Saipem Charters 7th Gen. Deepwater Drillship "Deep Value Driller"

Italian oilfield services group Saipem has agreed to charter a 7th generation deepwater drillship owned by the Oslo-listed Deep Value Driller AS.

The drillship, also named Deep Value Driller, will start its contract upon reactivation works, which are expected to be completed in the summer of 2023.

The drilling firm bought the rig, previously known as Bolette Dolphin, in early 2021 for only $65 million, which represented ~9% of the rig construction cost of around $750 million. The rig was delivered in February 2014 by South Korea's Hyundai Heavy Industry. 

According to the rig owner, the contract with Saipem, which is for a firm period of approximately three years, adds about $160 million in firm revenue backlog to Deep Value Driller.

While Deep Value Driller AS did not say how many days exactly the rig would be on a contract with Saipem (approximately 3 years), if we assume that the contract is for three years exactly, meaning around 1096 days, as 2024 is a leap year with 366 days, this means that the dayrate for this 7th generation rig would be around $145,985 (See note).

This comes at a time when global drillship utilization is reaching record highs and dayrates, with analysts and drilling companies alike forecasting a multi-year growth cycle in the industry.

Westwood's offshore rig analyst Terry Childs recently said that drillship utilization had averaged 93% for 2022, with several contracts awarded at over $400,000 dayrates, "with the highest reaching $462,000 for a contract offshore Brazil." Read More Here.

During the 2014–2017 period, when it was still called Bolette Dolphin, the drillship worked three years with Anadarko in West Africa at a $488.000 dayrate.

Now, as one of our readers pointed out, it is worth noting that this is a bareboat charter, meaning Saipem will have to find work for the rig, provide crew, bear operational expenses, meaning the dayrate for a contract that Saipem might eventually secure with an oil company will need to be much higher. According to a November 2021 article by offshore drilling rig market analysts, Esgian, daily opex for a modern drillship could reach around $150,000.

Stacking costs

According to information on the rig owner's website, between 2017 and 2020, the rig was warm-stacked at a cost of $70.000 per day, and it was then relocated to Norway for more efficient stacking in 2020 (25,000 per day). Upon buying the rig, Deep Value Driller AS said in an April 19, 2021, presentation, that its goal was to reduce the stacking amount to $20,000 a day, and that it was fully funded for 18 months of stacking. A little over 22 months have passed since.

Commenting on the contract with Saipem, Svend Anton Maier, CEO of the drilling rig company, said: "We are very pleased to enter into a contract with Saipem, a reputable operator in the ultra-deep water segment. The Deep Value Driller is one of the newest and most modern drillships in the world, and we expect the vessel to be one of the key contributors to Saipem for their drilling campaigns in the years to come." 

Reactivation

Deep Value Driller AS said Thursday that it had entered into a $75 million senior secured term loan facility agreement "with a reputable private lender" and Nordic Trustee AS as facility and security agent. 

The company said it would use the proceeds to fund the reactivation activities for the drillship, the refinancing of the company's existing credit facility, and general corporate purposes.

The reactivation of the drilling rig is expected to cost around $40 million, while about $10 million will be used to refinance the the existing credit facility. The remaining proceeds will be used for general corporate purposes.

In a presentation in April 2021, Deep Value Driller AS said that it would reactivate the rig only with firm contract secured.

The agreed reactivation scope shared at the time included a NOV package, ABB package, well control equipment (with full re-certification required), and hull and structure class renewal.

According to the company's 3Q presentation, the vessel was warm-stacked with a crew of 15 people at Westcon Yard in Ølensvåg in November 2022, at an average cost of $21,270 a day during the quarter. The company also said at the time that the activation of the rig would take place at Westcon Yard.

Offshore Engineer has reached out to Saipem, hoping to learn more about the terms of the charter, and the rig's deployment prospects. Saipem did not reply.

Deep Value Driller drillship specs (as found on the rig owner's website)

Note: The dayrate of $145,985 was obtained by simply dividing $160 million by 1096 days and is for illustrative purposes only.The actual dayrate may vary depending on the precise duration of the contract. Since the company stated that the contract is for approximately three years, the dayrate may be higher if the actual duration of the contract is less than three years.

The article's original headline, "Saipem Charters 7th Gen. Deepwater Drillship on the Cheap," has been changed to "Saipem Charters 7th Gen. Deepwater Drillship "Deep Value Driller," to reflect the fact that the charter and implied dayrate are for a bareboat deal, and that the dayrate, once Saipem finds the deal for the drillship with an oil company, will have to be much higher.