Transocean delays deliveries for the world’s first 8th gen ultra-deepwater drillships

Offshore drilling contractor Transocean has agreed with Sembcorp Marine’s subsidiary, Jurong Shipyard Pte Ltd (JSPL), on the delayed delivery of two ultra-deepwater drillships.

Transocean said on Monday that the agreement was made with the shipyard for the Deepwater Atlas and Deepwater Titan drillships.

These two drillships were ordered by Transocean back in 2014 for a price of $540 million each, but the deliveries have been postponed several times.

As part of the new agreement, Jurong has agreed to accept deferred payment for both rigs, the rig owner added. The next-generation drillships with ultra-deepwater drilling capability are being constructed in Singapore.

According to Transocean, the Deepwater Atlas and Deepwater Titan are the world’s first eighth-generation ultra-deepwater drillships and the only rigs to feature a 3,000,000 pound hook-load.

These drillships are the most capable and highest specification rigs in the world and will include the first 20,000 psi well control system. These rigs are also designed and equipped to optimize fuel consumption, reduce emissions and thus minimize the associated carbon footprint of each offshore project.

According to Transocean, the delivery of this drillship is now expected to be in December 2021. Upon delivery, Transocean will make a $50 million payment to JSPL; the balance of payments owed to the shipyard, or approximately $370 million, will be payable during a five-year period following delivery pursuant to a secured financing arrangement with the shipyard.

Transocean also has agreed with Beacon that drilling operations on the Shenandoah project in the U.S. Gulf of Mexico are expected to start during the third quarter of 2022. Transocean expects Beacon to begin drilling on its Shenandoah project utilizing the Deepwater Atlas following a final investment decision from Beacon and its partners. That decision is expected to be made on or before 31 July 2021.

The delivery of this drillship is now expected to be in May 2022. Upon delivery, Transocean will pay JSPL 80 per cent of amounts owed, or approximately $350 million. Twenty per cent of amounts owed, or approximately $90 million will be deferred and payable over a five-year period following delivery pursuant to a deferred payment arrangement with the shipyard.

Back in May 2021, Transocean said that Chevron had postponed the contract from H1 2022 to H2 2022. As a result, the end date had also been moved from H1 2027 to H2 2027.

However, Transocean has now also agreed with Chevron that commercial operations of the Deepwater Titan are expected to start in the first quarter of 2023.

Transocean’s contract with Chevron maintains its duration and estimated backlog of $830 million, excluding mobilization and reimbursables.

Payments under each arrangement will be made in accordance with the respective payment schedules over the terms of each arrangement. Principal balances will carry an interest rate of 4.5 per cent per annum.

Jeremy Thigpen, Transocean President and CEO, commented on the decision: “As the result, we will take delivery of the two highest specification ultra-deepwater drillships in the world, and the only two assets capable of drilling and completing 20,000 psi wells.

“Notably, as a critical element of these agreements, we will receive shipyard financing, which materially improves our year-end 2022 liquidity by over $450 million, thus extending our runway and providing us with additional investment flexibility as the industry recovers”.

Wong Weng Sun, President & CEO of Sembcorp Marine, said: “In the face of challenges stemming from the COVID-19 pandemic, Transocean has demonstrated understanding of the situation and confidence in Sembcorp Marine’s EPC capabilities to complete the two highly complex drillship projects”.