October 2017 - Front | Marine Money...October 2017 Ingolf Gillesdal Director, Market Analysis Rigs...

Offshore drilling update

October 2017

Ingolf Gillesdal Director, Market Analysis Rigs

+47 920 45 320

[email protected]

Our shipbroking services are unrivalled – in terms of the number and caliber of our

brokers, our breadth of market coverage, geographical spread

and depth of intelligence resources

2

Clarksons Platou - The world’s leading provider of insight and execution in the industry

163 49 1,448 20years offices employees countries

Leading investment bank within the shipping and oil services markets globally,

following issuers and investors in all major markets. Derivative

products that have been pioneered at Clarksons as well

as project finance

Our port services team provides the highest levels of support with 24/7 attendance

to vessel owners, operators and charterers at a wide range of strategically located ports in

the UK and Egypt

Our research is respected worldwide as the most

authoritative provider of intelligence on global shipping

Broking Financial Support Research

Globally coordinated execution of maritime, energy & natural resources services

3

Clarksons Platou’s global footprintAberdeenAccraAthensBrisbaneBristolCairoDubaiGenevaGenoaGreat YarmouthHamburgHong KongHoustonHullIpswichJohannesburgLedburyLiverpoolLondonMelbourneNew DelhiNew YorkOsloPerthRio de JaneiroShanghaiSingaporeSouthamptonSydneyTilbury

Clarksons Platou – A Global Leader

• 160+ years maritime experience

• 49 offices worldwide

• 1,400+ employees speaking 40+ languages

Executive summary, offshore drilling fundamentals

4

Source: IHS Petrodata; Clarksons Platou Offshore

• A stable oil price in the USD 50 – 60 price range should allow E&Ps togenerate required returns from offshore oil production

• Total demand for jack-up rigs is on the rise, in particular driven by increaseddemand from South-East Asia, India, and most important a continued strongdemand from the Middle East.

• In Norway and the UK, we count a large increase in semi-submersible rigscontract opportunities, likely bringing the region in to a balance by mid-2018(excluding cold stack rigs). Moreover, UK is the only reporting of increasedrevenue backlog (YoY growth)

• International E&Ps expected to be aggressive in Brazilian licensing rounds,lucrative pre-salt acreage. This will lead to contract awards from early 2019

• Massive rig retirements within the floater segment make a material impacton rig utilization as ~30% of the total rig supply has been retired since 2014

• Longer term we are more optimistic for a balanced market for floatersversus jack-up rigs

Summary, supply and demand forecast

5

Source: IHS Petrodata; Clarksons Platou Offshore

Total rig demand forecast 2018-2020:

• Jack-up rigs: contracted demand of 380-400 rigs, up from 315 (Oct 2017)• 2018: 330-340 rigs• 2019: 350-380 rigs• 2020: 380-400 rigs

• Floaters: contracted demand of 180-200 rigs, up from 150 (Oct 2017)• 2018: 150 rigs• 2019: 170-190 rigs• 2020: +200 rigs

www.clarksons.com 6

Offshore drilling segment – contract fixings and contract status

Rig fixing activity: Improvement in particular from the jack-up segment

Jackup fixing activity (2006-2017e) Floater fixing activity (2006-2017e)

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Note: 2017 estimates are annualized based on actual fixing activity as of Q32017Source: IHS-Petrodata; Clarksons Platou Offshore and Securities

321

235252

204

239

364

285

366

258

186

111

202

0

50

100

150

200

250

300

350

400

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

e

Rig

year

s fix

ed

289

256

354

59

134

253

301

149

110

39 4760

0

50

100

150

200

250

300

350

400

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

e

Rig

year

s fix

ed

2015 & 16 saw net negative demand adj.

for cancellations. This is not the case for 2017

Offshore drilling – rig status by sub segments

Commentary

• Modern jack-up fleet - 70% contracted

• Despite growing demand for jack-up rigs the segment carry high risk due to lack of rig retirements

• Massive retirement of floaters recent three years, representing ~30% of total floater fleet

• UDW demand likely to remain soft, until 2020 - however supply of marketable rigs reduced with non-performing rigs requiring extensive investments prior to returning to service

Rig status split by segment

Source: IHS-Petrodata; Clarksons Platou Offshore

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0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 340

MW

DW

UDW

JU <2000

JU >2000

Contracted Warm stacked Cold stacked Retired

Floaters – rig retirement analysis

Commentary

• Transocean and Diamond have combined retired ~60% of all floaters

• Expect increased retirement of rigs due to ongoing industry consolidation

• Small size companies are not retiring its fair share

Floater rig retirement 2014-2017

Source: IHS-Petrodata; Clarksons Platou Offshore

9

0

5

10

15

20

25

30

35

40

45

Existing Retired

www.clarksons.com 10

Jack-up rig segment

Jack-up rig segment – regional supply and demand analysis

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Source: Clarksons Platou Offshore

