reports
- Martin Huseby Karlsen
Supportive rig comments from Saudi Energy Minister
Following Saudi Arabia’s statement in late January that it will scale back production capacity from 13 to 12 mmboed, uncertainty has increased in the rig market related to future rig demand for jackups. Hence, we find the Energy Minister’s comments in an interview at IPTC positive. Regarding postponed projects (Safaniya and Manifa), he said, “that doesn’t mean we are abandoning things” and “that doesn’t mean that we are not going to use the rigs that Aramco commissioned”, among other comments. W...
- Martin Huseby Karlsen
- Martin Huseby Karlsen
- Martin Huseby Karlsen
Total and Vantage create JV for deepwater rig supported by 10-year agr...
Total and Vantage announced a JV in which Total will acquire 75% of the 2013-built 6G drillship Tungsten Explorer from Vantage for USD199m, implying a USD265m valuation on a 100% basis. At the same time, Vantage is being hired by the JV as a manager of the rig for a 10-year period, which implies Total will use the rig for a similar period. Based on disclosures, Vantage would get an average management fee of cUSD47k per day (cUSD17m per year) in addition to its pro-rata share of the cash flow fro...
- Martin Huseby Karlsen
Deepwater focus should remain on longevity of upcycle
In the upcoming earnings season, we expect drilling contractors to focus on the longevity of the deepwater upcycle and contract opportunities with 2025 and beyond startup. For the near term, we see greater attention related to utilisation challenges for open 2024 capacity, caused by a too-rapid near-term influx of rigs to the market. From an industry perspective, we see solid support for cycle duration by numerous ongoing long-term tenders. Dayrates are likely to reflect bifurcation related to c...
- Martin Huseby Karlsen
- Martin Huseby Karlsen
SLB comments indicate reduction in offshore activity for the out years
While there still is limited firm information available related to the action from Saudi Aramco following its production target reduction, SLB’s comments yesterday indicate a reduction in offshore activity versus earlier plans. On a positive note, SLB comments suggest that ongoing projects with Aramco will be unaffected. At the same time, SLB says that “two offshore oil incremental projects not yet started will be suspended”. We believe this relates to expansions on Safaniya and Manifa, which ap...
- Martin Huseby Karlsen
Added uncertainty is not helpful
Further to our update this morning on the impact on jackup-focused offshore drillers from Saudi Arabia’s order to cut its production target, we see the added uncertainty and concern as the main obstacle for investors. As the planned offshore expansion from Aramco was the main driver behind the improvement in the jackup market in 2022/23, further clarity on how the production target cuts will be implemented will be key to bringing investors back from the sidelines. Until such clarity is available...
- Martin Huseby Karlsen
- Martin Huseby Karlsen
Unprecedented valuation gap
While there have been several examples of offshore drillers in emerging markets enjoying a premium valuation, we are puzzled about the current valuation discount on jackup-focused names listed in the US and Norway versus the Middle East. Several growth-oriented jackup focused names (ADES, ADC and ADNOC Drilling) have listed in the Middle East over the past years. We calculate that they are trading at more than twice the EV/EBITDAs and implied asset values of Borr Drilling and Shelf Drilling. In ...
- Martin Huseby Karlsen
Large-cap commentary supports long-term offshore upcycle
Key takeaways from SLB, Halliburton and Baker Hughes Q4 earning calls include positive commentary on the ongoing offshore upcycle. They see continued growth in global EP spending in 2024 (high-single to low-doble digits), driven by offshore and international markets, while North America onshore outlook are less favourable. Lastly, SLB sees potential for more than USD100bn in global offshore FIDs in 2024 and 2025, while Baker Hughes expects over 300 subsea tree awards annually for the next 2–3 ye...
SOC SUBSEA 7 S.A.
SDRL SEADRILL LTD
ARCHERO ARCHER
AKER AKER ASA CLASS A
TGS TGS-NOPEC GEOPHYSICAL COMPANY ASA
ODL ODFJELL DRILLING
AKSOO AKER SOLUTIONS ASA
DO DIAMOND OFFSHORE DRILLING INC.
RIGN TRANSOCEAN LTD.
BWO BW OFFSHORE LIMITED
CGG CGG
AWDR AWILCO DRILLING
DRLCO DRILLING COMPANY OF 1972
BORR BORR DRILLING
MSEIS MAGSEIS FAIRFIELD
PRS PROSAFE
NODL NORTHERN DRILLING
SHLF SHELF DRILLING LTD.
VAL VALARIS LTD
NE NOBLE CORP NEW
OTL ODFJELL TECHNOLOGY LTD
SDNS SHELF DRILLING NORTH SEA
DDRIL DOLPHIN DRILLING
DOFG DOF GROUP ASA
- Martin Huseby Karlsen
- Martin Huseby Karlsen
- Martin Huseby Karlsen
- Martin Huseby Karlsen
- Martin Huseby Karlsen
New Petrobras deepwater requirement
Updates suggest Petrobras has just launched a new deepwater requirement for up to two deepwater rigs, starting in H1 2025. To our understanding, this relates to work at the Roncador field. As Petrobras has typically used 6G semis and drillships from local contractors at this field, we believe this is the likely outcome of this requirement as well. Hence, it may not be for incremental rigs, but as Petrobras runs multiple tenders in parallel, the outcome of this tender may lead to other tenders ta...
- Martin Huseby Karlsen
Investors’ deepwater expectations better aligned with reality
As highlighted in our recent sector report, we see greater awareness among investors in terms of expected idle time and volatile datapoints for deepwater ahead. For upcoming datapoints, we still see a bifurcated mix, with long-term jobs and contracts by smaller contractors representing risk to the downside, with likely dayrates around USD300k (or even below), while we see solid discipline among the larger contractors, with most upcoming contracts in the USD400k–500k range, including some long-te...
- Martin Huseby Karlsen
- Martin Huseby Karlsen
- Martin Huseby Karlsen
Investors searching for visibility
We see greater capital markets awareness of likely idle time for deepwater rigs in 2024, as demand seems patchy versus the number of rigs becoming available and certain sidelined rigs aggressively seeking work. Hence, we believe investors expect further downward revisions to consensus (we are 7–11% below consensus on 2024–2025e EBITDA). Meanwhile, investors are looking for datapoints that support cycle duration and dayrates holding up. Over the next few months, we believe new contracts by the la...
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