Offshore Drillers: Comprehensive Review Of New Floating Rig Supply - March 2015 Edition

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Includes: ATW, DO, ESV, ORIG, PACD, RDC, RIG, SDRL, VTG
by: Artyom Zakaryan, CFA

Summary

13 competitive semisubs are on order through 2017.

26 competitive drillships are on order through 2018.

Continued scrapping, Sete Brasil problems, and uncontracted newbuild delays will push the overall number of marketed floaters below 2014 year-end levels.

Approximately six months ago, I wrote an article detailing the amount of new competitive supply of drillships and semisubs coming into the market over the next two-three years. Things have changed quite a bit since that article and one of the fellow SA contributors suggested I update information regarding potential newbuilds hitting the market in 2015-2018. This article focuses on drillships and semisubs and does not present information regarding the jackup market.

Rigzone updates newbuild information on a weekly basis and as of February 27th, 2015 here are the tables detailing newbuilds segmented by semisubs and drillships

Semisubs

Your Search Criteria: Rig Type: Semisub
Status: Under Construction

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Rigs: 1 - 26 of 26
Rig Name Manager Rig Type Rated Water Depth Drilling Depth
Caspian Drilling Semisub TBN 1 Caspian Drilling Semisub 3000 ft. 40000 ft.
Hai Yang Shi You 982 China Oilfield Services Ltd. Semisub 5000 ft. 30000 ft.
Ocean GreatWhite Diamond Offshore Semisub 10000 ft.
Bollsta Dolphin Dolphin Drilling Semisub 10000 ft. 41010 ft.
Frigstad Semisub TBN 1 Frigstad Offshore Semisub 12000 ft. 50000 ft.
Frigstad Semisub TBN 2 Frigstad Offshore Semisub 12000 ft. 50000 ft.
Landmark Drilling Semisub TBN 1 Landmark Drilling Semisub 4000 ft. 26000 ft.
West Rigel North Atlantic Drilling Ltd. Semisub 10000 ft. 40000 ft.
Beacon Atlantic North Sea Rigs AS Semisub 4000 ft. 26246 ft.
Beacon Pacific North Sea Rigs AS Semisub 4000 ft. 26248 ft.
North Dragon North Sea Rigs AS Semisub 4000 ft. 26246 ft.
Botinas Odebrecht Oil & Gas Semisub 10000 ft. 33000 ft.
Orion Honghua Semisub TBN 1 Opus Offshore Semisub
Frade Petroserv SA Semisub 10000 ft. 33000 ft.
Portogalo Petroserv SA Semisub 10000 ft. 33000 ft.
Primepoint Semisub TBN 1 Primepoint Drilling PTE Ltd. Semisub
Primepoint Semisub TBN 2 Primepoint Drilling PTE Ltd. Semisub
Bracuhy Queiroz Galvao Oleo e Gas S.A. Semisub 10000 ft. 33000 ft.
Mangaratiba Queiroz Galvao Oleo e Gas S.A. Semisub 10000 ft. 33000 ft.
Urca Queiroz Galvao Oleo e Gas S.A. Semisub 10000 ft. 32000 ft.
Sevan Developer Seadrill Ltd Semisub 10000 ft. 35000 ft.
Songa Enabler Songa Offshore AS Semisub 1640 ft. 27887 ft.
Songa Endurance Songa Offshore AS Semisub 1640 ft. 27887 ft.
Songa Equinox Songa Offshore AS Semisub 1640 ft. 27887 ft.
Stena Drilling Semisub TBN 2 Stena Drilling Semisub 7500 ft. 30000 ft.
Stena MidMAX Stena Drilling Semisub 7500 ft. 30000 ft.

As you can see there are 26 semisubs under construction, although Rigzone notably omits two semisubs in this list (Songa Encourage and West Mira, which are yet to be delivered). Six of these semisubs are Sete orders. I'll discuss Sete situation a bit later in the article. Of the remaining 22 newbuilds, eight are being built at Chinese shipyards and are standard-spec. That leaves 14 higher-spec semisubs.

Four of these belong to Songa and are contracted with Statoil for 8 years each. Three belong to Seadrill with West Mira being contracted to Husky and the other two uncontracted. I'm assuming Rosneft deal does not go through and West Rigel's potential 5-year contract would therefore be cancelled.

