This morning, offshore contract drilling company, Transocean (RIG
7.01, +0.30, +4.47%), announced a deal with integrated energy giant, Chevron (CVX
108.99, -0.33, -0.30%), whereby Transocean would assist in the design and
construction of an ultra-deepwater drillship which is currently under
construction at the Jurong shipyard in Singapore.
The rig will be the first ultra-deepwater floater rated for 20,000 psi operations and is expected to commence operations in the Gulf of Mexico in the second half of 2021. In the event of termination for convenience by the customer, Transocean will be compensated for its incremental 20,000 psi subsea investment in the rig. Additionally, a termination for convenience occurring after April 2020, would result in a substantial termination fee.
The drillship will feature the advanced capabilities and technology including dual 20,000 psi blowout preventers, net hook-load capacity of three million pounds, 165-ton active heave compensating crane, and an enhanced dynamic positioning system. The rig’s high reliability power plant will also be configured to comply with Tier III International Maritime Organization emissions standards.
Concurrently, Transocean and Chevron also signed a five-year drilling contract which has an estimated backlog of $830 million, excluding mobilization and reimbursables. The drilling contract is subject to design, construction, and delivery requirements set forth in the construction contract.
On the whole oil and gas equipment names haven’t been immune to the woes of the market these past few months. Since the start of October CVX has lost about 10.8% of its value while RIG has fared much worse, down just shy of 50% since that time while the S&P 500 has declined 14.5%. The drop in crude oil prices coupled with a weak broader market has served to apply a decent amount of pressure to the oil and gas E&P group with just a few trading days remaining in calendar 2018.
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