While Ensco adds two more rigs to its cold-stacked list, the rig provider sold one of its semisubmersibles for US$1 million. The Houston-based company has also seen several of its contracts shortened.
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Image from Ensco. |
The company’s Ensco 8500 semisubmersible, built in 2008, is undergoing cold stack preparations. The rig, which was operating in the US Gulf of Mexico, had been idle since August 2015.
The Ensco 5005 semisubmersible, built in 1982, and operating offshore Singapore, will also be cold stacked. It recently came off of a contract two months ago in February.
With the two rigs added to the list, it brings the company's total cold stacked fleet to 17 units, the majority of which are jackups.
According to the company’s fleet status report, Ensco sold its Ensco 6000 semisubmersible for $1 million to an undisclosed client.
The Houston-based company revealed in its report that it disagrees with Brazilian giant Petrobras’s allegations stemming from January in which Petrobras asserted that there were irregularities regarding the DS-5 drillship prior to Ensco’s acquisition of Pride International in 2011.
Petrobras is claiming that “the Ensco DS-5 drilling services contract is void based on an allegation that Ensco’s subsidiary Pride had knowledge of and assisted a former third-party marketing consultant that procured and received improper payments from Samsung Heavy Industries, the shipbuilder of Ensco DS-5, that were then paid to employees of Petrobras,” Ensco said in its fleet status report. “We disagree with Petrobras’ assertions and have initiated arbitration proceedings in the UK against Petrobras and Samsung Heavy Industries in connection with the foregoing.”
The two companies are also in negotiations regarding revised commercial terms for four rigs operating offshore Brazil, the Ensco 6001, Ensco 6002, Ensco 6003 and Ensco 6004.
“Should final approval of these terms ultimately be received from our customer, it may result in a net reduction to contract revenue backlog of approximately $140 million for all four rigs collectively effective May 2016 and would reset the downtime on Ensco 6001 to zero with respect to downtime that could trigger a potential future early termination,” Ensco said.
Contract reductions and wins
In compliance with contract provisions with Fieldwood Energy, the term has been shortened to June for the Ensco 75 jackup, for operations in the Gulf of Mexico. The dayrate is in the mid $40,000 range.
Maersk Oil, also in compliance with contract provisions, has shortened its term with the Encso 72 jackup to September, at a dayrate in the mid $90,00 range.
The company’s Ensco 110 jackup was also hit with a shortened term to November. Dayrates for the rig between February and October stand in the mid $80,000 range, however for the month of October, the dayrate will be reduced to the low $80,000 range.
Chevron will use the Ensco 107 jackup for its Australian operations in a six-month contract beginning in September, in the high $120,000 range. The deal comes with six one-month options.
In February, Chevron awarded Ensco a contract for the Ensco 8504 rig for its Indonesia operations beginning in March. The contract is set to end in early July with a dayrate in the low $270,000 range, plus about $73,000 per day amortized from March to July for mobilization. Upon completion of Chevron’s contract, the Ensco 8504 will be contracted to Kangean from July to October at a dayrate in the mid $260,000 range.
Moody’s drops ratings
Last month, ratings house Moody’s downgraded Ensco from Baa2 to B1, with a stable outlook.
The downgrade reflects Moody's view that Ensco's leverage will increase to very high levels as more of its rigs roll off contracts in an extremely challenging offshore contract drilling market. By the end of 2018, 14 of Ensco's 15 active floaters and 23 of 25 active jackups will be off contract, assuming no new contracts.
Out of six US offshore drilling companies, Moody’s downgraded two companies by three notches, three companies' ratings were dropped four notches and one was dropped five notches.
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OE provided a Rig Market Review in our March 2016 issue.
Further reading
Most of the news in the rig market is bad, but there are bright spots if you look hard enough. Audrey Leon sets out the details.
The floating rig market is preparing for the most challenging year ahead. Leslie Cook, of Quest Offshore, explains.
35 offshore projects and 100 rig years have slipped after the oil price collapse. Oddmund Føre, Analyst, Rystad Energy, explains.
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