Transocean in shipshape

Transocean seems to be shaping up with a busy quarter of reactivating rigs and extending contracts, as the offshore drilling contractor sets its sights on nearly 60 floater programs that could begin within the next 18 months.

The Transocean Nautilus. Image from HHI.

Terry Bonno, the company’s senior VP, Industry and Community Relations, says Transocean remains determined to contract business in any market.

“As evidence of this commitment, we have been very busy reactivating and extending rigs while creating opportunities to work with old and new customers. Our teams are working around the clock to re-staff rigs, deliver flawless start ups with reactivation, deliver ready-to-drill newbuilds from shipyards, manage seamless entry into new countries and efficiently executing contracts,” Bonno said in Transocean’s Q2 2017 earnings call last week. “It is beginning to feel a lot like we are moving off bottom.”

Transocean’s Deepwater Nautilus semisubmersible inked a four-well drilling campaign with offshore Asia.

“After a sharp move and full crewing of the rig, she will commence operations in Q4 2017,” Bonno said.

The Deepwater Nautilus has been under contract with Shell for 17 years offshore Gulf of Mexico. Shell’s contract ends this month.

Hurricane Energy has contracted the Paul B. Loyd semisubmersible for two wells, plus options, on the Lancaster development in the UK. Drilling is expected to start April 2018. The rig is currently on contract with BP until November 2017.

Quadrant Energy is saving the GSF Developer Driller I (DD1) ultra deepwater semisubmersible from cold stacking, with a new contract offshore Australia. The contract with Quadrant is from August 2018 until November 2018.

“This will mark Transocean's return to the Australia market, where customers are very excited to see us return to the region,” Bonno said.

Woodside Energy will use the Dhirubhai Deepwater KG2 offshore Myanmar for two one-well options. According to Transocean’s fleet status report, the rig is scheduled to start work in December 2018, until June 2018.

Transocean has also reactivated the Deepwater Asgard from warm stacking, with a contract in the Gulf of Mexico with Deep Gulf Energy.

“With great team effort, the reactivation was executed in less than a month, and she has now been operating for two months,” Bonno confirmed.

“Our customers, with our support, have done a tremendous job of improving the economics on their projects. And we look forward to continuing our collaboration with them as we jointly work to make offshore projects economically viable at lower oil prices,” Bonno said.

“We also see multiple bidding opportunities globally where we have identified almost 60 floater programs that could begin within the next 18 months,” Bonno said. “As you can see from these awards and consistent with our prior comments, opportunities are coming from all parts of the world. We continue to have productive dialogue with our customers regarding additional opportunities. Customers recognize the importance of assuring rigs are available for their projects, and they are requesting more information on the readiness of crews and availability of floaters.”

“We're continuing strengthening of our customers' balance sheets and cash flows and expect more sanctioning of deepwater projects. Should the macro continue to strengthen and oil remain above the magic $50 level, we believe this will occur in 2018,” Bonno said.

Transocean confirmed that the company is participating in multiple bids, and have identified more opportunities in Latin America including Trinidad, Colombia, Guyana, and Suriname.

The company is also looking for opportunities offshore Asia, and Europe.

“The Asia Pacific region has been very active, with multiple offerings and awards in Australia, Malaysia, Myanmar and India. We expect to see 30 floater opportunities over the next 18 months in these markets,” Bonno said. With a positive result for the Woodside campaign offshore Myanmar with the KG2, we expect to see activity ramp up with customers holding leases in the two discovery areas.”

“We're excited to see that our prediction of a tightening market is happening sooner than expected,” Bonno said of the UK and Norway market. “Increased demand for spring 2018 commencement of work in the UK is now causing customers to consider a 2017 winter drilling season. This is certainly the best-leading indicator of improving market conditions for the UK market.”

Bonno pointed out that there has been a trend with operators that is eliminating “challenged” competitors.

“We are now seeing more operators in all markets express an emphasis on drillers' contractors' financial stability, by including financial metrics in recent tenders, are simply eliminating challenged competitors during the bidding process,” Bonno said. “This is narrowing the pool of suitable competitors for upcoming work. With the pace of current contracting, we could see the high-specification floater availability for suitable drillers dwindle faster than anticipated.”

“Our customers have ramped up activity in 1H 2017. The opportunities in front of us for 2018 and beyond are taking shape,” Bonno said.