Drilling Tools Industry Newsletter

Schlumberger is bracing itself for an acceleration in deep-water drilling activity as international oil companies increase upstream spending on the back of high oil and gas prices. Chief executive Paal Kibsgaard said in an earnings call on Friday, after the company released its second-quarter results, that shallow-water rig activity had already taken off after a period of increased onshore spending. "Deep-water drilling activity in 2018 is going to be probably 10% up compared to 2017. The growth in deep-water will probably continue and potentially accelerate into 2019," he said in the webcast call. Kibsgaard said all global regions are expected to witness healthy growth, positioning Schlumberger to put its global technological edge to good use. He said international oil companies are increasing offshore spending as they benefit from high oil prices to tackle more costly industry sectors - such as deep-water exploration. He added that the offshore rig count had increased by 12% in the second quarter. Kibsgaard expects double-digit growth in exploration activity in 2018. Offshore drilling activity is expected to remain strong well into next year.

BP is a huge Texas player now after agreeing to pay $10.5 billion for the shale assets of Australia's BHP Billiton. The sale represents a major turnaround for BP as it seeks to grow again after the 2010 Deepwater Horizon tragedy in the Gulf of Mexico. The deal includes all of BHP's acreage in West Texas' booming Permian Basin, South Texas' Eagle Ford shale and Louisiana's Haynesville shale. BP Chief Executive Bob Dudley said the deal is a transformative acquisition that gives BP a major presence in the onshore U.S., and not just the deep water Gulf. BP has largely shrunk this decade since the 2010 Gulf rig explosion, which killed 11 workers, spilled nearly 4 million barrels of oil, and cost the company billions of dollars to settle claims.

Chevron has been approved by US regulators for a plan to drill a new exploration well in close proximity to its Anchor discovery in the deep-water US Gulf of Mexico, The site lies about 124 miles (198 kilometres) offshore in 5470 feet of water and the blocks lie a single three-square-mile block north and two west of the original Anchor discovery in GC 807.Work had initially been scheduled to start as soon as June, with drilling lasting 200 days, but no drilling permit is yet observed on file with the US Bureau of Safety & Chevron has been at work for more than a year with pre-front-end engineering studies for a new mid-sized semi-submersible facility at Anchor, with Wood working on the topsides and KBR on the hull. A subsea FEED contest has also been in process for the two fields. The further drilling by Chevron in the basin, Turner suggested, represents a vote of confidence from the company in the progress of high-temperature, high-pressure technology that will be key to advancing the discoveries to production. "That’s an indication of their confidence of that moving along," he said. As for Crown, Chevron and private equity player Venari picked up the trio of blocks that comprise the prospect at a 2015 lease sale, paying bonuses of $8.5 million, $41.1 million and $43.1 million, respectively. As of last November, French giant Total had also joined the three leases, leaving Chevron operating with a 50% stake and the other two partners on a 25% stake each.

Private equity-backed US player Cantium has taken a Rowan jack-up for a firm two-well programme in the US Gulf of Mexico. The Louisiana-based relative new-comer has chartered the Le Tourneau 116 unit Rowan EXL III for the two wells, with an estimated total duration of 28 days, Rowan revealed in its latest fleet status report. Cantium took the rig after it came off charter with US player Freeport-McMoRan, with the deal to run into next month Cantium is backed by funds from private equity players York Capital Management and Sole Source Capital. Last year the company snapped up the last of US supermajor Chevron’s US continental shelf assets. The five fields and 300 active wells in the Bay Marchand and Main Pass areas comprise the entirety of Cantium’s portfolio.

