Norwegian major Statoil ASA (STO - Free Report) has given out contracts for the construction and operation of two tailor-made jack up rigs. These rigs will be utilized for drilling at Gullfaks and Oseberg oil fields offshore Norway and will be owned by the license holders.
Samsung Heavy Industries Co. Ltd. will be responsible for the construction of the rigs. The new category J rigs will be equipped to function in water depths of 70–140 meters in harsh environments and drill wells up to a depth of about 10,000 meters. These rigs, which are based on proven technology, will be optimized for drilling and completing subsea wells more efficiently.
On the other hand, KCA Deutag Drilling Norway AS will carry out drilling services and maintenance as the rigs’ operator. The operating and staffing framework is similar to that of leased rigs in conventional drilling contracts.
The initial operations contract is valued at $900 million for a period of eight years, which can later be extended by 4*3 years. The operations are expected to commence in 2016–2017.
The inclusion of new Cat J rigs is part of Statoil’s long-term strategy of revitalizing its rig fleet, securing long-term rig capacity as well as lowering drilling costs to boost NCS recovery rates. Statoil has set an aggressive goal of an average 60% recovery from the NCS assets that can be attained by enhancing the number of wells drilled.
Both the fields – Gullfaks and Oseberg – are assumed to have a long-term rig demand. Hence, these new rigs are expected to operate at these fields for a long period and simultaneously reduce drilling costs. This is primarily due to the ownership model, which will strengthen the drilling targets and even add targets that would not have been profitable otherwise.
Gullfaks was brought online in 1986 and currently produces about 39,000 barrels of oil per day. The license partners of Gullfaks are Statoil and Petoro AS with a stake of 70% and 30%, respectively.
Oseberg has been producing since 1988 with a current yield of about 59,000 barrels of oil per day and natural gas plus gas liquids of 8.1 million standard cubic meters per day. The partners in the field are Statoil, Petoro, Total SA (TOT - Free Report) and ConocoPhillips (COP - Free Report) , which have a share of 49.3%, 33.6%, 14.7% and 2.4%, respectively.
Statoil carries a Zacks Rank #3 (Hold). However, Zacks Ranked #1 (Strong Buy) Enerplus Corporation (ERF - Free Report) appears more attractive as it is expected to outperform over the next few months.