a somewhat interesting & bizarre article. Probably one for c.captain, as I recall he posted similar Shell-Noble comments in the past.
[SIZE=3][B]Curious coincidence involving Shell, Iran, Noble Corp and $2.16 billion
RoyalDutchShellPLC.com - Jun 25th, 2015 by John Donovan
[/SIZE]FROM A REGULAR CONTRIBUTOR
The former owners of the Frontier drilling company sold their rigs to Noble for $2.16 billion in 2010. Given that their fleet of five vessels consisted of ancient rust buckets which were fit only for the scrapyard, this has always seemed like an inordinately large sum. The five vessels had been acquired by Frontier for about $100 million. The only client of Frontier was Shell. See http://www.reuters.com/article/2010/06/28/us-noblecorp-idUSTRE65R2C520100628.
Noble operated two rigs for Shell in Alaska (Discoverer and Kulluk) during the disastrous 2012 drilling campaign. In spite of their performance in 2012, Noble will once again be operating the Discoverer (now over 50 years old) during the upcoming drilling campaign. Discoverer is one of the rust buckets that Noble acquired from Frontier.
It is a curious coincidence that we discover today that the figure of $2.16 billion corresponds precisely to the amount owed by Shell to the Iranians.
UPDATED FROM THE SAME SOURCE:
Let us suppose that Shell was under pressure from the Iranians to pay their due, and sought to find a way to do so.
What better arms-length transaction than a process along the lines of:
(1) Set up a privately held company called Frontier, whose shareholders are uncertain
(2) Frontier buys some cheap hardware. Hardware doesn’t come much cheaper than 2nd generation rigs that are 35 years old such as the Transocean Explorer, the last rig stacked in Invergordon and about to head out of Cromarty Firth for the scrap yard. Rename the rig the Frontier Driller, and then rename it again to Noble Driller and suddenly an ancient 1976 Aker H3 with a water depth capability of 1250ft becomes a 5000ft ultra deep water rig. And for just $15 million (including fresh paint) you have a rig which on paper appears comparable to a $500 million 5th generation rig. Magic! Or take a 1973 Pelican class drillship, call it the Frontier Phoenix, and market it as a DP deep water vessel. Even if it can’t hold its position in flat calm water off Brunei, the analysts won’t notice. And the analysts will believe you when you say a 1973 Pelican is just the same as Transocean’s latest $600 million sixth generation vessel. They will never see them side by side or realise that the sixth generation vessel is actually about ten times larger
(3) Shell awards contracts to Frontier at grossly inflated rates to lease the hardware (of course these contracts can easily be cancelled when the rigs don’t work as advertised, just as they were in Brunei)
(4) Get Noble to buy Frontier at a grossly inflated price of $2.16 billion in order to take over the contracts
(5) Suddenly the phantom shareholders of Frontier are $2.16 billion richer. Who are they? Where did the money really go? Iran?
(6) Noble are paid $415000/day for the Noble Driller, so the monthly lease rate is roughly what Frontier paid Transocean for the rig.
(7) Noble get their $2.16 billion back from Shell through the inflated day rates
(8) The authorities around the world reimburse Shell for the inflated day rates under cost recovery and tax rebates
(9) If the money ultimately went to Iran (or offshore Iranian accounts), Shell has managed to successfully work around sanctions, pay Iran, and the IRS has provided much of the money!
You can be sure of Shell…
FURTHER UPDATE 26 JUNE 2015 FROM THE SAME SOURCE
Drilling contractors lease their rigs to oil companies on the basis of a daily rental rate. This is known as the dayrate, and applies from the time the rig is hired (mobilised) until it is released (demobilised).
The dayrate paid by Shell for the Noble Phoenix (formerly the Frontier Phoenix) was $306,000. Shell paid Noble $55 million “compensation” when they cancelled the contract of the Noble Phoenix.
The JOIDES Resolution (formerly the Sedco-BP 471) is a DP drillship of similar age and capabilities to the Noble Phoenix (day rate $306,000) and the Noble Discoverer (day rate $363,000).
The day rate of the JOIDES Resolution is $86,000.
The key difference is that the contract for the JOIDES Resolution involves neither Shell nor Noble. Why are the Shell-Noble dayrates four times higher than the rate for comparable vessels in the market?