Shelf Drilling sees encouraging signs of improving jack-up market

Following the oil price stabilisation, offshore drilling contractor Shelf Drilling is seeing encouraging signs of an improving jack-up market with a global number of contracted jack-ups increasing to 353 in May 2021.

The rig owner has also sold three of its jack-up units in addition to securing several new contracts over the past couple of months.

In its fleet status report on Tuesday, Shelf Drilling said it had completed the sale of three rigs in April 2021, the Trident 15, Galveston Key, and Key Hawaii.

All three rigs were recorded as assets held for sale as of the end of March 2021 and they were stacked in Malaysia, UAE, and Bahrain. They were built in 1982, 1978, and 1983, respectively.

Furthermore, Shelf said that the Rig 141 secured a short-term contract each with SROCO and Gempetco in Egypt. The contract with SROCO started in March and is set to end in May 2021. This contract will be followed in direct continuation by a short-term contract with Gempetco, which is scheduled to end in June 2021.

In addition, the Shelf Drilling Resourceful rig started a one-year contract with Conoil in West Africa in April 2021. Conoil also has a one-year option.

Finally, Shelf Drilling Tenacious completed its contract with Masirah Oil in Oman in April 2021. The rig is now available and located in the UAE.

In the last couple of months since Shelf Drilling’s previous fleet status report, the rig owner also secured several other contracts, which were previously announced.

These include a 10-year contract extension with Saudi Aramco, two 3-year contracts with ONGC in India – one for the J.T. Angel rig and the other for Trident XII rig – both expected to start in November 2021, and a 2-year extension with Petrobel Egypt.

The improvement and the stabilisation of the Brent oil price in March and April 2021 is also reflected in the global jack-up tendering and marketing activity.

According to Shelf Drilling, the global number of contracted jack-ups has increased from 344 rigs as of the end of 2020 to 353 rigs in May 2021.
Marketed utilization has improved from 80 per cent to 83 per cent during the same period.

David Mullen, Shelf Drilling CEO, commented: “We are observing encouraging signs of an improving jack-up market with the recent recovery and stabilization of the oil price. We have seen a number of recent contract awards and have built a solid pipeline of marketing opportunities.

“The $310 million issuance in March 2021 of new senior notes due in 2024 improves our balance sheet, simplifies our capital structure and significantly increases our liquidity position and financial flexibility”.

The company’s total debt at the end of March 2021 was $1.2 billion. At the end of March 2021, Shelf Drilling had a $1.3 billion in contract backlog across 27 contracted rigs.

When it comes to its financial performance, Shelf Drilling booked a net loss of $16.4 million in 1Q 2021 compared to a loss of $90.4 million in 4Q 2020 and compared to $184.9 million loss in 1Q 2020.

Revenues were $129.7 million in Q1 2021 compared to $121.3 million in Q4 2020 and compared to $181.4 million in revenues in 1Q 2020.

The $8.4 million, or 6.9 per cent, sequential increase in revenues was primarily due to higher effective utilization. Effective utilization increased to 77 per cent in Q1 2021 from 69 per cent in Q4 2020.

This was primarily due to the startup of one new contract in Thailand, the full quarter of operations of two rigs which started contracts during Q4 2020, the return to operations of one rig each in Saudi Arabia and Nigeria, which were previously suspended, and completion of extended out of service time for one rig in Saudi Arabia.

This was partly offset by the completion of two contracts in Tunisia and Nigeria, and the planned out of service of one rig in Saudi Arabia. The average day rate increased to $56,300 in Q1 2021 from $55,800 in Q4 2020.