Pacific Drilling's drillship Pacific Santa Ana has been placed on a reduced standby rate, the drilling company said in its first-quarter report on Thursday, leaving the company with only one rig actually working at the moment - the Pacific Khamsin.
The Pacific Santa Ana rig was working on a P&A program for Petronas in Mauritania that should've kept it busy until December 2020.
However, Pacific Drilling, which owns a fleet of seven deepwater drillships, said Thursday that Petronas had provided it with notice of force majeure on the contract effective March 29, 2020.
"In accordance with the contract terms, we were on standby at 70% of the contractual dayrate through April 28, 2020. We have agreed with Petronas to continue on stand-by up to March 31, 2021, at 35% of the contractual dayrate," Pacific Drilling said.
The rig is currently in Las Palmas, Spain, where Pacific Drilling has two other drillships smart stacked - the Pacific Scirocco and Pacific Mistral.
Also, the Pacific Bora drillship and the Pacific Sharav drillships recently completed their respective contracts with Eni in Oman and Chevron in the Gulf of Mexico, and the owner is now working on ramping them down to reach Smart Stacked status by the end of Q2 2020.
Worth noting, the Pacific Sharav should begin its new two-well contract with Murphy in Mexico in the fourth quarter. The Pacific Meltem drillship has been stacked in the Gulf of Mexico region.
With all the stacking and ramping down, this means that apart from the Pacific Santa Ana, which isn't working but is generating standby revenue, the only other rig - that is actually drilling - generating revenue is the Pacific Khamsin in the Gulf of Mexico.
The rig worked for Equinor in the first quarter and was then passed on to Total with whom it will drill until August. After that, the drillship will again be used by Equinor until October 2020. Equinor will have an option to extend.
Guidance withdrawn on significant uncertainty for drilling services outlook
Pacific Drilling on Thursday posted a net loss for first-quarter 2020 of $61.0 million, compared to net loss of $308.1 million in fourth-quarter 2019, and compared to a net loss of $84 million in the first quarter of 2019.
Pacific Drilling CEO Bernie Wolford commented, “The first quarter of this year started strong with improving market fundamentals and solid demand growth for high-specification drillships, reflected in increased utilization and rising dayrates."
Wolford said: “Since mid-March, we have seen significant cuts in our clients’ current year’s capital expenditure budgets as a result of COVID-19 pandemic related oil demand destruction and the resulting severe oversupply of oil. We expect a significant reduction in exploration drilling in the near term as well as deferral of major development programs until 2021 or later."
"As we look ahead, we see significant uncertainty in the global market for our services as our customers have canceled or delayed to 2021 work that had been scheduled or awarded to us for 2020.
"These market conditions will negatively affect our revenue, profitability and cash flows for 2020 and 2021. In light of these unprecedented market conditions and in an abundance of caution to protect our access to working capital, we drew the full availability under our $50 million revolving credit facility on March 20, 2020. We continue to work closely with our clients to keep our employees safe and our rigs sanitary as we navigate through these challenging times.”
Given the uncertainty caused by recent market conditions, Pacific Drilling withdrew its full-year 2020 financial guidance that was provided with its March 11, 2020, Fourth-Quarter and Full-Year 2019 Results Announcement.
"We expect Full-Year 2020 results to reflect substantial reductions from our previous guidance as a result of initiated cost reduction measures, including reducing operating expenses and general and administrative expenses via layoffs and non-labor spend cuts and decreasing capex," Pacific Drilling said.