Nabors said it won awards for 13 "incremental" rigs globally in the second quarter as the company saw business pick up, with nine deals signed in the US and four internationally. "We signed three-year contracts for six upgraded rigs with one operator to be deployed progressively through January 2019, and received awards for three more, all for operations in the Permian," chief executive Anthony Petrello said. "We are in discussions for additional upraded rigs with operators in multiple basins in the Lower 48." The company also saw the start-up of its MODS 400 platform rig Chevron's Big Foot offshore production facility as the US supermajor kicked off develop-ment drilling. The US drilling segment saw that same Ebitda figure pop by 19% to $87 million due to the start-up of the modular platform rig. "In the Lower 48, average daily gross margin increased by more than $450 to $7,400, while rig count was stable," the company said. "Higher daily operating rates and improved rig-move efficiency accounted for the margin increase."

Mexico's National Hydrocarbons Commission has approved a $7.49 billion development plan by Italian major Eni for the Amoca, Mizton and Tecoalli fields, the second and largest by a private operator to be cleared since Mexico's energy reform and the first that would employ a floating production unit. The plan would begin with an early-production scheme via a tieback to onshore Pemex infrastructure at the San Ramon battery, which aims to bring online 8000 barrels per day by the first quarter of 2019 from the Mizton field. The plan involves the completion of four exploration wells drilled during the exploration campaign, with a total of 22 development wells and 10 injector wells. Production would be driven by electric centrifugal pumps and secondary recovery via water injection.

Otto Energy has hooked up with US player Hilcorp Energy, with the pair set to drill multiple wildcats in the US Gulf of Mexico region. Otto has taken a 37.5% stake in a joint venturwill target eight onshore or near shore prospects to be drilled over the next 18 months, with further wells possible. Otto is to pay 50% of the drilling costs, with the net cost to the company estimated at $37.5 million. Hilcorp will be the operator. The prospects are Big Tex, Mallard and Oil Lake in Louisiana and Mustang, Don Julio 2, Beluga, Tarpon and Lightening in Texas.If either Tarpon or Mustang is a hit, then Otto may participate in drilling the nearby Damsel and Corsair/Hellcat prospects.Otto managing director Matthew Allen said: “The eight independent prospects announced today are in our geological and geographical sweet spot and provide a unique opportunity to substantially grow our Gulf of Mexico business in one transaction with an outstanding operator and partner in Hilcorp.”

Rowan also confirmed that ExxonMobil has the ultra-deep water drillship Rowan Relentless for a one-well job in the US Gulf, between September and December. The US supermajor had taken the unit, with four well extension options. ExxonMobil has not disclosed exactly what it plans to drill, but the supermajor has been making a cautious return to wildcatting in the US Gulf after several years of working on its Julia development, a tieback to the Chevron-operated Jack St Malo production semi-submersible.

US independent Llog Exploration has also extended its charter of the ultra-deepwater drillship Rowan Renaissance in the US Gulf by one more well. The company had taken the unit for two wells after fellow US independent Anadarko Petroleum terminated its contract early. Llog also has two further priced options on the unit, with the first option at the same rate as the current dayrate, but the second one at a higher rate.

GulfSlope Energy said it has kicked off operations for its drilling campaign in the US Gulf of Mexico, with the Rowan jack-up Ralph Coffman now under tow to the first of two drilling sites in the company's exploration campaign. The US indepen-dent said it plans to spud the Canoe Shallow well on 1 August with the high-spec unit, pending drilling regulatory approval and final rig inspection.The prospect is located in Vermilion Area, South Addition Block 378 in about 325 feet of water. The well is expected to take about 15 days to reach a measure depth of 6249 feet. "The Canoe exploration well is planned to test multiple Pleistocene age amplitudes that correlate to productive zones in nearby producing fields," GulfSlope said. "If successful, this above-salt test will be evaluated for development options ranging from subsea tiebacks to building a production platform. "The initial test will be GulfSlope's first step towards proving up its long-held exploration thesis that prolific subsalt formations in the Gulf of Mexico can be tapped via easie to each locations in shallow water especially with the benefit of modern seismic imaging. Immediately after the brief Canoe drill, GulfSlope plans to move the Ralph Coffman to kick off its first subsalt test, the Tau prospect, on Ship Shoal Area, South Addition Blocks 336 and 351. GulfSlope has already won approval on its exploration plan and expects its drilling permit to be approved it August, according to the company. The Tau prospect lies in 305 feet of water and will be drilled to a measured depth of 29,728 feet and will target multiple deep subsalt formations."Over the past few years, we have had success in leveraging subsalt seismic technologies with the skilled expertise of highly-experienced subsalt exploration geoscientists," chief executive John Seitz said. "When we combined those results with a deeply experienced drilling team, the result is a superior drilling program that we believe will drive a resurgence in industry interest for the shelf of the US Gulf of Mexico."

