Ocean Rig CEO: Rig inquiries rising, but worst not over

Oil companies have recently posted positive quarterly results, the oil prices have risen from the 2016 lows of below $30 a barrel, however, the worst might not be over for some offshore drillers.

This is according to Pankaj Khanna, the recently appointed CEO of Ocean Rig, an offshore drilling company.

Presenting the company’s quarterly results on Tuesday, Khanna, said: “Looking ahead, oil prices have increased substantially from the low levels seen in 2016 and 2017 approaching $70 per barrel. Consequently, the cashflow for oil companies even post payment of dividends is positive, allowing for increase in their capital expenditure budgets.

“Recent results from the oil companies and announcements evidence this development and we expect further FIDs on development projects coming through in the coming months leading to increased rig demand.”

Worst not over

He said: “We are already experiencing an increase in the number of rig inquiries which should result in improving rig utilization in the coming 12-18 months. This obviously does not mean that the worst is over.

“The bottom of the market appears to have passed but 2018 will still be a tough year with periods of idle time for our rigs that roll off contract. The management team is focused on maximizing shareholder value and taking the Company through one of the worst markets experienced in recent drilling history.”

The company recorded net income of $79.4 million for the three-month period ended December 31, 2017, as compared to a net loss of $3,7 billion in the third quarter of 2016.

Ocean Rig in September 2017 completed financial restructuring through an exchange of approximately $3.7 billion principal amount of debt (plus accrued interest) for new equity of the company, approximately $288 million in cash and $450 million of new secured debt.

Talks with Total

Ocean Rig’s total backlog as of December 31, 2017 amounted to approximately $969 million.

The ultra-deepwater driller’s rigs Eirik Raude, Ocean Rig Olympia, Ocean Rig Apollo, Ocean Rig Mylos, Ocean Rig Paros and Ocean Rig Athena, are currently cold stacked in Greece.

The Ocean Rig Poseidon drillship, which recently completed a Statoil drilling contract in Tanzania, is en-route to Namibia, where it will remain “ready to drill.” The same fate awaits the Ocean Rig Mykonos drillship which will move to Las Palmas in March upon completion of the contract with Petrobras in Brazil.

Furthermore, Ocean Rig is in talks with Total over the Ocean Rig Skyros drillship in Angola to revise commercial terms.

“These discussions may lead to no change to the contract, to a blend and extend arrangement, or termination according to the termination for convenience provisions of the
contract,” Ocean Rig said.

Ocean Rig’s semi-submersible rig Leiv Eiriksson has earlier this month begun its shipyard stay at Olen, Norway where it will undergo certain enhancements related to its contract with Lundin, its intermediate survey and upgrade its BOP to 5-rams.

The Leiv Eiriksson is expected to complete its stay by the end of the first quarter. The rig is now expected to have firm employment secured until August 2018. Should Lundin exercise its remaining six one-well options, the rig could be employed until the second half of 2019.