As a new demonstration of the continuing pressures on the offshore oil sector, drill operator Transocean announced that it has agreed to delay delivery of its two new ultra-deepwater drillships and defer payments to the shipyard. The company also reported that it has reached new financing terms with the shipyard to improve its balance sheet, while it also scheduling contracts with major customers.
Transocean initially orders the two advanced drillships from Sembcorp Marine’s subsidiary, Jurong Shipyard in 2014 with delivery scheduled for 2017 and 2018. Since then, with the ongoing downturn in the sector, Transocean has delayed the delivery. Known as the Deepwater Atlas and Deepwater Titan, Transocean says the two drill rigs are the world’s first eighth-generation designed for ultra-deepwater operations. They are the only rigs to feature a 3,000,000 pound hook-load and will include the first 20,000 psi well control system.
Under an agreement with the shipyard, Transocean now plans to take delivery of the Deepwater Atlas in December 2021. Deepwater Titan is now scheduled for delivery in May 2022.
Jeremy Thigpen, President and CEO of Transocean also highlighted that “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.
Under the terms, Transocean will make a $50 million payment when the Atlas is delivered, with the balance owed to the shipyard of approximately $370 million payable over five years. Upon delivery of the Titan, Transocean will pay JSPL 80 percent of the amounts owed, or approximately $350 million, with the remaining $90 million deferred and payable over five years.
Concurrent with the shipyard agreement, Transocean also announced new customer agreements for the anticipated deployment of both vessels. Atlas is scheduled to be utilized by BOE Exploration & Production on the Shenandoah project in the U.S. Gulf of Mexico, which is expected to commence drilling in the third quarter of 2022, subject to a final investment decision by Beacon and its partners due by July 31, 2021. Titan is expected to commence operations in the quarter of 2023 as part of Transocean’s agreement with Chevron U.S.A.
“These agreements clearly represent a monumental achievement for Transocean,” said Thigpen. “As the result, we will take delivery of the two highest specification ultra-deepwater drillships in the world."
Discussing market conditions and performance last month during the first quarter report, Thigpen discussed reduced activities for ultra-deepwater units, which were stacked or idle, in Asia and North America, as one of the factors contributing to a decline in contract drilling revenues. Transocean, he said, remained optimistic as the global economy began to emerge from the pandemic which they believed would drive an increase in contract activity. They reported an increasing number of customer inquiries for both harsh-environment and ultra-deepwater projects.