will the Chinese buy up old equipment to start their own offshore industry?
Diamond Offshore has sold two drilling rigs as of this morning, its fleet status report shows. Terms are undsiclosed.
The rigs are the Ocean New Era and the Ocean Whittington. Both rigs are stacked in the US GOM and are classified by Diamond Offshore as retired.
The Ocean New Era is a 1974 built Korkut designed semisubmersible rated to drill in 1,500 ft. of water. The Ocean Whittington is a 1974 built Aker H-3 Enhanced class semisubmersible rated to drill in 1,500 ft. of water.
While terms were undisclosed, industry sources we’ve talked with this morning suspect these two rigs were likely sold for scrap - a trend that could accelerate in a low oil price environment next year. That said, we’ve also heard from industry sources recently that CNOOC has been doing due diligence on Diamond’s rigs. Specifically, our sources say that the Chinese operator was interested in buying as many as 14 of Diamond’s rigs in a multi-billion dollar deal. If this was the case, and CNOOC turns out to be the buyer of these two rigs, then today’s disclosure could suggest that the two parties were unable to agree on a larger transaction as only two rigs were announced as sold this morning.
While CNOOC could make sense as a buyer of older retired rigs, it does seem like a stretch they would buy these two (which need significant investment before they will be drilling-ready) and then pay to move them to Asia. Diamond Offshore has been known to try and put a drilling ban on old rigs it sells (a competition safeguard meaning the buyer can’t use them for drilling purposes in the future).
If the rigs weren’t scrapped, then it is possible they could be converted by the buyer to an alternative use like accommodation. Conversion would make sense as there would likely be a significant capital outlay for the buyer in order to get these rigs ready to work (surveys, upgrades, and refurbishment).
I also got an email from a broker listing the JASPER EXPLORER as available for sale but no price listed. Gotta be cheap in this market.