Seadrill takes action ahead of drilling upturn

Seadrill cut its staffing levels by nearly 25% last year, with 1,393 positions shed offshore.

Offshore staff

HAMILTON, BermudaSeadrill cut its staffing levels by nearly 25% last year, with 1,393 positions shed offshore.

Taking into account the current level of commercial activity in theoffshore drilling market, the company believes it now has the minimum number of employees required to run its business safely and efficiently.

Seadrill also reduced its rig and operating costs last year by $596 million to $1.02 billion, with 60% of the cuts related to rigs in operation and 40% to idle units.

The jackupWest Mischief is set to finish operations for NDC four months early after receiving a contract termination notice.

PTTEP Thailand has awarded the jackupWest Cressida a two-month extension of its existing contract, which is now due to expire in April.

SeaMex, the company’s 50% owned joint venture, has secured a 29-month contract extension with PEMEX for five jackups operating offshore Mexico.

Ophir Energy has contracted the drillshipWest Saturn to drill a well offshore Cotê d’Ivoire, due to spud during 2Q.

Seadrill has agreed to reduce the total remaining value of the ultra-deepwater drillshipWest Jupiter’s contract off Nigeria with Total, which runs until December 2019, by $144 million.

Offshore Venezuela, Cardon IV has exercised an option on theWest Freedom to extend the non-operating flotel period by three months to March 31. Operations are set to re-start on April 1 and continue until Sept. 30, at a day rate of $225,000.

Seadrill says tendering activity for rigs has continued at increased levels over the past few months, especially in theNorth Sea. However, near-term drilling programs are largely based on opportunistic spot market activity, and numerous oil companies still have excess rig capacity on contract.

Somedrilling contractors are bidding for contracts below cash breakeven in some instances in order to keep their rigs active.

Longer term indicators appear to be heading in the right direction. While capex on E&P will likely fall again this year, the reductions appear to be less than was previously anticipated and expenditure should rise progressively from 2018-20.

At the same time, break-even costs for offshore fields have fallen significantly with many more now at or below current oil prices.

Seadrill believesdeepwater production will have to revive in order to meet long-term demand forecasts. But use of floating rigs could get worse before it gets better as more units become available than are required in the short term.

Scrapping and cold stacking therefore look set to continue.

Demand for jackups is shorter cycle and any decline tends to bottom earlier and recover more quickly. The company points out that the jackup market tends to be more stable than floaters since activity is driven largely by development spending in shelf regions and is not as exposed to volatile exploration spending.

02/28/2017

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