Drilling Rigs & Equipment
The Wait is Over: Deep Value Driller Ready to Unleash Its Potential
A lesser known offshore rig owning firm recently secured a long-term deal for a drillship that has been stacked since 2017, in yet another proof that the offshore drilling industry is back.
By Bartolomej Tomić
Deep Value Driller drillship.©Paul Misje/MarineTraffic.com
The offshore drilling industry is back.
After several years of downturn and uncertainty, offshore drilling analysts and rig owners alike are now painting an optimistic picture for the future, with rig demand, utilization, and dayrates growing across the board.
“As an industry, it is clear that we have finally emerged from eight exceptionally challenging years and are now in the early stages of what we believe will be a multi-year upcycle,“ said Transocean CEO Jeremy Thigpen in the company's recent quarterly presentation.
Rystad Energy recently said that the offshore oil and gas sector was set for the highest growth in a decade in the next two years, with $214 billion of new project investments lined up, and annual greenfield capital expenditure (capex) set to break the $100 billion threshold in 2023 and 2024 – the first breach for two straight years since 2012 and 2013!
While the words of Transocean and Rystad resonate through the industry, this article is about a recent drillship contract secured by a little-known company: Oslo-listed Deep Value Driller AS and its 7th-generation drillship.
The ultra-deepwater drillship, bearing its current name, might be known to few in the oil industry; however, the rig's previous name – the Bolette Dolphin – could be more familiar. The rig, which has a maximum operating depth of 3,048 meters, and a maximum drilling depth of 12,192 meters was initially owned by then Fred. Olsen Energy’s subsidiary Dolphin Drilling.
Delivered in February 2014 by Hyundai Heavy Industries, it had spent years working for (also then) Anadarko Petroleum before the contract was terminated in July 2017, and it hasn't worked since.
Come 2019, Dolphin Drilling lenders decided to sell the Bolette Dolphin to refocus Dolphin Drilling's business on the mid-water fleet.
However, the sale only occurred two years later, when in the early 2021, Deep Value Driller said it had scooped the rig for only $65 million. The price represented ~9% of the rig construction cost of around $750 million.
Deep Value Driller's strategy is written on its website's homepage:
On February 23, 2022, Deep Value Driller said it had secured a bareboat charter for the drillship with the Italian offshore services firm Saipem. The contract, for approximately three years, is worth around $160 million.
While Deep Value Driller AS did not say how many days exactly the rig would be on a contract with Saipem (ie. “approximately three years”), if we assume that the contract is for three years exactly, this means that the dayrate for this 7th generation rig would be around $145,985.
This comes at a time when global drillship utilization is reaching record highs and dayrates, with analysts and drilling companies alike forecasting a multi-year growth cycle in the industry.
Westwood's offshore rig analyst Terry Childs recently said that drillship utilization had averaged 93% for 2022, with several contracts awarded at over $400,000 dayrates, "with the highest reaching $462,000 for a contract offshore Brazil."
During the 2014–2017 period, when it was still called Bolette Dolphin, the drillship worked for three years for Anadarko at a reported $488.000 dayrate.
It is worth noting that the deal between Deep Value Driller and Saipem is for a bareboat charter, meaning it was on Saipem to find work for the rig, provide crew, bear operational expenses, and secure a big enough contract to both pay for the bareboat charter to Deep Value Driller and make profit for itself.
According to a November 2021 article by offshore drilling rig market analysts, Esgian, the daily operational expense for a modern drillship could reach around $150,000.
According to information on the rig owner's website, between 2017 and 2020, the rig was warm-stacked at the cost of $70,000 per day, and it was then relocated to Norway for more efficient stacking in 2020.
Upon buying the rig, Deep Value Driller AS said in an April 19, 2021 presentation that its goal was to reduce the stacking cost to $20,000 a day, and that it was fully funded for 18 months of stacking.
A little over 22 months passed between that presentation and the Saipem contract.
