Ensco gets three drillship contracts in Nigeria


By Our Reporter

* Ensco Plc – Ensco DS-4 contracted to Chevron for two years Ensco DS-10 contracted to Shell for one year Ensco DS-7 to return to work with total​

* Ensco Plc – ‍awarded three drillship contracts offshore West Africa, representing an aggregate three years of contracted term​

* Ensco Plc – Ensco DS-4 is expected to commence a two-year contract with Chevron offshore Nigeria in August 2017

* Ensco Plc – ‍three drillship contracts offshore West Africa also represent more than six additional years of options​

* Ensco Plc – Ensco DS-10 is scheduled to commence work with shell offshore Nigeria in Q1 2018

* Ensco Plc – ‍contract drilling expense for Q2 2017 is expected to be approximately $282 million after adjustment​

* Ensco Plc – ‍anticipated capital expenditures are now expected to total approximately $350 million for nine month period from Q2 2017 through Q4 2017​

* Ensco Plc – Ensco DS-10 delivery is expected to be accelerated into Q3 2017 from Q1 2019

* Ensco Plc -Ensco DS-7 is now scheduled to mobilize to ivory coast to drill one well beginning in Aug 2017 that is expected to take 60 days to complete

Ensco announces 3 contracts for drillships.

The company will accelerate the delivery of the newbuild DS-10.

The merger with Atwood now looks like an even bigger mistake.

Ensco (ESV) has signed three contracts offshore for drillships in West Africa

Ensco DS-4 got a 2-year contract with Chevron (CVX) offshore Nigeria which starts in August 2017. The contract includes a 1-year priced option. The rig was previously preservation stacked. Ensco stated that reactivation expenses for the rig will be $28 million while $15 million will be spent on upgrades.
Ensco DS-10 got a 1-year contract with Shell (RDS.A) (NYSE:RDS.B) offshore Nigeria. The contract starts in first quarter of 2018. Ensco DS-10 is a newbuild whose delivery was previously postponed to the first quarter of 2019. Due to this new contract, the delivery of the rig was rescheduled to the third quarter of 2017. Ensco estimates that capital expenditures on the rig will total $190 million including the final payment to the shipyard.
Ensco DS-7 returns to work with Total (TOT). The rig will work from August 2017 in Ivory Coast and will drill one well that is expected to take 60 days to complete. Total has a priced option for 1 additional well.

In all cases, dayrates for the contracts have not been provided by Ensco.

This is a major development for Ensco and for the industry as a whole. These contracts showed that warm stacked rigs have a chance to win jobs in the current environment. Importantly, drillship work is returning to West Africa, which was the most beaten UDW area. These contracts have been secured despite the recent downside in oil prices, perhaps signaling that oil majors start thinking about their reserves and want to take advantage of low dayrates.

The news is great but there is also downside to this news. The dayrates have not been made public (and I bet that Ensco won’t provide exact numbers when it publishes its fleet status report later this month) which means that they are as low as possible. Also, Ensco will have to deal with a newbuild delivery at times when it decided to merge with Atwood Oceanics (ATW) and will likely have to immediately deal with its indebtedness due to change of control

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