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Norwegian drilling contractor Borr Drilling has sold 14 old jack-up rigs tied to its acquisition of Paragon Offshore.
The rigs will be sold to non-drilling company and retired from the international jack-up drilling market. Going forward, thirteen of the jack-ups instead will be targeted for Mobile Offshore Production Unit (MOPU) work. The remaining rig is allocated to development work for a specific life of field project.
Borr Drilling says the rigs will be delivered to the new owner over the next 30 days, with disposal expected to contribute up to US$16 million in profit to Borr’s second quarter 2018 results.
Since the conclusion of Borr Drilling’s acquisition Paragon transaction in March 2018, the drilling contractor has actively tried to reduce the daily operating cost and capex linked to older jack-ups that are no longer able to generate revenue.
“Since the beginning of the year, Borr and Paragon have sold in total 26 rigs which will all leave the actively marketed jack-up fleet,” Borr said in a statement. “The direct stacking cost for these 26 rigs was estimated to be around USD 35 million yearly which will be reduced to zero when the last rig is delivered within the next 30 days.”
According to Borr, out of the total delivered jack-up fleet of 531 units, a total of 244 units (46 %) were delivered prior to 1988. Among those older units, 104 of them have been stacked for more than 1 year. “The cost and investments required to bring old, unemployed rigs back to the drilling market cannot be defended from a financial, operational or safety point of view,” the company said.
Borr Drilling was established in late 2016 by Tor Olav Troim, a former top advisor to John Fredriksen. Since then, the company has been able to accumulate a 24 high spec jack-ups, including 9 newbuilds, making it the largest premium jack-up operator in the world. The company also owns 5 older jack-ups and 1 older North Sea semi-submersible all performing contractual obligations, and 2 older jack-ups unemployed in the North Sea Market.
CEO Svend Anton Maier says in a comment: “We have, over the last 17 months, been able to build a unique fleet of 24 high specification assets acquired at attractive prices funded by a strong combination of equity and attractive seller financing. We see clear signs that the tender activity in the market is increasing, to a large extent, driven by NOCs and major oil companies. With the solid operational platform built both organically and through the Paragon acquisition, we are very well positioned for what we see as the start of the next upturn cycle in the jack-up market.”
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