Seadrill Limited SDRL has entered into new contracts for the construction of two high
specification jack-up drilling rigs at Dalian Shipbuilding Industry Offshore
Co., Ltd. (DSIC Offshore) in China. The newbuild rigs are scheduled for
delivery during the second and third quarters of 2016, and the total project
price per rig is approximately US$230 million (including project management,
capitalized interest, drilling and handling tools, spares and operation
preparations), with tail-heavy payment terms.
The two new units will be based on the F&G JU2000E design, with water depth
capacity of 400ft and drilling depth of 30,000ft. Seadrill now has in total
ten jack-ups under construction at DSIC Offshore of which two are scheduled
for delivery in 2013, five in 2015 and three in 2016.
Seadrill's construction program now totals 24 units, including 9 drillships, 2
harsh environment semi-submersibles, and 13 high specification jack-ups. In
addition the Company has fixed priced options for two ultra-deepwater units.
The Board of Seadrill is of the opinion that the premium jack-up segment
continues to provide a compelling investment thesis. The global jack-up market
is at an inflection point as approximately 60% of the global contracted fleet
is built before 1993. Almost 100 newbuild jack-ups have been delivered since
2005. However in the last two years we have seen increased utilization and the
number of stacked rigs decline to multi-year lows. Utilization rates have
exceeded 90% while average dayrates, unmet demand and average contract lengths
have all increased.
Newbuild activity has increased in response to the industry's calls for
additional demand and more capable units. We are of the opinion that the
current orderbook falls well short of adequately supplying oil company needs
going forward. Currently, the orderbook stands at approximately 115 units of
which approximately 50% are not competitive on a global basis. Most of these
uncompetitive units are either low specification or destined for markets with
regional factors that will limit their global mobility.
Tender activity continues to be robust with a significant increase over the
last six months. We have experienced increased inquiries primarily in Latin
America, the Middle East, and West Africa. Our customers continue to shift
their focus toward higher specification jack-up rigs and the benefits in terms
of efficiency and safety that these units deliver. Not only are operators
high-grading their fleet for the short term, but also increasing the duration
of contracts, a trend which speaks to the scarcity value of high specification
units.
Seadrill is currently in specific discussions about long term chartering for
several of our jack-ups. These discussions confirm a stronger day rate
environment as well as longer contracting terms.
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