I met up with Pankaj Khanna, Chief Marketing Officer at Ocean Rig UDW at Marine Money in New York this week.
Ocean Rig (ORIG:NASDAQ) owns 9 offshore drilling vessels, including 2 semi-submersibles and 7 drillships, and is a pure play on the ultra-deepwater drilling market.
Pankaj, tell us a bit about your background and how you ended up as CMO of Ocean Rig.
I’ve been in maritime and offshore for 23 years. I’ve sailed on ships, worked at a ship broker in London for 4 or 5 years, and for 8 years I worked at Teekay heading up vessel sales & purchase activities, newbuilding ordering activities and other strategic development projects in Vancouver.
I left to take an opportunity as Chief Operating Officer at Alba Maritime, a new bulk carrier company owned by a friend of mine. The intention was to take this company public, which consisted of 24 Capes, 12 Panamax bulk carriers, that were ordered at the top of the market. As the whole sub prime crisis was breaking, the banking market essentially disappeared, the equity markets closed out, so I helped them sell off a lot of the assets and saved the company from bankruptcy. We sold 9 or 10 of those Capes betwee $90-100 million, and in two weeks time they were worth $60 million with no one there to buy them.
Then I moved on for a brief period with another bulk carrier company called Excel before eventually ending up at Dryships 4 months later, where I’ve been for the past three years now.
I was initially hired to take care of all the commercial side of the company, assets, projects, but we had already acquired Ocean Rig, so I was shadowing the Ocean Rig CEO while he was there.
When he left, I ran the company for a period of time before a new CEO was brought in, I then stepped back to head up marketing, but I’m also actively engaged in corporate affairs and am the lead with all the capital raises. I am the public face of the company in front of the investors.
While at Marine Money this week I am conducting one-on-one meetings with investors.
How big of an issue is getting financing for your rigs? Are all your rigs paid for right now?
We have 6 rigs on the water which are fully financed, we have 3 newbuildings coming out next year from Samsung which we’ve already put in $240 million each in equity, so what remains is the final delivery payment of $425 million. That will come from debt, and we are working on the debt facility. While the banks have been pulling out of shipping, they have been working in the offshore sector, and are increasing their portfolios in this sector.
We have good relationships from our standpoint and have already determined who those banks are going to be, and we are working now to finance this facility.
Watching what happened with Chevron and Transocean off Brazil, and considering the high level of operations Ocean Rig is currently conducting in that area, how much does that concern you from a commercial risk standpoint?
We have a very strong safety culture at Ocean Rig which has been developed over the past 10-plus years. For example, our crews don’t just have the responsibility to stop unsafe operations, they have the obligation. This is written in our manuals. When we do the contracts with our customers, we write in there that the OIM has the final decision on safety when it comes to anything. There is no fuzzy lines in terms of who is responsible.
As far as the regulatory regimes are concerned, we have always worked in tough regulatory environments. We have worked up in Canada on the Flemish Pass and our rigs are certified to work, and continue to work offshore Norway. So we are very accustomed to working in these regulatory environments, it is not new for us.
In terms of how the authorities react when an incident, this is out of our control. It’s a risk in the business, and the only thing we can do is to be prudent in how we run our rigs, be prudent in who we choose as our customers, and ensure that our policies and procedures are followed.
Yes, plenty. The most important one was to ensure our contracts cover us if Greenpeace or some other NGO come on board so that there is clarity and there is no confusion on how that is handled.
We in fact had a very good relationship with Greenpeace. When they came on board, we stopped the operations, we helped them out by providing them drinking water etc. The main thing from working in Greenland was to avoid having any sort of adversarial relationship with NGOs.
Besides that of course, Greenland is a harsh environment, and that’s great for the Leiv Eiriksson semi, but not so good for the drillship. While we were drilling in the summer, it was all ok, but we extended it past the summer for one month at the customer’s request, and in the future I don’t think we would do that.
The drillship performed very well and stayed in position, but the drillships weren’t designed to operate in 20 meter waves, the semis are.