Fate of two delayed ex-Seadrill drillships still uncertain but owner sees improvement in deepwater market

John Frederiksen’s Northern Drilling, an offshore drilling contractor with a focus on ultra-deepwater environments, currently has no rigs in operation but it does have two new 7th generation ultra-deepwater drillships whose fate is still uncertain.

Incorporated in March 2017 for the purpose of ownership of offshore drilling rigs, Northern Drilling has two drillships, West Aquila and West Libra. The drillships, whose delivery has experienced numerous delays, are being preserved at South Korea’s Daewoo Shipbuilding & Marine Engineering (DSME) yard while their fate is being decided by the owner and the builder.

Northern Drilling also had two harsh-environment semi-submersible drilling rigs, West Mira and West Bollsta, but the company completed a spin-off of these two rigs in February 2020 through its subsidiary Northern Rig Holding. The company has then been renamed Northern Ocean Ltd.

Norwegian billionaire John Fredriksen’s other offshore drilling company, Seadrill, was the previous owner of the two new drillships, which were never delivered to the company. Namely, Seadrill in 2016 postponed the deliveries of the two rigs for the second quarter of 2018 and the first quarter of 2019 only to cancel the orders in March 2018.

Come May 2018 and Northern Drilling entered into agreements to buy the two rigs from DSME. These two drillships are said to be among the most sophisticated in the world and the price tag was $296 million each with $90 million paid at contract signing and the remainder at delivery.

The rig owner also had an option to acquire the Cobalt Explorer drillship for a purchase price of $350 million, but this part of the deal was cancelled in October 2019 due to various reasons, including repudiatory breach of contract by DSME, Northern Offshore claimed.

The 7th generation drillship West Cobalt, previously known as Cobalt Explorer, was originally ordered by Vantage Drilling, but the order was cancelled in August 2015.

The West Aquila and West Libra were supposed to be delivered in January and March 2021, respectively. However, according to information from Northern Drilling, the delivery of either of the drillships still has not happened.

Namely, during the first quarter of 2021, the company continued executing preservation and maintenance activities for West Aquila and West Libra. The company said in its latest financial report that it remains actively engaged with stakeholders, including potential strategic partners, to consider and assess all possible alternatives available for these drillships.

The drillships have not been delivered to the company and there are still some remaining items and outstanding issues to be completed by the shipyard, Northern Drilling said. 

This was a reiteration of Northern Drilling’s previous statement in 4Q 2020 when the company said it had been discussing with the shipyard certain matters that prevented delivery and had been working towards a resolution. However, no further details had been provided by the company. 

Northern Drilling might be working towards an agreement with the shipyard to postpone further the delivery of the rigs, hoping to secure contracts later on as it continues to believe in the long-term fundamentals of the deepwater offshore market.

In its 1Q 2021 report, Northern Drilling said that the global demand for natural resources is showing resilience and continuing its year-over-year increases despite lingering pandemic impacts. 

The company further stated: “The offshore market is becoming more active with over 35 contracted rig years awarded year-to-date in 2021. Multiple drilling contractors have now re-emerged from bankruptcy with new balance sheets, executing new strategic consolidations and a new willingness to balance rig supply.

“The deepwater market should continue to improve as rigs stacked for a prolonged period are confirmed as scrapping candidates. The West Aquila and West Libra will be some of the highest specification deep-water drilling units available”.