Transocean has divulged a range of new contracts, adding work to the company's fleet sheet in the Gulf of Mexico, Norway and south-east Asia. The Zug, Switzer-land-based company said in the US Gulf of Mexico, customer Murphy Oil had opted to exercise a one-well option that will keep the drillship Deepwater Asgard on contract through November 2018. Murphy's contract started in February for the unit, which has recently been drilling the Samurai appraisal well on Green Canyon Block 432. Suncor Energy will also take the semi-submersible Transocean Barents for a six-month deal to follow up existing work off Eastern Canada, running from November through April 2018 at a day rate of $285,000. The prior deal ran from August 2017 through October 2018 at a day rate of $260,000.

Castex Offshore has secured a drilling rig for an appraisal-development well at its Hummer oil and gas field, off the coast of Louisiana in the Gulf of Mexico Minority partner Petsec Energy confirmed Wednesday the jack-up Ensco-68 had been secured to drill the Main Pass Block 270 B-2 well. B-2 is only the second well to be drilled at the Hummer field following the 2015 discovery made in the B-1 Exploration well which penetrated five oil and gas reservoirs, one of which was completed for production. The well was brought online in 2017 and is currently producing at a rate of about 16.5 million cubic feet of gas per day and 330 barrels of oil per day. The B-2 appraisal-development well will be drilled from the Main Pass Block 27 “B” production platform, to a bottom hole location roughly 6000 feet east of the B-1 discovery. The well will test six oil and gas reservoirs, including the five intersected at the discovery well as well as a deeper reservoir not tested at B-1 but which Petsec said was productive in the area. The rig is expected to arrive on location in the first week of August, with drilling to start my mid-August and take roughly 80 days to reach a total depth of 18,559 feet. The B-2 well is the first of three-to-eight potential appraisal and development wells required to fully develop the field. If B-2 is successful, the production facility will be expanded and the well is anticipated to be brought online in mid-December

Spot prices for Helmerich & Payne's US land rigs increased about 11% in the second quarter of the year, driven by strong demand and higher oil prices. The driller said adjusted average rig revenue per day increased in the second quarter by $689 to $23,400 in the US land segment. Additionally, the segment benefitted from a 7% increase in quarterly revenue days. As prices rose, so did expenses: The average rig expense per day increased quarter-on-quarter by $848 to $14,934, due mostly to wage increases in the red-hot Permian basin of Texas and New Mexico as well higher pass-through and other one-time costs. Corresponding adjusted average rig margin per day dipped about 2% to $8466, H&P said. "Our US Land operations benefitted from higher activity and pricing as we continued to capitalise on our superior position in the sold-out super-spec market," CEO John Lindsay said. In addition to the Permian growth, we are seeing improved rig activity in the Eagle Ford, the SCOOP/STACK play in Oklahoma as well as the Bakken."

Schlumberger turned in a net profit for the second quarter as revenues increased. Net income for the three months to the end of June was $430 million as against a loss a year earlier of $74 million. Excluding charges and credits, the company pulled in $594 million, compared with $488 million a year earlier and the same $525 million in the first quarter. Revenues hit $8.3 billion, up from $7.46 billion a year ago and $7.83 billion in the first quarter. North America continued to be the standout performer in terms of revenue, pulling in $3.14 billion in the period as against $2.84 billion in the first quarter and $2.2 billion a year ago. Growth was driven largely by the production division, with revenues of $3.26 billion up 10% on the first quarter and 30% year-on-year compared with $2.5 billion again with the North American shale market being the main driver. Schlumberger also cut costs in the quarter, completing a process to remove one whole layer of management and a support structure. Chief executive Paal Kibsgaard said. "In North America, lack of additional pipeline capacity in the Permian basin is becoming an increasing constraint to production growth. At the same time, spare production capacity, which is essentially limited to only a few Opec countries, is now nearing its lowest level for more than a decade while decline in the world’s mature production base continues to accelerate.