Frigstad and Stena each have two rigs on the list, all uncontracted. Diamond Offshore, Dolphin Drilling, and SOCAR (national oil company of Azerbaijan) round the list with one rig each and all are under long-term contracts. The latter is being built to drill specifically in the Caspian Sea and therefore is not part of the global competitive supply.

To summarize semisubs, there are 13 competitive rigs being built through 2017 with 7 contracted and 6 uncontracted.

Drillships

Your Search Criteria: Rig Type: Drillship
Status: Under Construction

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Rigs: 1 - 50 of 53
Next End
Rig Name Manager Rig Type Rated Water Depth Drilling Depth
Atwood Admiral Atwood Oceanics Drillship 12000 ft. 40000 ft.
Atwood Archer Atwood Oceanics Drillship 12000 ft. 40000 ft.
Ocean BlackLion Diamond Offshore Drillship 12000 ft. 40000 ft.
ENSCO DS-10 ENSCO Drillship 12000 ft. 40000 ft.
ENSCO DS-8 ENSCO Drillship 12000 ft. 40000 ft.
ENSCO DS-9 ENSCO Drillship 12000 ft. 40000 ft.
DSME e-Smart Drillship TBN 1 ESSA Servicos de Perfuracao Drillship 12000 ft. 40000 ft.
DSME e-Smart Drillship TBN 2 ESSA Servicos de Perfuracao Drillship 12000 ft. 40000 ft.
Cassino Etesco Drilling Svcs Drillship 10000 ft. 40000 ft.
Comandatuba Etesco Drilling Svcs Drillship 10000 ft. 40000 ft.
Curimim Etesco Drilling Svcs Drillship 10000 ft. 40000 ft.
Itapema Etesco Drilling Svcs Drillship 10000 ft. 40000 ft.
Salinas Etesco Drilling Svcs Drillship 10000 ft. 40000 ft.
Can Do KeppelFELS Drillship 12000 ft. 40000 ft.
Ocean Rig Drillship TBN 10 Ocean Rig ASA Drillship 12000 ft. 40000 ft.
Ocean Rig Drillship TBN 11 Ocean Rig ASA Drillship 12000 ft. 40000 ft.
Ocean Rig Santorini Ocean Rig ASA Drillship 12000 ft. 40000 ft.
Boipeba Odebrecht Oil & Gas Drillship 10000 ft. 40000 ft.
Interlagos Odebrecht Oil & Gas Drillship 10000 ft. 40000 ft.
Ondina Odebrecht Oil & Gas Drillship 10000 ft. 40000 ft.
Pituba Odebrecht Oil & Gas Drillship 10000 ft. 40000 ft.
Guarapari Odfjell Drillship 10000 ft. 40000 ft.
Itaoca Odfjell Drillship 10000 ft. 40000 ft.
Siri Odfjell Drillship 10000 ft. 40000 ft.
Pacific Zonda Pacific Drilling Limited Drillship 12000 ft. 40000 ft.
Rowan Relentless Rowan Drillship 12000 ft. 40000 ft.
Camburi Seadrill Ltd Drillship 10000 ft. 40000 ft.
Itaunas Seadrill Ltd Drillship 10000 ft. 40000 ft.
Sahy Seadrill Ltd Drillship 10000 ft. 40000 ft.
West Aquila Seadrill Ltd Drillship 12000 ft. 40000 ft.
West Dorado Seadrill Ltd Drillship 12000 ft. 40000 ft.
West Draco Seadrill Ltd Drillship 12000 ft. 40000 ft.
West Libra Seadrill Ltd Drillship 12000 ft. 40000 ft.
Arpoador Sete Brasil S.A. Drillship 10000 ft. 35000 ft.
Copacabana Sete Brasil S.A. Drillship 10000 ft. 35000 ft.
Grumari Sete Brasil S.A. Drillship 10000 ft. 35000 ft.
Ipanema Sete Brasil S.A. Drillship 10000 ft. 35000 ft.
Joatinga Sete Brasil S.A. Drillship 10000 ft. 40000 ft.
Leblon Sete Brasil S.A. Drillship 10000 ft. 35000 ft.
Leme Sete Brasil S.A. Drillship 10000 ft. 35000 ft.
Marambaia Sete Brasil S.A. Drillship 10000 ft. 35000 ft.
Opus Tiger 1 Songa-Opus JV Drillship 5000 ft. 32800 ft.
Opus Tiger 2 Songa-Opus JV Drillship 5000 ft. 32800 ft.
Opus Tiger 3 Songa-Opus JV Drillship 5000 ft. 32800 ft.
Opus Tiger 4 Songa-Opus JV Drillship 5000 ft. 32800 ft.
Deepwater Conqueror Transocean Ltd. Drillship 12000 ft. 40000 ft.
Deepwater Pontus Transocean Ltd. Drillship 12000 ft. 40000 ft.
Deepwater Poseidon Transocean Ltd. Drillship 12000 ft. 40000 ft.
Deepwater Proteus Transocean Ltd. Drillship 12000 ft. 40000 ft.
Deepwater Thalassa Transocean Ltd. Drillship 12000 ft. 40000 ft.
Transocean Espadon Drillship TBN 1 Transocean Ltd. Drillship 12000 ft. 40000 ft.
Transocean Espadon Drillship TBN 2 Transocean Ltd. Drillship 12000 ft. 40000 ft.
Cobalt Explorer Vantage Drilling Drillship 12000 ft. 40000 ft.

