Diamond Offshore signs 10 new drilling contracts for work offshore Brazil, Mexico

By Phaedra Friend Troy

Offshore drilling contractor Diamond Offshore (NYSE:DO) announced the company’s second quarter 2011 results Thursday, with income reaching $266.6 million and revenues climbing to $822.6 million, up from the same period last year. 

In addition to adding more money to the coffers, in the last 45 days, Diamond Offshore has put 10 new drilling contracts into place worth a combined $1 billion and representing 14 years in drilling backlog. 

Petrobras Snaps Up Rigs for Brazilian Drilling 

Much of the drilling work will be performed offshore Brazil. Major oil producer Petrobras (NYSE:PBR) extended its contracts on the ultra-deepwater Ocean Baroness and Ocean Valor semisubmersible drilling rigs for a combined revenue bump of $500 million. In an agreement that drops the dayrates on the rigs by $10,000, Petrobras optioned to extend the three-year contracts to five-year agreements. 

Earning a dayrate near $440,000, the Ocean Valor can drill in waters up to 10,000 feet deep, and the Ocean Baroness can drill in waters up to 6,500 feet deep, earning the rig a dayrate near $270,000. 

Contracted since early January 2008, Petrobras has also extended its contract with the Ocean Concord semisub for a dayrate of more than $240,000 to run from January 2013 to August 2015. 

Including these rigs, Petrobras currently has 11 Diamond Offshore drilling rigs working in Brazilian waters. Petrobras has the Ocean Whittington semisub contracted through 2011, the Ocean Yatzy contracted through October 2014, the Ocean Winner contracted through February 2015, the Ocean Alliance contracted through June 2016, the Ocean Courage contracted through February 2015, the Ocean Valor contracted through October 2015, the Ocean Yorktown through August 2011, and the Ocean Clipper contracted through December 2015. 

OGX Contracts Diamond Offshore 

Additionally, Brazilian independent OGX has extended both of its contracts on the Ocean Quest and Ocean Star semisubmersibles by one year, adding a combined $200 million in revenue. Earning a dayrate of $270,000, the Ocean Quest is capable of drilling in waters up to 3,500 feet deep, while the Ocean Star is rated for waters up to 5,500 feet deep, earning the rig a dayrate of $300,000 on the one-year extension. 

In existing contracts, OGX also has the Ocean Lexington semisub contracted through February 2013, the Ocean Ambassador semisub through September 2012, and the Ocean Scepter jackup through February 2012.
Pemex Picks Up Rigs 

Petrobras has agreed to demobilize the Ocean Yorktown semisubmersible offshore Brazil, and move the rig to the Gulf of Mexico. Destined for work offshore Mexico, the Ocean Yorktown received a letter of award with Pemex for a 930-day contract to commence in mid-November 2011. The new drilling contract for the jackup will earn Diamond Offshore about $171 million, and the remaining days the rig was contracted with Petrobras have been added to the Ocean Concord contract. 

Currently earning a dayrate of about $250,000 with Petrobras, the Ocean Yorktown semisub is capable of drilling in waters up to 2,850 feet deep. Pemex is slated to pay a dayrate near $185,000 for the rig. 

Additionally, Pemex has contracted the Ocean Summit jackup for a 985-day contract to start in late February 2012. Capable of working in waters up to 300 feet deep, the Ocean Summit is currently working for Pemex in Mexican waters at a dayrate of approximately $85,000. The contract is worth $85 million. 

Pemex has also awarded the Ocean Titan jackup a 777-day, $80 million contract for work starting in mid-November 2011 in the Mexican Gulf. Currently working in the US Gulf of Mexico for Magnum Hunter, the Ocean Titan can drill in waters up to 350 feet deep. 

Even More Rigs Contracted

BG Group also added four firm wells and one option well to its contract with the Ocean Nomad semisub in the North Sea, extending its contract through May 2012. 

Additionally, Hess (NYSE:HES) signed a contract for four firm wells and two optional wells with the Ocean Valiant semisub offshore Equatorial Guinea. The Ocean Valiant is currently working with Total in Angola, but that contract will expire in September 2011. The Ocean Valiant will then begin work for Hess, which is expected to last through January 2012. 

With 33 semisubs, 13 jackups and four drillships (three of which are under construction), Diamond Offshore also has rigs contracted and drilling in the US Gulf of Mexico, offshore Australia, Indonesia, Malaysia, Egypt, Angola, Falkland Islands, Thailand, and in the North Sea. 

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