltd. (NYSE: RIG) has reached an agreement with Sembcorp Marine unit Jurong Shipyard Pte Ltd (JSPL) to delay delivery and defer payments for a pair of newbuild, ultra-deepwater drillships, the offshore drilling contractor reported Monday.

Under the deal, Transocean now expects a December 2021 delivery for the Deepwater Atlas and a May 2022 delivery for the Deepwater Titan, the company revealed in a written statement emailed to Rigzone. The firm pointed out the vessels will be the world’s first eighth-generation ultra-deepwater drillships and the only rigs featuring a 3-million-pound hook-load. Calling the drillships the “most capable and highest specification rigs in the world,” Transocean noted Deepwater Atlas and Deepwater Titan will feature a pioneering 20,000-pounds per square inch (psi) well control system.

“In addition to their state-of-the-art drilling capabilities, these rigs are also designed and equipped to optimize fuel consumption, reduce emissions, and thus minimize the associated carbon footprint of each offshore project,” Transocean stated.

According to Transocean, terms of the deals for both drillships and the vessels’ projected mobilizations in the Gulf of Mexico are as follows:

Deepwater Atlas

  • Upon delivery this December, Transocean will pay JSPL $50 million. The drilling contractor will pay the approximately $370 million balance of payments owed to JSPL over the subsequent five years under a secured financing arrangement with the shipyard.
  • Transocean also noted that it has reached an agreement with BOE Exploration & Production LLC (Beacon) that drilling operations with Deepwater Atlas on the Shenandoah project in the U.S. GOM are now slated to begin in the third quarter of 2022. The drilling contractor added that Beacon and its partners are expected to render a final investment decision to use Deepwater Atlas for Shenandoah by July 31, 2021.

Deepwater Titan

  • Transocean will pay JSPL approximately $350 million (80% of amounts owed) when it takes delivery of Deepwater Titan, now projected for May 2022. The drilling contractor added that it will defer the remaining 20%, roughly $90 million, over a five-year period following delivery.
  • Under an agreement with Chevron U.S.A., Inc. (NYSE: CVX), Deepwater Titan is now expected to commence commercial operations in the first quarter of 2023, Transocean continued. The drilling contractor added that its contract with Chevron preserves its duration and estimated $830 million backlog, excluding mobilization and reimbursables.

“These agreements clearly represent a monumental achievement for Transocean,” remarked Transocean President and CEO Jeremy Thigpen. “As the result, we will take delivery of the two highest-specification ultra-deepwater drillships in the world, and the only two assets capable of drilling and completing 20,000 psi wells. Notably, as a critical element of these agreements, we will receive shipyard financing, which materially improves our year-end 2022 liquidity, thus extending our runway and providing us with additional investment flexibility as the industry recovers.”

Transocean pointed out the principal balances will carry an interest rate of 4.5% per annum.

“On behalf of Transocean, I sincerely thank JSPL, Chevron, and Beacon Offshore for their significant contributions to this process,” commented Thigpen. “I would especially like to thank our customers, as these agreements clearly demonstrate the trust that they have in Transocean’s track record of successfully introducing revolutionary new technologies to the industry, and the confidence that they have in our ability to consistently deliver safe, reliable, and efficient drilling operations across our global fleet.”

The map below, taken from Transocean’s presentation Monday announcing the updated drillship schedules, highlights GOM discoveries and anticipated prospects requiring a 20,000-psi blowout preventer (BOP).

Transocean_20000psiSOURCE: Transocean "Newbuilds Update June 2021" presentation, June 7, 2021

 “We are extremely excited about these initial campaigns for the Deepwater Atlas and Deepwater Titan and we are excited about the expanding list of 20,000-psi opportunities requiring the extraordinary capabilities of these rigs,” said Thigpen.

JSPL is located in Singapore, where Sembcorp Marine has been grappling with a skilled worker shortfall linked to COVID-19 restrictions imposed by the city-state's government.

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