By Braden Reddall
Nov 21 Transocean Ltd offered some hard
rig numbers that validated industry concerns about slack demand
for certain oil and gas work, saying on Thursday its deepwater
units would represent more than a third of all those available
for hire next year.
Shares of Transocean, owner of the world's largest offshore
drilling fleet, fell more than 3 percent.
Executives said 14 Transocean deepwater rigs would be come
off contract in 2014 out of a total of 39 industry-wide. Both
figures are unusually high in a market segment where leases can
run for five years or more, though two-thirds of the total only
needed contract extensions, as opposed to brand-new deals.
Among rivals, Ensco Plc will have eight rigs coming
available in 2014 and Seadrill five, Transocean told
analysts at a meeting in New York.
But there was pent-up demand for 10 to 15 rigs in the West
African deepwater market alone, where programs were held up by
delays, according to Terry Bonno, Transocean's senior vice
president for rig marketing.
In this cyclical business, customers often strategically
wait for over-supplied markets before pressing ahead with
drilling, in order to secure long-term contracts at lower rates,
Referring to the deepwater market in the near term, Bonno
cited a customer as saying recently: "There's a cold wind
Long term, however, Transocean cited predictions for 1,250
deepwater wells to be drilled in 2025, compared with about 500
this year. To meet this, there are 110 new rigs under
construction, but about 120 were due to be replaced, and Bonno
saw potential for 215 additional deepwater rigs to be built.
Transocean shares were down 3.6 percent at $51.99 in morning
trading on the New York Stock Exchange. The stock gained 10
percent in the past two weeks in the wake of strong quarterly
results, an increased dividend and plans for more cost savings
and a tax-efficient asset vehicle.
That unit, structured along the lines of a master limited
partnership (MLP), would launch in mid-2014 and start with three
or four Transocean rigs, with potential to add one more per year
later, said Chief Financial Officer Esa Ikaheimonen.
The CFO, who launched such a vehicle at Seadrill a year ago
before moving to Transocean, also laid out plans
for renewing the fleet. Transocean deepwater rigs, for example,
are on average 14 years old, compared with three years at
Seadrill, based on Seadrill figures from earlier this year.
Divestments of Transocean's "non-core" rigs would be
complete by 2018, he said, while $1.5 billion to $2 billion
would be spent annually on replacing them with one or two
floating rigs and multiple shallow-water "jackups" every year.