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Global credit crunch hitting offshore rig operators

Posted on 10.01.2009 - 19:54 EST in GENERAL NEWS by Rons_ROV_Links

HOUSTON -- Some offshore drilling companies are having a hard time expanding their fleets because the economic conditions have made new vessels harder to finance.

Scorpion Offshore announced today that it was unable to secure financing for their Deepwater Rig semisubmersible. Keppel FELS in Singapore was to build the new rig.

According to Brian Uhlmer, research analyst with Pritchard Capital Partners LLC, Scorpion already had invested about $74 million into it.

"It was contracted with Petrobras and it could not get financed," he says. "So even with a contract, a well-known yard, a company that—although relatively new has been around a few years now, and has got jackups actually working so they have some operational experience and some cash flows—but they couldn't get financed."

Scorpion blames the "continuing turmoil in the global credit market" for its inability to get financing. The company says it has reached amicable agreements with Keppel FELS and third party vendors to terminate the construction contact and equipment orders on "mutually acceptable terms."

Seadrill also announced today that it has amended its agreements with PPL Shipyard and Keppel FELS for the construction of four new jackups—postponing payments. Seadrill has issued corporate guarantees for the remaining installments on the first two units; no guarantees were made for payments on the second units at the yards.

"But they're also trying to buy Scorpion which has seven jackups—so they had to make a decision and they realized it would be cheaper to average in and buy all of Scorpion," Uhlmer says (prior to the official announcement from Seadrill).

In Pride International's latest monthly fleet update, the company announced its jackup Pride Nevada, which contract ended in December, has been cold stacked. Pride Mississippi was cold stacked after its contract was up in October. Earlier in the year, Pride Alabama and Pride Colorado took the same path (Pride Utah in 2007).

Hercules Offshore has no fewer than nine vessels warm stacked and six cold stacked.
ODS Petrodata reported Hercules 252 and Hercules 250 jackups also have been released and stacked. The company said it expects an additional two Gulf of Mexico jackups stacked as well in the coming weeks.

The US GoM contracted offshore rig fleet utilization rate was at 75.8% at the end of December, with 94 of the 124 offshore rigs deployed. Worldwide offshore rig fleet utilization was at 87.9%.

© 2009 - Offshore

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