Hamilton, Bermuda-based Seadrill Ltd. has entered into contracts to build two high-specification, jackup drilling rigs at Dalian Shipbuilding Industry Offshore Co., Ltd. (DSIC Offshore) in China. The rigs are scheduled for delivery during Q2 and Q3 2016, and the total project price per rig is about US$230 million (including project management, capitalized interest, drilling and handling tools, spares and operation preparations), with tail-heavy payment terms.
The two new units will be based on the F&G JU2000E design, with water depth capacity of 400ft and drilling depth of 30,000ft. Seadrill now has ten jackups under construction at DSIC Offshore, of which two are scheduled for delivery in 2013, five in 2015, and three in 2016.
Seadrill's construction program now totals 24 units, including 9 drill ships, 2 harsh environment semisubmersibles, and 13 high-specification jack-ups. In addition, the company has fixed-price options for two ultra-deepwater units.
The Board of Seadrill believes that the premium jackup segment continues to provide a compelling investment thesis. The global jackup market is at an inflection point, as approximately 60% of the global contracted fleet was built before 1993. Almost 100 newbuild jack-ups have been delivered since 2005. However, in the last two years, we have seen increased utilization and the number of stacked rigs decline to multi-year lows. Utilization rates have exceeded 90% while average day rates, unmet demand, and average contract lengths have all increased.
Newbuild activity has increased in response to the industry's additional demand. Seadrill says its current orderbook falls short of adequately supplying oil company needs going forward. Currently, the orderbook stands at approximately 115 units of which approximately 50% are not competitive on a global basis. Most of these uncompetitive units are either low specification or destined for markets with regional factors that will limit their global mobility.
Per Wullf, CEO of Seadrill says, "Seadrill has focused its newbuild activity on the high end of all asset classes since the company's inception in 2005. High-specification units have historically commanded the highest day rates and utilization rates and we fully expect this trend to continue. The market for high specification jackup units is poised for a significant uplift in day rates and we continue to invest."