In conjunction with the bareboat charter news, Deep Value Driller AS also said it had entered into a $75 million senior secured term loan facility agreement "with a reputable private lender.”
The company said it would use the proceeds to fund the reactivation activities for the drillship, the refinancing of the company's existing credit facility, and general corporate purposes.
The reactivation of the drilling rig is expected to cost around $40 million, with about $10 million to be used to refinance the existing credit facility. The remaining proceeds will be used for general corporate purposes.
In a presentation back in April 2021, Deep Value Driller AS said that it would reactivate the rig only with a firm contract secured.
The planned reactivation scope shared at the time included an NOV package, ABB package, well control equipment (with full recertification required), and hull and structure class renewal.
According to the company's 3Q presentation 2022, the vessel was warm-stacked with a crew of 15 people at Westcon Yard in Ølensvåg in November 2022, at an average cost of $21,270 a day during the quarter. The company also said at the time that the activation of the rig would take place at Westcon Yard.
After the bareboat charter announcement, Deep Value Driller awarded Scana's PSW Technology a contract for deepwater BOP stack services.
PSW Technology will provide services for the classification and testing of two deepwater BOP stacks.
Scana said the contract was a sizeable one, meaning it is worth between $966,370 and $4.8 million (at the time of the award).
HMH, a drilling equipment and services firm, subsequently said it would be supporting Deep Value Driller (DVD) in reactivating its ultra-deepwater drillship.
HMH said that the full project would contain recertification of the complete portfolio of subsea pressure control products, including the riser system, diverter System and Dual Stack Blow-out Prevention System.
“Soon the BOP frame […] will be furnished with newly refurbished HMH BOP equipment and be deployed back to the rig after [five years] in preservation,” HMH said in a social media post. HMH itself is a relatively new firm, at least under the current name.
The company was established after oilfield services firm Baker Hughes and Norway's Akastor in late 2021 merged Baker Hughes’ Subsea Drilling Systems business with Akastor’s subsidiary, MHWirth. The company did not share details on the contract value.
Where next for the drillship?
Just days after Deep Value Driller announced the bareboat charter deal with Saipem, the Italian contractor revealed that it had secured a $400 million contract for the Deep Value Driller drillship in the Ivory Coast with the joint venture between Eni and Petroci.
The contract length was not disclosed, and Saipem did not reply to Offshore Engineer’s request for more information.
Announcing the $400 million deal with the Eni-led consortium, Saipem said the value "is to be considered gross of the leasing costs of the Deep Value Driller vessel that will be used for the operations."
"The contract includes the use of the seventh-generation drillship named Deep Value Driller, one of the most modern in the world, for which Saipem has entered into a charter agreement with the company Deep Value Driller. Saipem is thus strengthening the competitiveness of its fleet by leveraging its consolidated expertise in the selection and management of technologically advanced vessels," Saipem said.
The Italian offshore services firm also said the contract award represented an important consolidation of Saipem's presence in the Ivory Coast “a strategic area where the company is currently executing the project for the development of the oil and gas field Baleine.”
Eni discovered the Baleine, Ivory Coast’s largest ever offshore discovery, in August/September 2021 using the Saipem 10000 drillship at Baleine-1x, its first ever well drilled in the country.
"The potential of the discovery can be preliminarily estimated at between 1.5 and 2.0 billion barrels of oil in place and between 1.8 and 2.4 trillion cubic feet (TCF) of associated gas," Eni said at the time.
Come July 2022, the size estimate was boosted with the help of Saipem 12000 drillship which Eni used to drill the Baleine East 1X well, results of which led Eni to boost the hydrocarbons in place estimate at the Baleine field to 2.5 billion barrels of oil and 3.3 trillion cubic feet (TCF) of associated gas.
Now, the Italian energy company will be hoping that the third Saipem-managed rig, Deep Value Driller, will bring it more joy and value, pun intended, in the West African country.