Noble works out equity/variable day rate deal in dispute
The past several years have been some of the most difficult for the drilling sector, and operators and drilling contractors have been at odds with each other. While increasing or decreasing day rates are, and always will be, the main focus of conflict between the two, new fuel has been added to the fire and made bridging the gap and finding a common solution more difficult.
This new fuel has been the construction of the new drilling fleet. Both sides of the dispute have argued over contracts and escalating time and costs, but there have been many amicable resolutions. The most common resolutions has been an extension of the contract period for a lower overall day rate than what was contracted, or in some worse case scenarios for the contractors - just a lower day rate. Recently, Noble Drilling and Mariner Energy found a new way to find a common ground and settle their dispute.
In January, Noble filed suit against Mariner Energy and Samedan over breach of contract on the EVA-4000 conversion semisubmersible Noble Homer Ferrington.
Mariner said that its letter agreement to sign the contract over the rig had expired, while Samedan questioned the rig's design criteria. As a result, Noble filed suit. It appeared the only way Noble could put the rig to work was at a lower day rate.
The dispute was settled, and Noble is getting a lower day rate, but in exchange, it is gaining something that could be of greater value in the long-run. Under the amended agreement, Mariner will pay Noble a variable day rate for use of the rig for 660 days during a five-year period. In exchange, Noble will receive working interests in seven of Mariner's deepwater exploration prospects, but Mariner will pay Noble's share of the drilling costs during the initial test well on each of those prospects.
On the downside for Noble, they get a variable day rate for the rig over about one-third of the contract period, which is industry norm for these kinds of disputes. And if the prospects turn out to be dry, they are not any worse off than other contractors that were put in this position, but they do have a long-term contract. On the upside, if a major discovery is made, the interest in the prospects could turn out to be much greater than the loss of day rate.
The companies have not released the variable day rate figure, nor the interest or location of the prospects. The Noble Homer Ferrington is now undergoing final commissioning and should be drilling within the next few months.
Smedvig puts two rigs to work
Smedvig's West Navion drillship and West Venture semisubmersible have left their respective shipyards and begun work in the Norwegian sector of the North Sea. The West Navion drillship will drill its first well on the Norne Field in the Norwegian sector of the North Sea and a number of minor assignments under a contract to Statoil through November, after which it will be leased to BP Amoco for a well.
The drillship is equipped for working in water depths over 2,000 meters. It features a dual derrick, dynamic positioning, and a fully automated drill floor. The ship can also perform subsea field explorations as well as extended well tests.
The West Navion was originally scheduled for delivery in May 1998, but experienced frequent delays and major cost overruns. The total construction cost of the vessel was $660 million. It is owned jointly by Smedvig and Navion on a 50-50 basis.
The West Venture on the other hand has been less problematic. The vessel was delivered in 36 months and cost $340 million. The West Venture is a fifth generation semi also equipped with a dual derrick, dynamic positioning, and a fully automated drillfloor. The rig was constructed at the Hitachi Zosen yard in Japan and was outfitted in Bergen, Norway. The rig will drill its first well on the Troll Field under a four-year contract to Norsk Hydro.
Espadarte FPSO complete
The Espadarte FPSO undergoing final stages of construction at Keppel shipyard in Singapore. The rig is on its way to work for Petrobras on the Espadarte Field off Brazil.
Keppel shipyard in Singapore has completed the conversion of the Espadarte FPSO for Single Buoy Moorings (SBM) on schedule. Under the contract, Keppel installed an internal turret mooring system and removed existing oil processing utility systems. These were replaced by new oil, water, and gas production and treatment facilities on the main deck. The company also refurbished the boilers for gas and diesel oil and installed a flare tower, helideck, supply handling deck cranes, foundation, walkways, lighting communications, and utilities for various deck facilities.
Keppel also performed conversion work on the accommodation, cargo loading, and offloading piping, together with the fitting of tandem mooring and offloading systems on the stern. Refurbishment and life extension work was also carried out and the vessel is now equipped to work for 16 uninterrupted years of service onsite without drydocking.
The Espadarte FPSO will work for Petrobras on the Espadarte Field off Brazil. The vessel will be operated by SBM. Keppel also recently finished the conversion of the Yetagun FSO for SBM. Both contracts were awarded in 1999.
Fred.Olsen ups claim against Saga
Fred.Olsen Energy has increased its claim against Saga Petroleum, now a part of Norsk Hydro, for the Bideford Dolphin semisubmersible. Fred. Olsen now claims it needs compensation in the amount of $230 million, up some $36 million. The total cost for the rig has doubled from the original estimate to $270 million. The reason for the row is that Fred Olsen claims that Saga ordered extensive testing and changes to the original design when the rig arrived in Norway, following the rig's completion at the Harland & Wolff yard in Belfast. At the same time, Saga was seeking compensation for delays during construction at the yard. The rig is presently working for Statoil on a six-year contract at a day rate of $160,000.