Seadrill (SDRL) has 13 newbuilds in its pipeline. Of these, one is semi-submersible, four are drillships, and eight are jack-ups. Since the start of the industry downturn, Seadrill has been actively negotiating with shipyards and postponing newbuild deliveries and their associated capital expenditures.
The company’s tendering activity is at a very low level. Its taking deliveries of newbuilds without any contracts adds to its costs. Also, obtaining financing for these newbuilds is nearly impossible in the current downturn. The need to preserve cash to weather this downturn, postponing newbuild deliveries, is key for offshore drillers.
This scenario isn’t unique to Seadrill. Offshore drilling (IYE) companies Diamond Offshore Drilling (DO), Atwood Oceanics (ATW), Ensco (ESV), Noble (NE), and Transocean (RIG) have also deferred their newbuild programs.
During October 2016, North Atlantic Drilling announced an agreement regarding the West Rigel rig with Jurong Shipyard. The agreement extends the rig’s delivery date to January 6, 2017. With the deferral, the company has bought time to find employment opportunities for the rig. In the event that no employment for the rig is secured, Seadrill and Jurong will form a joint asset holding company for joint ownership of the rig. The rig will be owned 23% by Seadrill and 77% by Jurong.
During October, Sevan Drilling and Cosco agreed to exercise the third six-month option to extend their deferral agreement to April 15, 2017. Cosco will refund $26.3 million, or 5% of the contract price, during 4Q16. The final delivery installment has been amended to $499 million.
With the latest deferrals, the company now doesn’t have any scheduled deliveries in 2016. The company’s 2017 deliveries are currently contracted:
The company still remains in talks with shipyards to further delay these deliveries. It doesn’t plan to take deliveries in 2017 without suitable contracts.
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