Tuesday, December 7, 2021

Deepwater drillers positioning for big opportunities in prolific Guyana-Suriname basin

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The Guyana-Suriname Basin is currently a big operating arena for deepwater players Maersk Drilling and Noble Corporation, and according to S&P Global Platts, the companies are looking to expand this position as they merge to create a world class offshore drilling firm.

The Guyana-Suriname Basin is an emerging deepwater play off the northern coast of South America. A group led by ExxonMobil has made more than 20 major discoveries amounting to around 10 billion barrels of oil equivalent in Guyana.  The consortium, which also includes Hess Corp. and China’s CNOOC, has one development producing with a second expected online in Q1 2022, and is in the design phase or construction of two to three more. All told, Exxon expects to have around 10 FPSOs operating off the Guyana coast in the coming years.

Moreover, TotalEnergies and APA Corporation have made four big discoveries in Suriname, although their specific development plans are still under study. APA Corporation said last week that it successfully completed flow testing at the Sapakara South appraisal well and drilling results from the Bonboni exploration well in Suriname, on Block 58.

Noble currently has four contracted deepwater drillships active in Guyana. One, the Tom Madden, has a contract that runs until January 2027. In addition, Noble recently inked a deal for a drillship with APA Corp in Suriname for one firm well and two well options.

Maersk currently is running two Suriname deepwater rigs and one in Guyana.

Norway has ‘promising potential’

And both companies also work in Norway (Maersk with four jackups, Noble with one), a market the drillers said they see recovering after a 2020 lull.

A recent Norwegian tax incentive package is expected to spur new investments and rig demand in 2023 onward. That shallow-water market is ideal for Noble/Maersk harsh-environment jackup rigs, with “promising” potential based on current field projects’ status, the companies said.

“What Noble and Maersk are doing makes sense,” said David Mullen, CEO of Shelf Drilling, an Eastern Hemisphere jackup provider, on his company’s Q3 earnings call Nov. 10.

“There’s far too many companies for this to be a viable landscape, and consolidation is inevitable,” Mullen said. “We’re going to see quite a lot more.”

Noble and Maersk shareholders will each hold 50% in the combined entity, which will be named Noble Corp. with headquarters in Houston. Its shares will be listed on both the New York Stock Exchange and Nasdaq Copenhagen.

By 2023 and afterward, the combined driller’s free cash flow yield should be about $375 million, for a percentage yield of 11%, which slightly exceeds that of the S&P E&P index, according to presentation slides. The deal would achieve cost synergies of $125 million/year, realized in the first two years as a combined entity.

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