Ensco plc Announces Three Drillship Contracts

Published Jul 12, 2017
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ENSCO DS Series – Ensco’s fleet of dynamically-positioned drillships are equipped with advanced capabilities to meet the demands of ultra-deepwater drilling in depths of up to 10,000 feet with a total vertical drilling depth of 40,000 feet (photo: Ensco plc)

Ensco plc has announced that it has been awarded three drillship contracts offshore West Africa, representing an aggregate 3 years of contracted term and more than 6 additional years of options.

Chief Executive Officer and President Carl Trowell says, “Our recent contract awards demonstrate our ability to win work for preservation stacked rigs and newbuilds ahead of the competition. We contracted ENSCO DS-4, a rig that was previously preservation stacked, for a two-year term and reactivated the rig on time and within our cost estimates. We also secured a one-year contract for ENSCO DS-10, our final newbuild drillship, which is among the most technologically advanced rigs in the global fleet.”

Trowell concludes, “We continue to see offshore drillers with track records of safe and efficient operations as well as financial strength win a disproportionate amount of new work and these contracts are examples of our recent success in capitalising on this trend. Additionally, we believe that this new work positions us well for follow-on opportunities, benefiting future utilisation for our rig fleet.”

ENSCO DS-4 is expected to commence a two-year contract with Chevron offshore Nigeria in August 2017. The contract also includes a priced customer option for one additional year of work. Ensco recently reactivated the rig following a period during which the rig was preservation stacked in Tenerife and reactivation expenses are expected to total USD 28 million. In addition, USD 15 million of capital upgrades were added to the rig and are anticipated to benefit the asset over its remaining useful life.

ENSCO DS-10 is scheduled to commence work with Shell offshore Nigeria in first quarter 2018. The contract duration is for one year and includes five one-year priced customer options. As a result of winning this contract, the rig’s delivery is expected to be accelerated into third quarter 2017 from first quarter 2019. ENSCO DS-10 will then undergo a period of acceptance testing before mobilising to Nigeria to begin its maiden contract. Remaining capital expenditures associated with the rig are expected to total approximately USD 190 million inclusive of a final milestone payment to the shipyard, an upgrade to add a second seven-ram blowout preventer, acceptance testing, capitalised interest and mobilisation.

ENSCO DS-7 is contracted to Total until November 2017. Since November 2016, the rig has been idle in Tenerife earning a standby rate following early termination of its original contract for customer convenience. ENSCO DS-7 is now scheduled to mobilise to Ivory Coast to drill one well beginning in August 2017 that is expected to take 60 days to complete. Additionally, Total has a priced option for one further well.

As a result of these new contracts, contract drilling expense for second quarter 2017 is expected to be approximately USD 282 million after adjusting for a USD 10 million settlement of a previously disclosed legal contingency, slightly higher than the prior guidance of USD 270 million to USD 280 million, or USD 292 million on an unadjusted basis. Anticipated capital expenditures are now expected to total approximately USD 350 million for the nine month period from second quarter 2017 through fourth quarter 2017. This capital expenditure estimate includes approximately USD 240 million for new rig construction, inclusive of approximately USD 29 million of capitalised interest, and approximately USD 110 million for rig enhancements and minor upgrades and improvements.

Tags: Chevron, Ensco plc, Shell, Total


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