The table shows 53 drillships under construction. Sete Brasil rigs comprise 23 of the above. EAS, one of the shipyards responsible for construction of 7 Sete rigs cancelled the orders due to a missed payment. Sete Brasil is on the brink of default and the whole 29 rig program is in jeopardy. The company has stopped making progress payments back in November and has little chance of obtaining further financing if Petrobras drilling backlog is no longer in place. This whole project is looking like a monumental failure and even if it is somehow miraculously resurrected it will be delayed by several years until all parties involved can get their corruption-laden houses in order.

Excluding Sete rigs there are 30 drillships on the list, which notably no longer contains Maersk Voyager (uncontracted), West Carina (contracted), Rowan Reliance (contracted), and Ocean Apollo (contracted).

Four of these thirty are standard-spec rigs being built by Opus Offshore targeting specifically the Asian market. That leaves 26 competitive drillships to enter the market over the next three years.

The table below provides consolidated picture of semisubs and drillships with the number of rigs under construction, estimated delivery year, and contractual status.

*numbers in parentheses refer to uncontracted rigs

Company

Type of floater

2015

2016

2017

2018

2019+

Transocean (NYSE:RIG)

Drillship

3

3 (1)

1(1)

Seadrill (NYSE:SDRL)

Drillship

4 (4)

Semisub

3 (2)

Ocean Rig (NASDAQ:ORIG)

Drillship

1 (1)

2 (2)

Ensco (NYSE:ESV)

Drillship

3 (1)

Diamond Offshore (NYSE:DO)

Drillship

1

Semisub

1

Pacific Drilling (NYSE:PACD)

Drillship

1 (1)

Atwood Oceanics (NYSE:ATW)

Drillship

1 (1)

1 (1)

Rowan (NYSE:RDC)

Drillship

1

Stena Drilling

Semisub

2 (2)

Vantage Drilling (NYSEMKT:VTG)

Drillship

1 (1)

Songa

Semisub

4

Sonangol

Drillship

2 (2)

Keppels

Drillship

1 (1)

Frigstad

Semisub

2 (2)

Dolphin Drilling

Semisub

1

Total

15 (5)

18(14)

5 (3)

1 (1)

As you can see from the table there are 15 competitive floaters expected for delivery for the rest of 2015. Only five of them are uncontracted. Three of the five, Atwood Admiral, Sevan Developer and West Rigel may be pushed back into 2016. The other two, Ensco DS-10, and Pacific Zonda are intended for delivery at the end of 2015 at least based on companies' latest conference calls.

For 2016 there are 18 rigs scheduled for delivery and only 4 are contracted at this point, of which three belong to Transocean. I suppose most of these rigs get pushed back a year if still uncontracted, considering 2017 has only five rigs with expected delivery.

In total, 39 competitive floaters awaiting delivery over the next three years is not as scary of a number as 80, which is the nominal number based on Rigzone data. The article provides specifics of each segment and in my view continued scrapping of older floaters over the next twelve-eighteen months will keep the overall amount of floating rigs constant and possibly lower than end of 2014 levels.

Pacific Drilling reflected this thesis in their latest presentation.

They see a lower rig count in 2015 due to scrapping and with 70 additional 2nd-3rd generation floaters up for regulatory survey over the next three years, the company and the industry may revise down expectations for the number of rigs in the market from 2% growth to high single-digit decline through 2017-2018.

Disclosure: The author is long RIG.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.