How things stand for Valaris rigs

Offshore drilling contractor Valaris has secured new contracts and extensions for its rig fleet, with an emphasis on jack-up rig deals.

The contrast between the latest contract awards for the Valaris fleet and those recently announced by its rival Transocean is evident in the type of rigs which secured new jobs, with Transocean getting several new drillship deals and Valaris revealing mostly new jack-up deals, but let’s not forget that Valaris in early July secured a 540-day drillship contract for work in Brazil.

While in its fleet status report released on Thursday Valaris kept the day rates for many of its rigs confidential, Transocean, on the other hand, disclosed that the new contracts came with higher day rates.

As detailed in Valaris’ quarterly status report, a six-month option has been exercised by Shell Nigeria Exploration and Production Company (SNEPCo) offshore Nigeria for drillship Valaris DS-10. The option will be in direct continuation of the existing firm programme.

The drillship worked for Shell in Namibia from November 2021 until April 2022 when it started its gig in Nigeria, which was previously supposed to end in October 2022. With the option now exercised, the rig will stay there until April 2023. The day rate has not been revealed.

While in Namibia, the 2017-built drillship drilled the Graff-1 deepwater well, located in Block 2913A in the Orange Basin. Drilled to a total depth of 5,376 meters in water depths of approximately 2,000 meters, the well turned out to be an oil discovery in both primary and secondary targets. The encouraging results, announced in February 2022, provided hope for a “new dawn in the country’s future prosperity.”

The discovery is expected to usher in a wave of new investment across the entire energy value chain in the country and, once developed, improve energy security in a nation that relies heavily on petroleum imports and intermittent hydropower.

When it comes to the Valaris DS-11 drillship, it is worth reminding about the termination of its contract with TotalEnergies for work on the North Platte project, now known as Sparta.

The contract termination for this drillship was first announced in February 2022 and, while in April it seemed the problem was solved with the contract being novated to Equinor, come June and the Norwegian giant also terminated the contract much to the disappointment of its owner.

It was revealed later that month that Equinor is transferring the majority stake and operatorship of the Sparta development to Shell. Announcing the deal with Shell, Equinor explained that the FEED had been matured for the project. The two companies will work together to review the work that has been completed and to update the development plan.

The termination became effective at the end of June and the rig owner’s total contract backlog as of 2 May 2022 included approximately $428 million.

In the jack-up segment, Valaris has secured more work for four of its drilling units.

The first one is a three-year bareboat charter agreement with ARO Drilling for standard duty modern jack-up Valaris 141, which is expected to begin in August 2022. Under the agreement, the 2016-built rig is working for Saudi Aramco in Saudi Arabia. The previous contract started in August 2018 and ended in May 2022 and the new one ends in August 2025. The day rate has not been disclosed.

Furthermore, a four-well contract extension has been secured with BP offshore Indonesia for the heavy-duty modern jack-up Valaris 106. The four-well contract extension has an estimated duration of 360 days and will be in direct continuation of the existing firm programme, which is scheduled to end in January 2023. The 2005-built rig has been working for BP in Indonesia since January 2018. The day rate for this rig is also confidential.

In the U.S. Gulf of Mexico, the standard duty modern jack-up Valaris 144 has won a one-well contract with Talos. The contract is expected to begin in the fourth quarter of 2022 (October 2022) with a minimum duration of 30 days. The operating rate is $85,000 per day.

However, before that, the rig will complete a four-well contract with an undisclosed operator in the U.S. Gulf of Mexico. The contracted work is expected to take place from August till October 2022 with an estimated contract value of approximately $5 million.

Then, after the contract with Talos, the 2010-built jack-up is scheduled to work for Cantium, starting in December 2022 and until February 2023 with a day rate of $80,000.

Finally, a one-well option has been exercised by an undisclosed operator offshore Australia for the heavy-duty modern jack-up Valaris 107. The one-well option has an estimated duration of 31 days and will be in direct continuation of the existing firm programme, starting in August and ending in October 2022. The operating rate is $112,000 per day.

Currently, the rig is working for Vermillion off Australia until August 2022 when the latest one-well option starts. After that, a contract with Eni, also in Australia, is scheduled to start in October until December with a day rate of $115,000. Finally, as previously reported, the rig will then work for GB Energy until January 2023 with a day rate of $118,000.

It is worth reminding that the Valaris 107 in early 2022 completed the drilling of Carnarvon Energy’s Buffalo-10 well offshore Timor-Leste, but only residual and uncommercial oil was encountered. It was a disappointing result for a highly anticipated well, which in the end quashed Carnarvon’s hopes for re-development of the Buffalo field.

When it comes to its quarterly financial performance, Valaris will hold its second quarter 2022 earnings conference call on Tuesday, 2 August 2022 and the earnings release will be issued before the New York Stock Exchange opens that morning.