Equinor Extends Contract for Odfjell Semi-Submersible
Posted 20/11/2023 10:54
Equinor ASA has exercised options to extend the contract for Odfjell Drilling AS’ semi-submersible, Deepsea Aberdeen, for seven wells on the Breidablikk field. The exercised option is set to commence in mid-first quarter of 2025, directly continuing the current firm period and extending the firm backlog on the Deepsea Aberdeen until the end of the fourth quarter of 2025. The value of the options amounts to approximately $138 million, excluding integrated services, performance incentives, and fuel.
In addition to the exercised wells, the contract encompasses further optional periods that could keep the Deepsea Aberdeen contracted until 2029 if exercised. These optional periods consist of six optional wells followed by three further optional periods of eight wells each, with rates for all optional periods to be mutually agreed upon before exercising.
Odfjell Drilling CEO Kjetil Gjersdal expressed satisfaction with the extension, emphasizing the successful collaboration with Equinor on the Breidablikk field. The One Team approach, focusing on safe, low-carbon, and cost-effective wells, has delivered impressive results, with the Deepsea Aberdeen drilling the initial Breidablikk wells ahead of schedule, paving the way for early production on the field.
Gjersdal highlighted the financial benefits of the exercised optional wells, indicating substantial cash flow earlier than forecasted as the rig moves to a higher day rate level. The extension mechanisms agreed upon could potentially keep the Deepsea Aberdeen in continuous operation with Equinor until 2029, contributing to strong, predictable cash generation.
The Deepsea Aberdeen is an enhanced GVA7500 harsh environment design semi-submersible, designed for operations in harsh environments and water depths of up to 9842.5 feet (3,000 meters).
In addition to the contract extension announcement, Odfjell reported positive financial results for the third quarter. The company posted an EBITDA of $87 million, reflecting a 7.4 percent increase compared to the same period the previous year. Revenue for the quarter reached $186 million, indicating a 12.7 percent year-over-year increase.
Odfjell Drilling achieved multiple new records across its business during the third quarter, setting new operational standards. The company's financial utilization was the highest since Q1 2022, and it experienced strong performance bonuses from its crews. The positive results have allowed Odfjell to declare a quarterly dividend for the period, totaling $14.2 million.
Gjersdal expressed optimism about the industry's performance, noting significant demand and tight supply. He anticipates continued solid demand in the long term, supporting positive momentum in day rates. The company sees no realistic situation where new builds enter the market.