When operators regain their appetite for deepwater drilling, they’ll find a Gulf of Mexico floater fleet turned upside down.
Three offshore drilling contractors have already filed bankruptcy this year with a fourth likely headed that way, again. After just over a year as a newly branded company, Valaris plc joined Noble Corp. and Diamond Offshore by filing for bankruptcy protection on Aug. 19. With a diversified 74-rig fleet, the former EnscoRowan plc, which was renamed a year ago after the merger of Ensco and Rowan Companies, is the world's largest offshore contractor.
Noble filed for Chapter 11 reorganization on July 31, hoping to wipe out more than $3.4 billion of debt, while Diamond Offshore entered bankruptcy three months earlier. Though Noble listed three semisubmersibles as coldstacked in its July 9 fleet status report, it managed to extend Shell deepwater Gulf contracts for the drillships Noble Globetrotter I and Noble Globetrotter II into July 2022 and September 2023, respectively, each operating under modified $275,000 day rates.
By the time you read this, Seadrill will have likely filed a petition for bankruptcy protection for the second time in three years. After first filing in September 2017, the contractor successfully completed a reorganization in July 2018. But weak demand and Covid-19’s effect on prices rendered current market conditions untenable, Chief Financial Officer Stuart Jackson said in a June earnings call. “With the market changes, both from an oil price and the Covid-19 perspective arising in the last three months, we’ve decided not to progress with the interim solution and to move directly to a comprehensive restructuring.”
Seadrill coldstacked the West Auriga drillship in August after wrapping up a Gulf project, joining the Sevan Louisiana semi it parked in June. So far this year, 12 floaters have been retired from the global fleet, seven since March, said Noble’s new President and CEO Robert W. Eifler. “A great deal of exploration and appraisal drilling, as well as multiyear field development opportunities, have been postponed or canceled,” he said in a final pre-bankruptcy call on May 7.
For now, leading deepwater contractor Transocean claims to have a sufficiently healthy balance sheet to avoid “the distractions and challenges associated with restructuring,” President and CEO Jeremy Thigpen said on July 31. Transocean recently signed a multiyear contract for the newbuild Deepwater Atlas drillship, the industry’s second 20,000-psi ultradeepwater floater. The rig is expected to be commissioned by early 2021 at the latest and is slated to go to work on Beacon Offshore Energy’s planned Shenandoah deepwater project in the Gulf of Mexico's Walker Ridge area.
Meanwhile, between March 1 and Aug. 16, the Bureau of Safety and Environmental Enforcement (BSEE) processed nine new well permit requests for 4,000’ of water and deeper, with none received or approved since June 12. BSEE approved 17 deepwater permits during the same period last year.