Shell Gives Transocean a Huge Shot in the Arm with 40 Years of Drilling Contracts on Four New Drillships

Following dismal news from the Brazilian Federal Court yesterday, offshore drilling contractor Transocean Ltd. (NYSE: RIG) (SIX: RIGN) received an extraordinary show of support from Royal Dutch Shell in the way of 10-year contracts for four newbuild dynamically positioned ultra-deepwater drillships.

These contracts, which are expected to commence in 2015 and 2016, add an estimated $7.6 billion, to Transocean’s revenue backlog which as of July 18th, totaled $22.9 billion. That’s a 33 percent increase.

“These contracts add 40 years of rig work to our revenue backlog, expand and upgrade our ultra-deepwater fleet, improve our fleet mix and provide an opportunity to expand our relationship with an important customer with which we have 40 years of experience in advancing the state of the art in offshore drilling technology,” said Steven L. Newman, President and Chief Executive Officer of Transocean Ltd. “We look forward to providing Shell with incremental value through the addition of these seventh-generation, ultra-deepwater drillships.”

The newbuild rigs will be constructed at the Daewoo Shipbuilding and Marine Engineering’s (DSME) facility at Okpo, South Korea, where Transocean’s five Enhanced Enterprise-Class rigs were built and where the company currently has two other ultra-deepwater drillships under construction.

Construction on the first drillship is expected to commence during the fourth quarter of 2013 with a delivery date of mid-2015.

The remaining three drillships are expected to be delivered from the shipyard at approximately six-month intervals thereafter. The aggregate capital investment for the four newbuild rigs is an estimated $3.0 billion, excluding capitalized interest.

All four drillships have advanced capabilities: each is designed to operate in water depths of up to 12,000 feet and drill wells to 40,000 feet. Featuring state-of-the-art equipment, including Transocean’s patented dual-activity drilling technology, the newbuild drillships will possess industry-leading hoisting capacity. The drillships will also have a variable deckload capacity of 23,000 metric tons and feature enhanced well completion capabilities. Additionally, each newbuild rig will be outfitted with two 15,000 psi blowout preventers (BOPs), which are expected to reduce customer non-productive time between wells. The four newbuild drillships will be able to accommodate a future upgrade to a 20,000 psi BOP, when it becomes available. The rigs will also feature diesel engines configured to comply with anticipated Tier III International Maritime Organization (IMO) emissions standards.

Peter Sharpe, Shell’s Executive Vice President, Wells, said, “Shell continues to develop its deepwater operations and modernize its contracted rig fleet at fair market rates. These state-of-the-art deepwater rigs, on which we are collaborating with Transocean to design, will comply with the highest industry standards for safety, operations and environmental protection for drilling deepwater wells.”