Due to continued challenging market conditions, Athens, Greece-based rig provider Ocean Rig announced that if no future work is found for two of its fifth generation ultra-deepwater semisubmersible rigs – the Eirik Raude and Leiv Eiriksson – they could be scrapped.
“The market continues to remain challenging due to the massive spending cuts initiated by the oil companies,” said George Economou, Chairman and CEO, Ocean Rig. “In this environment, cash preservation and liquidity remain our number one priority and we will adjust our available capacity to the new market conditions. For rigs that we cannot secure long-term employment that are coming up for their five-year SPS we will cold stack the units and in the case of the semisubmersible rigs seriously consider all our options including disposal or scrapping.”
The Eirik Raude, a Trosvik Bingo 9000 design built in 2002 at the Dalian shipyard in China, arrived in the Falkland Islands in March, and is in the process of completing its third well in a six-well program for operator Premier Oil. Ocean Rig expects Eirik Raude to be employed into January 2016. However, the rig provider said that there are no further prospects for employment in the Falklands, and if none are found, the rig will be cold stacked and possibly disposed of or scrapped, the company said.
In May, the semisub experienced an equipment malfunction, which halted drilling and required the BOP to be repaired, while drilling Premier’s Isobel Deep 14/20-1 well in the North Falkland Basin. Ocean Rig said in its August fleet status report that unit experienced nine days off-hire due to the incident.
Premier’s partner Rockhopper said in its half-year results that it expects the Eirik Raude to return to the North Falkland Basin to drill the Chatham well. In late September, Rockhopper announced that the unit will re-drill the Isobel Deep well, which could not be logged or sampled due to mechanical reasons. The new well, approximately 4km away, will replace the Jayne East well in the current campaign.
The Leiv Eiriksson, built in 2001 at the Dalian shipyard in China, is currently completing a well in Norway for Rig Management, a consortium of companies who operate on the North Sea, which includes Bayerngas Norge, Maersk Oil and OMV. The Leiv Eiriksson has been under contract with the consortium since February 2012. Ocean Rig said that there is no further program for the unit under its current contract, which is expected to expire in March 2016. The company said, like with the Eirik Raude, if no further employment is found, the rig will be cold stacked, and could be disposed of or scrapped.
Ocean Rig also announced it will cold stack the Ocean Rig Olympia, a sixth generation deepwater drillship featuring the enhanced Saipem 10000 design, if no further work can be found past its June 2016 contract in Angola. The unit began working off Nigeria and Angola for Italian explorer Eni in August, and the vessel picked up a short one-month contract with IOTC along the Ivory Coast, beginning in November.
Finally, the rig provider was also dealt a blow from client Repsol Sinopec, which has had the Ocean Rig Mylos drillship under a three-year, US$700 million contract since August 2013 offshore Brazil. The contract was originally supposed to run until 3Q 2016, yet, on 25 September, Ocean Rig received notice of material breach under the contract that entitles Repsol Sinopec to terminate the contract if such breach is not remedied within 75 days. Ocean Rig said that the company believes that such notice is totally without merit.
There was some good news in Ocean Rig’s report, the Ocean Rig Skyros, a seventh-generation deepwater drillship, also featuring the Saipem 10000 design, has begun a new six-year contract with Total offshore Angola as of 1 October.
Simmons & Co.’s Ian Macpherson said of the news in today’s morning note, “[the fleet status update] serves as a reminder of just how bleak the demand situation is right now for the offshore drillers, indicating that its two fifth generation harsh environment semis are likely to be scrapped, one of its sixth generation drillships is likely to cold stacked, and another six generation drillship could (we infer) also be heading to cold stack as well following an untimely contract cancellation.”
Image: Eirik Raude/Ocean Rig
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