Over $400 million of Valaris backlog hangs in the balance after TotalEnergies abandons project

Offshore drilling contractor Valaris has secured new contracts and extensions for its fleet of drilling rigs and sold one of the jack-ups. However, over $400 million of backlog related to a drillship contract in the Gulf of Mexico now hangs in the balance due to a client’s decision to withdraw from the project.

In its latest fleet status report, Valaris informed that approximately $428 million of backlog as of 21 February 2022 is attributable to a contract awarded to the Valaris DS-11 drillship for an eight-well contract for a deepwater project in the U.S. Gulf of Mexico, which was expected to begin in mid-2024. The contract award was revealed in the fleet status report from August 2021.

The 2013-built drillship was previously known as Atwood Advantage while under Atwood Oceanics and as Ensco DS-11 while under Ensco. It is currently stacked in Spain.

Valaris revealed on Monday that, in February 2022, the customer had decided not to sanction and therefore withdraw from the project. According to Valaris, the contract contains early termination provisions should the project not receive a final investment decision (FID). The project has not received the FID but the customer has not terminated the contract either. Valaris said the customer may do so upon the payment of the early termination fee.

“We are in discussions with the customer and its partner on the project to determine next steps,” Valaris said.

While Valaris did not mention it specifically, the customer in question is TotalEnergies and the contract was expected to begin in July 2024 and run until December 2027.

As recently reported, TotalEnergies is withdrawing from its North Platte deepwater project in the U.S. Gulf of Mexico to focus on better opportunities to allocate its capital. The withdrawal will be effective following a short transition period to ensure an orderly hand-over of operatorship.

The development was supposed to include a semi-submersible floating production unit (FPU) in water depths of over 1,300 meters. The development plan was based on eight subsea wells and two subsea drilling bases connected via two production loops to a newbuild, lightweight FPU.

The fleet status report also shows that Valaris MS-1 semi-submersible has been awarded a five-well contract with an undisclosed operator offshore Australia. The contract is expected to start in the second half of 2023 with an estimated duration of 300 days. The contract is subject to a final investment decision (FID) by the customer.

The rig is currently working for Eni under a contract that is set to expire next month. After that, it is scheduled to work for Western Gas from June to July with a Santos contract following immediately after until October 2023. The work for the undisclosed operator is scheduled to start that October and last until August 2024.

Furthermore, Valaris DPS-5 semi-submersible, formerly known as Valaris 8505, has secured a one-well contract with Apache in the U.S. Gulf of Mexico. The contract is expected to begin in June 2022 with an estimated duration of 25 days.

As reported last January, the rig first won a one-well contract with Kosmos Energy in the U.S. Gulf of Mexico for the duration of 105 days, scheduled to start next month, and later that month two one-well contracts with Murphy Oil Corporation, expected to start in the third quarter of 2022 with a minimum duration of 30 days. The second contract, offshore Mexico, will begin in direct continuation of the first contract and has an estimated duration of 60 days. The rig is undergoing a special periodic survey before its contract with Kosmos.

The contract for the Valaris DPS-1 semi-sub with Woodside Energy offshore Australia has been extended due to the exercise of a one-well option with an estimated duration of 60 days. Due to the extension, the rig’s contract end date moved from March 2024 to May 2024.

In the jack-up segment, the Valaris 140 rig has been awarded a three-year bareboat charter agreement with ARO Drilling in Saudi Arabia that is expected to begin in March 2022 and end in March 2025. The rig previously worked for Saudi Aramco from July 2018 until December 2021.

Furthermore, the Valaris 118 rig has won a four-well contract with BP for operations offshore Trinidad. The contract is expected to start in the second half of 2022, specifically in October, with an estimated duration of 270 days, expected to end in June 2023. The rig is currently working for Fieldwood in Mexico under a contract expected to end in May this year.

BP has hired another Valaris-owned rig, the Valaris Norway. The jack-up has secured a 114-day contract with BP in the UK North Sea in a contract that is expected to begin in the second quarter of 2022. Specifically, the rig is starting the BP contract in April and ending in August 2022.

As previously reported, Valaris Norway was awarded a six-well plug and abandonment contract with Centrica Storage in the UK North Sea. The contract is expected to kick off in the second half of 2022, in September 2022, with an estimated duration of 100 days, ending in January 2023. The rig is currently working for Harbour Energy under a contract expiring in March 2022.

Valaris also revealed that three of its jack-up rigs secured continued work under current deals.

The first one is the Valaris 122, which has received a contract extension with Shell in the UK North Sea due to the exercise of a one-well option with an estimated duration of 97 days. As a result, instead of ending in May 2022, the rig’s contract with Shell is set to end in September 2022.

In addition, Valaris 144 has been awarded a one-well contract with an undisclosed operator in the U.S. Gulf of Mexico. The contract is expected to kick off in the first quarter of 2022 with a minimum duration of 68 days.

According to Valaris’ previous fleet status report, published in October 2021, the rig was awarded a 30-day contract with an undisclosed operator in the U.S. Gulf of Mexico, which was expected to begin late in the fourth quarter of 2021 or early in the first quarter of 2022. The current report shows that the first of these contracts with the undisclosed operator started this month and will run until March 2022 after which the second one will follow until May 2022.

Finally, the Valaris Viking has been awarded a one-well contract with Sval Energi offshore Norway. The contract is expected to start in March 2022 with an estimated duration of 66 days, ending in May this year. After that, the rig is scheduled to work for Repsol, also in Norway, until October 2022.

Valaris has also informed about the sale of a jack-up rig, Valaris 37, which has now retired from the offshore drilling fleet. Before the sale, the 1981-built rig was stacked in Bahrain following the completion of its contract with ARO Drilling in October 2021.