0.00

20.00

40.00

60.00

80.00

Mar-04 Dec-10 Sep-17

South East AsiaSupply Contracted

0.00

10.00

20.00

30.00

40.00

50.00


Indian OceanSupply Contracted

0

50

100

150

200


Middle EastSupply Contracted

0

10

20

30

40


West AfricaSupply Contracted

0

5

10

15

20

25


Mediterranean/Black SeaSupply Contracted

0

20

40

60


North SeaSupply Contracted

0

20

40

60

80


MexicoSupply Contracted

0

50

100

150


US GulfSupply Contracted


Floater rig segment

Floater segment – regional supply and demand analysis

13


0

5

10

15


Central AmericaSupply Contracted

0.00

20.00

40.00

60.00


Canada/North SeaSupply Contracted

0

20

40

60

80


US GulfSupply Contracted

0

20

40

60

80

100


BrazilSupply Contracted

0.00

20.00

40.00

60.00


West AfricaSupply Contracted

0.00

5.00

10.00

15.00


Australia/NZSupply Contracted

0.00

10.00

20.00

30.00

40.00

50.00


South East AsiaSupply Contracted

0.00

5.00

10.00

15.00

20.00


Indian OceanSupply Contracted

0

5

10

15

20


Mediterranean/CaspianSupply Contracted

325

33

5611

43

90

57

23

39

188160

0

50

100

150

200

250

300

350

400

450

500

# Fl

oate

r rig

s

Limited deliveries until market balance improves +80%

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Floater rigs – fleet analysis


Likley retirement candidates


Brazil – region specific themes

www.clarksons.com

QGOG

Odebrecht

Seadrill

Transocean

Ocean Rig

Ensco

Diamond

PetroservEtesco

0

5

10

15

20

25

30Oil production:

So far Petrobras has been the dominant operator

Petrobras with success in pre-salt, switching to UDW rigs

Drilling contractors: Larger US drillers

being replaced by locals and their standard rigs have been forced to leave the region

Brazil – a challenge but still a long term offshore attractive region

Brazilian companies dominate

Brazil – historic dayrates

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Source: Clarksons Research

High spec modern rigs Standard rigs

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Oct 2002 Apr 2005 Oct 2007 Apr 2010 Oct 2012 Apr 2015 Oct 2017

S America - Semi 3001-5000 - Average (US$)

S America - Semi <=3000 - Average (US$)

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Oct 2002 Apr 2005 Oct 2007 Apr 2010 Oct 2012 Apr 2015 Oct 201

S America - Drillship >5000 - Average (US$)

S America - Semi >5000 - Average (US$)


Offshore drilling segment – competitive landscape and themes

Newbuild floater capex – 1997 to 2016

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Source: Clarksons Research; Clarksons Platou Offshore

100

120

140

160

180

200

220

240

260

280

300

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Cape

x in

USD

mill

Newbuild floater capex Contracted floaters

Top 5 drillers – leverage, liquidity and backlog

Considerations

Capitalisation(USDbn)

Solidity(Multiple)

Contract backlog (Q3-17)

Liquidity(Available USDbn)

Total EBITDA backlog of USD 1.3bn




Source: Company filings


3.9

2.11.8

Market value

NIBD5.8

3.5

2.3 0.9

4.4

3.5 1.43.1

1.7

11.4

6.8

4.6

2.8xNIBD/EBITDA 2018E

6.3x 8.4x

4.4x 4.9x

Board and Senior Management

0.21.5Liquid assets

RCF capacity

2.21.82.4

0.61.51.2

2.2 3.0

James S. Tisch(Chairman, elected in 1995)

Marc Edwards(CEO, elected in 2014)

Paul E. Rowsey(Chairman, elected in 2015)

Carl Trowell(CEO, elected in 2014)

Leading deepwater and HE contractor

Sector lead revenue backlog

RCF matures in 2019

Leading jack-up position Strong cash liquidity

position RCF matures in 2021

Strong market position in US GoM

Strong revenue backlog RCF matures in 2020

Strong cash liquidity position

Relative low leverage (for now)

RCF matures in 2022

Strong market position in US GoM

Relative strong revenue backlog

RCF matures in 2020

David W. Williams(Chairman, elected in 2008)

David W. Williams(CEO, elected in 2008)

Graham James Kearne(Chairman, elected in 2016)

Thomas P. Burke III(CEO, elected in 2014)

Merrill A. Miller Jr. “Pete”(Chairman, elected in 2015)

Jeremy D. Thigpen(CEO, elected in 2015)

Offshore drilling rig landscape

(HE jack-ups)

(deepwater)

(Strong liquidity position, mixed fleet and no lead

segment position)

