Petroleum Africa
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Thursday, July 13, 2017
Ensco was awarded three drillship contracts offshore West Africa. According to a statement released by the company this represents an aggregate three years of contracted term and more than six additional years of options.
CEO and president Carl Trowell said, “Our recent contract awards demonstrate our ability to win work for preservation stacked rigs and new builds ahead of the competition. We contracted ENSCO DS-4, a rig that was previously preservation stacked, for a two-year term and reactivated the rig on time and within our cost estimates. We also secured a one-year contract for ENSCO DS-10, our final new build drillship, which is among the most technologically advanced rigs in the global fleet.”
Trowell concluded, “We continue to see offshore drillers with track records of safe and efficient operations as well as financial strength win a disproportionate amount of new work and these contracts are examples of our recent success in capitalizing on this trend. Additionally, we believe that this new work positions us well for follow-on opportunities, benefiting future utilization for our rig fleet.”
ENSCO DS-4 is expected to commence a two-year contract with Chevron offshore Nigeriain August 2017. The contract also includes a priced customer option for one additional year of work. Ensco recently reactivated the rig following a period during which the rig was preservation stacked in Tenerife and reactivation expenses are expected to total $28 million. In addition, $15 million of capital upgrades were added to the rig and are anticipated to benefit the asset over its remaining useful life.
The ENSCO DS-10is scheduled to commence work with Shell offshore Nigeria in Q1 2018. The contract duration is for one year and includes five one-year priced customer options. As a result of winning this contract, the rig’s delivery is expected to be accelerated into Q3 2017 from Q1 2019. ENSCO DS-10 will then undergo a period of acceptance testing before mobilizing to Nigeria to begin its maiden contract. Remaining capital expenditures associated with the rig are expected to total approximately $190 million inclusive of a final milestone payment to the shipyard, an upgrade to add a second seven-ram blowout preventer, acceptance testing, capitalized interest and mobilization.
ENSCO DS-7 is contracted to Total until November 2017. Since November 2016, the rig has been idle in Tenerife earning a standby rate following early termination of its original contract for customer convenience. ENSCO DS-7 is now scheduled to mobilize to Cote d’Ivoire to drill one well beginning in August 2017 that is expected to take 60 days to complete. Additionally, Total has a priced option for one further well.
As a result of these new contracts, contract drilling expense for second quarter 2017 is expected to be approx. $282 million after adjusting for a $10 million settlement of a previously disclosed legal contingency, slightly higher than the prior guidance of $270 million to $280 million, or $292 million on an unadjusted basis. Anticipated capital expenditures are now expected to total approx. $350 million for the nine-month period from second quarter 2017 through Q4 2017. This capital expenditure estimate includes approximately $240 million for new rig construction, inclusive of approx. $29 million of capitalized interest, and approximately $110 million for rig enhancements and minor upgrades and improvements.
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