With the delivery of its first deepwater drillship on the horizon, Opus Offshore’s chief executive Vern Westerhout said the Singapore-based start-up is ready to embark on further expansion to at least double its fleet to eight new drilling floaters by 2019.
SPOTL“My vision is to own and operate eight to 12 new drilling floaters capable of operating in up to 7,500 feet of water,” Westerhout said.
Opus has invested an additional $20 million mainly on extra risers to high-grade the rated water depth of its first drilling floater, Tiger-1 (DW drillship), to 5,000 feet, up from 3,000 feet.
The high-grading of Tiger-1 is in line with the decision of Opus management to focus on the deepwater belt, where “vast majority of drilling activity” is taking place, according to Vice President of Technical David Smallwood.
OPUS KEEN ON ACQUIRING ORION’S SEMISUBMERSIBLES
Opus will be eyeing the acquisition of up to four semisubmersible drilling units of which China’s equipment manufacturer Honghua Group Ltd. was commissioned to build for U.S.-based Orion Engineering, Inc. in Qidong, China.
The drilling start-up has picked up the option to either purchase or bareboat charter the semisubs through a project management contract for the rig construction, Westerhout said.
The newbuild contract between Orion and Honghua is for one firm semisub (Orion Honghua Semisub TBN1) plus individual options for up to three additional semisubs. Delivery of the first semisub is targeted for the second quarter of 2017.
Among others, Opus is looking at, raising equity to fund the fleet expansion through an initial public offering, which Westerhout suggested, is being tabled for as early as late 2015.
The firm has so far counted on capital injections from the cash-rich Reignwood Group to finance the milestone payments for the construction of its four Tiger design drillships in Shanghai.
The drilling outfit reached out to the bond market in early 2014 to raise $90 million for the acquisition of Songa Offshore’s seasoned semisubmersibles, Songa Venus (mid-water semisub) and Songa Mercur (mid-water semisub).
The acquisition of the Songa semisubs also saw the management team pump in cash for a 30 percent stake in Opus, with Reignwood retaining the other 70 percent interest.
Westerhout said Venus and Mercur will serve as “forerunners to the new Tiger rigs” to allow Opus to access Songa Offshore’s operational crew and track records with the oil majors for deepwater drilling.
Rated to operate in 1,500 feet and 1,800 feet of water depths respectively, the two semisubs are fitted with “the class of work we want to do”, he added.
The two semisubs are managed by a joint venture newly set up between Songa and Opus.
The partners are exploring among others, contracts in Bohai Bay and South China Sea for Venus during three available winter windows outside of the 2015 through 2017 summer drilling program committed with Russia’s OAO Gazprom.
Mercur is ready-stacked off Malaysia, according to Rigzone’s RigLogix database, after coming off a charter with Mubadala Petroleum. The second Songa semisub on Opus’ rig fleet is understood to have been pitched for work off Mexico and Africa.
OPUS ON LEAN TIGER DESIGN DRILLSHIPS
The acquisition of Venus and Mercur and the joint venture with Songa Offshore to operate the two semisubs lay the groundwork for marketing the four Tiger design drillships scheduled for delivery from the first quarter of 2015 through the first quarter of 2017.
Smallwood describes the Tiger design drillships as a cross between a “reduced specification ultra deepwater drilling unit” and a “high specification mid-water drilling floater”.
Unlike most other newbuild rig projects, Opus has decided from the start to “put things we need instead of what we want” into the Tiger drillships.
Such “pathological focus on specifications” contributes to a decision to go for a 1,000 ton derrick against the average 1,250-ton on ultra deepwater drilling units currently being built in South Korea.
Opus also shaved off $150 million by going for a moored, non-dynamic positioning drilling unit in Tiger-1, according to Smallwood.
By taking full control of the specifications without any third party influence, Westerhout said the newbuild cost for Tiger-1 was controlled at $268 million, just within the $270 million budget.
The lower capex on Tiger-1 translates to a lower break-even point easily $200,000 per day off that of a sixth-generation ultra deepwater drilling unit, Smallwood said.
Smallwood believes the competitiveness of Tiger-1 drillship will be further bolstered under an environment of sub-$100 a barrel oil prices.
With oil trading at around $80 a barrel, even the supermajors “had to relook at what it costs to deliver the wells”, he added.
TIGER DRILLSHIPS MARKETED FOR WORK GLOBALLY
The core design brief for the Tiger drillship was based on operations in the Andaman Sea.
Field operators including PTTEP have struggled to muster sufficient drilling activity to justify hiring multiple drilling units to drill in near-shore to deep-water reservoirs off Thailand and Myanmar.
Opus aims to fill the gap by providing “a single drilling solution” for non-DP drilling across a wide range of water depths in the remote Andaman Sea.
The Tiger drillships are particularly well-suited for PTTEP-operated Block M-11 off Myanmar, according to Westerhout.
In absence of any immediate well requirements off Myanmar, however, Opus is evaluating five possible “options” spanning from one to five years in duration, for Tiger-1’s maiden charter.
The five options comprising mostly exploration drilling requirements, include a possible term charter with Petroliam Nasional Berhad (Petronas) off Sabah or Sarawak, Malaysia.
Opus has a standing memorandum of understanding with PTTEP, although the Thai state-owned field operator does not have any immediate drilling campaigns suited for the Tiger drillships.
Smallwood flags India as an attractive market particularly for the first two Tiger rigs. India offers opportunities for 3 to 5 year charters, providing stable cash flows to generate investor interest in a new start-up like Opus.
The Opus vice president of technical also views Mexico as a highly potential market, with state-owned Petroleos Mexicanos (Pemex) “looking at solutions for work in water depths well-suited for the Tiger drillships”.
The Tiger drillships will serve as an ideal bridge with the appropriate age profile for Pemex to graduate from jackup to the ultra-deepwater operating environments, he opined.
The four Tiger design drillships are built to identical specifications, translating to economies of scale that comes with repeat production.
No additional engineering was performed on Tiger-2 and this in turn shaves off 15 percent from the man-hours spent on the rig construction as compared to Tiger-1, according to Smallwood.
Tiger-1 will be fitted with a five-ram 15,000 psi blow-out preventer (BOP) supplied by Cameron and this is due to arrive at the Chinese yard in late December. The drillship will set sail for sea trial later this month.
Smallwood said the delivery of Tiger-1, previously scheduled for late 2014, was subject to delivery of long-lead items including the BOP.
Opus has a dedicated team of about 65 engineers managing the construction of the Tiger drillships at the Shanghai Shipyard.