Different challenges and threats associated with each drilling contractor

Ongoing industry consolidation

Current theme seem to prioritize sub-segments

prioritization vs global full service provider

NOC clients – getting increased market share

Renewed investor interest 2H 2017

Client relationships, how to gain competitive advantage

Runway lengthsecured

Companies involved /likely withbankruptcys

M&A targets / recently

restructured Strong segment position / industry

leadership

Global players with unsecure future

Source: Clarksons Offshore Platou


Appendix


Contract overview – South America

Source: Clarksons Research

2017 2018 2019 2020Name Manager Rig Type 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2West Freedom Seadril l Jackup Ecopetrol ColombiaPetroSaudi Saturn PetroSaudi Dril lship PDVSA VenezuelaStena Carron Stena Dril lship ExxonMobil GuyanaDhirubhai Deepwater KG1Transocean Dril lship Petrobras BrazilGold Star QGOG Constellation Semisubmersible Petrobras BrazilOcean Rig Mykonos Ocean Rig Dril lship Petrobras BrazilLone Star QGOG Constellation Semisubmersible Petrobras BrazilOcean Rig Corcovado Ocean Rig Dril lship Petrobras BrazilWest Carina Seadril l Dril lship Petrobras BrazilENSCO 6001 Ensco Semisubmersible Petrobras BrazilWest Saturn Seadril l Dril lship Standby Ca Yard Canar En ro Statoil BrazilAtlantic Star QGOG Constellation Semisubmersible Petrobras BrazilSevan Brasil Seadril l Semisubmersible Petrobras BrazilBrava Star QGOG Constellation Dril lship Petrobras BrazilAmaralina Star QGOG Constellation Dril lship Petrobras BrazilTransocean 706 Transocean Semisubmersible Petrobras BrazilOcean Valor Diamond Offshore Semisubmersible Petrobras BrazilLaguna Star QGOG Constellation Dril lship Petrobras BrazilSSV Victoria Petroserv Semisubmersible Petrobras BrazilNorbe VI Odebrecht Semisubmersible Petrobras BrazilODN Delba III Odebrecht Semisubmersible Petrobras BrazilPetrobras 10000 Transocean Dril lship Petrobras USA Petrobras BrazilWest Tellus Seadril l Dril lship Petrobras BrazilENSCO 6002 Ensco Semisubmersible Petrobras BrazilVitoria 10000 Schahin Dril lship Petrobras BrazilOcean Courage Diamond Offshore Semisubmersible Petrobras BrazilGP-20 PDVSA Jackup PDVSA VenezuelaGP-19 PDVSA Jackup PDVSA VenezuelaNoble Bob Douglas Noble Dril lship Tullow Hot stacked Suriname ExxonMobil GuyanaNorbe VIII Odebrecht Dril lship Petrobras BrazilCarolina Petroserv Dril lship Petrobras BrazilNorbe IX Odebrecht Dril lship Petrobras BrazilNoble Bully II Noble Dril lship Shell BrazilEtesco Takatsugu J Etesco Dril lship Petrobras BrazilODN II Odebrecht Dril lship Petrobras BrazilODN I Odebrecht Dril lship Petrobras BrazilGrumari Petrobras Dril lship Under construction Br Acce Petrobras BrazilIpanema Petrobras Dril lship Under construction Brazil Acceptance testing BPetrobras BrazilOndina Odebrecht Dril lship Standby Japan En route Br Under construction Acceptanc Petrobras BrazilUrca Queiroz Galvao Semisubmersible Standby Brazil Unde Accep Petrobras BrazilDeepsea Guarapari Odfjell Galvao Dril lship Under construction Singapore En ro Under con Accep Petrobras BrazilFrade Petroserv Semisubmersible Standby Brazil Under construction BrazilAccep Petrobras BrazilPituba Odebrecht Dril lship Standby Japan En ro Under construction Brazil Accep Petrobras BrazilBracuhy Queiroz Galvao Semisubmersible Standby Br Under construction Brazil Acce Petrobras BrazilDeepsea Itaoca Odfjell Galvao Dril lship Under construction Singapore En ro Under construction Brazil Accep Petrobras BrazilCamburi Seadril l Dril lship Standby Singapore Under construction SingapEn ro Under construction Brazil Acceptance tes Petrobras BPortogalo Petroserv Semisubmersible Standby Brazil Under construction BrazilCassino Etesco / OAS Dril lship Standby China En ro Under construction BrazilArpoador Petrobras Dril lship Under construct Accep Petrobras BrazilCopacabana Petrobras Dril lship Standby Japan En ro Under con Accep Petrobras BrazilPetrobras XXIII Petrobras Semisubmersible Warm stacked BrazilPetrobras XVII Petrobras Semisubmersible Warm stacked BrazilPetrobras XVI Petrobras Semisubmersible Warm stacked BrazilP-60 Petrobras Jackup Warm stacked BrazilP-59 Petrobras Jackup Warm stacked BrazilAlpha Star QGOG Constellation Semisubmersible Warm stacked Brazil

October 2017 - Front | Marine Money...October 2017 Ingolf Gillesdal Director, Market Analysis Rigs...

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