Fleet transformation is under way in North Sea sector

August has witnessed some significant changes in the make-up of the North Sea rig fleet, particularly in regard to semi-submersibles. The number of semisubs in the sector has dropped to 42 as a result of Diamond Offshore, Transocean and Fred Olsen Energy subsidiary Dolphin Drilling all deciding to scrap some of their older rigs for which prospects of future work were diminishing as rig demand remains stubbornly weak.

Diamond has sold three rigs for scrap: the Ocean Nomad, Ocean Princess and Ocean Vanguard, which were built between 1975 and 1982. All three had also been cold-stacked for a considerable time, thereby reactivation costs were likely to be high if new contracts ever developed. Diamond's North Sea fleet has essentially been halved to three active rigs. Meanwhile, Fred Olsen Energy also reported it was calling time on its 1975-built rig Borgsten Dolphin, which had been stacked for a prolonged period.

Transocean has been trimming what it describes as its midwater fleet for the past couple of years, following its decision to become a deepwater and harsh environment rig supplier. In recent months the drilling contractor has reduced its North Sea fleet by scrapping the 1976-built Sedco 704, plus the Transocean John Shaw, Transocean Prospect, Transocean Searcher and Transocean Winner which were all built in the 1980s. In addition, the Transocean Barents has just left the sector for a two-year contract in Canada which starts in the fourth-quarter. Transocean also exited the jack-up sector altogether after selling 10 jack-ups, plus another five under construction, to Borr Drilling; the $1.25 billion sale was announced on 31 May.

However, Transocean's fleet transformation developed further on 15 August when it reported a $3.4 billion takeover of Songa Offshore; a deal which provides Transocean with four modern Cat-D semi-submersibles that have long-term contracts with Statoil, plus another three older rigs. Transocean's current North Sea fleet contains seven semi-submersibles and will therefore initially double once the acquisition of Songa is completed. The North Sea semi-submersible fleet is likely to be reduced further in the coming months and units built in the 1970s and 1980s are expected to be prime candidates to be scrapped. There are still around 17 semi-submersibles idle or stacked in the North Sea, although a few have a future contract in place. The fleet probably needs to number 30-35 units before it begins to match actual rig demand.

Meanwhile, no fleet reduction action has yet been undertaken within the North Sea's jack-up fleet which still numbers 52 rigs, of which 22 are currently not working. The number of inactive rigs has been consistently over 20 since the industry downturn and fleet reduction action in the jack-up sector seems inevitable at some point.

Contract activity in July was low with only three fixtures confirmed. ConocoPhillips hired the jack-up Ensco 100 for a three-year term, Total re-hired the jack-up Rowan Gorilla V for two-years and Lundin fixed the semi-submersible COSLInnovator to drill one firm well in Norway.    

                                                                                                                                                                          North Sea Rig Contracts - May 2017


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