A deadly fire erupted on a Pemex offshore platform, Valaris saw a management shakeup and oil rebounded after a week-long slump
After sliding for a week, oil bounced back on 23 August, with traders pushing the price of Brent crude oil (ICE) up almost 5.5% to US$68.75 per barrel for October contracts. The oil sell-off had been driven by fears that the rapid spread of the Delta variant would depress global energy demand and slow the economic recovery. Traders, however, were buoyed by the report of no new locally transmitted Covid cases out of China since the Delta variant outbreak began in July.
Meanwhile, Mexican state-run oil company Pemex reported a deadly fire broke out on 22 August on an offshore platform in the Bay of Campeche, killing five and injuring six others, with at least two others missing. The fire broke out in an underwater pipeline that connects the Ku-A processing platform to the Ku-Maloob-Zaap production development.
Pemex confirmed in a statement that the fire began "while the COTEMAR and BMCI companies carried out scheduled preventive maintenance tasks, cleaning the lines of the suction heads and gas discharge from the pneumatic pump compressors" on the platform.
The damaged platform remains out of service. This would result in a loss of 421,000 barrels of oil per day and 125 wells offline, Pemex chief executive Octavio Romero told a news conference, according to a report by Reuters.
Efforts were underway to locate the missing, assess the damage and effect the repairs to the platform. Pemex has said it expects to resume full production on the site by 30 August.
Global jack-up drilling steady
For the fourth week in a row, global offshore jack-up drilling activity was “steady as she goes”, with 345 units contracted, while floater activity fell for the third consecutive week.
Overall, Westwood Global Energy’s RigLogix reported 111 floaters under contract for week 34 2021, down two week-on-week. Deepwater drilling in West Africa fell to its lowest levels in six weeks, with only eight floaters under contract.
One floater that will go to work in West Africa in Q4 2021 under new contracts is the drill ship Valaris DS-10. Valaris was awarded one-well contracts with Shell Namibia Upstream BV and Shell Sao Tome and Principe BV offshore Namibia and Sao Tome and Principe, respectively. The Sao Tome and Principe contract will follow on directly from the Namibia contract. The contracts have an estimated duration of 60 days each.
Big Board-listed Valaris also announced a shake-up at the top, with president and chief executive Tom Burke and executive vice president and chief financial officer Jon Baksht both stepping down effective 2 September. The board chose Anton Dibowitz, a current board member, as interim president and chief executive and Darin Gibbins, the company’s vice president – investor relations and treasurer, as the interim chief financial officer. Both appointments are effective 3 September.
High scrapping levels
While the mid-year has passed, results for the first half of the year are just coming in. In his H1 2021 review of demolition in the offshore sector, VesselsValue analyst Guy Cooper noted the difficult financial straits faced by many offshore drillers as a result of Covid-19 and the low-price oil environment, calling it “one of the toughest periods since the oil price crash of 2014/2015.” This has led to Chapter 11 bankruptcy protection filings by Diamond Offshore, Noble Drilling, Pacific Drilling, Valaris and Seadrill. In turn, many of these rig owners were forced to shed older tonnage as part of pre-packaged bankruptcy agreements. Of the five companies, only Seadrill remains in Chapter 11 bankruptcy protection. While Seadrill has its own plan to emerge from Chapter 11, competitors Transocean and Dolphin Drilling have put forth a new competing bid for the driller’s assets, according to a report by Reuters.
In his analysis, Mr Cooper notes that Seadrill was active in selling older rigs for demolition in H1 2021. It sold five rigs, all cold-stacked between seven and five years. These were 2011-built West Pegasus for US$7.6M, 2009-built West Eminence for US$7.6M, 1998-built West Navigator for US$11.9M, 1999-built West Venture for US$6.5M and 1986-built West Alpha for US$4.2M.
All were sold ‘as is’ to a Turkish demolition cash buyer Rota Shipping for a total price of US$38M.
Overall, rig owners sold 20 units for demolition.
Maersk shrinks fleet, too
While Maersk Drilling has not sold any of its rigs for demolition, it has been rationalising the size of its fleet. Most recently, it agreed to divest Maersk Inspirer to Havila Sirius, a subsidiary of family owned Havila Holding, for US$373M. Repsol Norge, operator of the Yme field in the NCS, signed an agreement to take over the day-to-day operations of the rig. Under the agreement, the Yme licensees will lease the rig from Havila Sirius under a bareboat charter.
Earlier in the year, Maersk completed the sale of two older rigs, Maersk Gallant and Maersk Guardian, to New Fortress Energy for US$31M for non-drilling purposes for the Fast LNG project.
Reporting improving results for Q2 2021, with increases in contracted days, higher day rates, utilisation and a 33% jump in revenue quarter-on-quarter, Maersk Drilling reported revenues of US$350M for Q2 2021, up from US$264M in Q1 2021. Its rig utilisation rate now stands at 80%, up from just 61% the previous quarter. Average day rates for its rigs rose US$10,000 per day quarter-on-quarter, reaching US$230,000.
As a result of the strong quarter, revenue for H1 2021 was US$614M, up 5% from H1 2020’s US$584M. Maersk Drilling chief executive Jorn Madsen said the first half results were “supported by a strong commercial performance in a market that is showing signs of an impending recovery.”
Maersk Drilling secured a nine-month contract for the jack-up rig Maersk Innovator to drill three subsea development wells in Block 28/9 on the UK continental shelf. The contract is expected to start in December 2021. Maersk Innovator has been warm-stacked in Grenaa, Denmark, since its last contract ended in May 2020.
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