Halliburton posted a significant increase in profit in the second quarter of 2018. Net profit for the three mon ths ending June 30 was $511 million compared to just $28 million a year earlier and $46 million in the first quarter of 2018.This compares to reported income from continuing operations for the first quarter of 2018 of $46 million, or $0.05 per diluted share, and adjusted income from continuing operations for the first quarter of 2018 of $358 million, or $0.41 per diluted share, excluding impairments and other charges related to a write-down of all of the Company’s remaining investment in Venezuela. The company said operating income was $789 million during the second quarter of 2018, compared to reported operating income of $354 million and adjusted operating income of $619 million in the first quarter of 2018. We achieved total company revenue of $6.1 billion, representing a 7% increase while operating income was $789 million, a 27% increase over adjusted operating income for the first quarter of 2018. Our overall strategy is working well and we plan to stay the course,” commented Jeff Miller, President and CEO. The company’s Completion & Production division grew operating income by 34%, primarily driven by the strength of U.S. land.

ExxonMobil has upped the estimated discovered recoverable resource base at its prolific Stabroek block off Guyana to more than 4 billion barrels of oil equivalent after recent finds and appraisal work. The previous estimate of recoverable resources on the tract was 3.2 billion boe, but this was expected to be significantly increased as it did not take into account a number of known discoveries. "The increase follows completion of testing at the Liza-5 appraisal well, a discovery at Ranger, incorporation of the eighth discovery, Longtail, into the Turbot area evaluation and completion of the Pacora discovery evaluation," Irving, Texas-based block operator ExxonMobil said on Monday. The company also said that the increase to the resource estimate has also progressed plans for a third and even fourth and fifth stage of development on the block. The discoveries to date have been made at Liza, Payara, Liza Deep, Snoek, Turbot, Ranger, Pacora and most recently Longtail. ExxonMobil and its partners plan on taking a final investment decision on phase two by the end of this year.The partners' most recent discovery on the block, at the Pacora-1 well, will be included in the third development, which will concentrate on the Payara field. This will also incorporate the Liza-5 appraisal well. This third phase, the Payara development, will target sanctioning in 2019 and will use an FPSO vessel with production capacity of 180,000 bpd. Estimated gross production from the first three phases on the block will exceed 500,000 barrels of oil equivalent per day. The partners' most recent discovery on the block was Longtail, revealed in June. That find was made near the Turbot discovery, located to the south-east of the Liza. "The Longtail well established the Turbot-Longtail area as a potential development hub for recovery of more than 500 million oil-equivalent barrels," ExxonMobil said on Monday. "Additional prospects to be drilled in this area could increase this estimate."

Global oil and gas sector spending is expected to grow modestly for a second year in 2018 helped by an ongoing shift to short-cycle, quick-return projects which are underpinning the resurgence of US shale, the International Energy Agency said Tuesday. Following a decline of more than 40% between 2014 and 2016, global upstream investment rebounded modestly in 2017 by 4% to $450 billion in nominal terms and is set to increase by 5% to $472 billion in 2018, the IEA said in its latest annual World Energy Investment report. Capital spending in US shale sector has boomed since the end of 2016 and is estimated to increase by around 20% in 2018 following a 60% jump in 2017, the IEA said. "The United States shale industry is at a turning point after a long period of operating on a fragile financial basis," IEA executive director Fatih Birol said in a statement. "The industry appears on track to achieve positive free cash flow for the first time ever this year, turning into a more mature and financially solid industry while production is growing at its fastest pace ever."