Saudi Aramco 'Suspends' Noble Corp Jack-Up Rig

[El Nikko + 2,145]

Saudi Aramco 'Suspends' Noble Corp. Jack-Up Rig

Bartolomej Tomic, Editor

Bartolomej Tomic is managing editor of Offshore Engineer....

May 7, 2020

Noble Scott Marks - Credit: MarineTraffic

 

Offshore drilling company Noble Corp has said that its jack-up rig Noble Scott Marks, located offshore Saudi Arabia, will be suspended at the request of its client.

The rig is on a contract with Saudi Aramco, which, as Noble Corp. said in April, had recently requested for Noble to reduce the rig's dayrate from $159,000.

The offshore drilling contractor said Wednesday that the client had suspended the rig for a period of up to 365 days, with the suspension starting in the first half of May following the conclusion of the well in progress. It did not provide info on the previous dayrate reduction request.

"During the suspension period, no dayrate will be paid. However, the company has the right to market the rig in pursuit of other work opportunities in the region," Noble Corporation said. The rig has a contract with Saudi Aramco until late October 2022.

Noble Corporation on Wednesday posted a net loss for the first quarter of $1.1 billion, or $4.25 per diluted share, on total revenues of $281 million.

Results for the first quarter included a pre-tax non-cash charge totaling $1.1 billion relating to the impairment of the semisubmersible rigs Noble Danny Adkins and Noble Jim Day, the drillships Noble Bully I and Noble Bully II, and certain capital spares.

Evercore hired to advise on options

Noble's long-term debt at the end of the quarter stood at $3,69 billion. At March 31, 2020, the company reported an estimated revenue backlog of $1.5 billion, including $1.0 billion resulting from the floating fleet and $500 million from the jack-up fleet. The company concluded the first quarter with cash and equivalents of $176 million.

Noble Corp. CEO Julie J. Robertson said Wednesday the company had hired Evercore as a financial advisor "and are actively working with them to evaluate alternatives to enhance our liquidity position and reduce our total amount of debt and corresponding interest costs."

"These alternatives include, but are not limited to, potential capital exchange transactions as well as a more comprehensive debt restructuring," Roberton said.

Hard to predict the length of the downturn

In its quarterly statement, Noble said it continually monitors compliance with the covenants under our 2017 Credit Facility and its senior notes. 

"While we are in compliance with all covenants today, the negative impact on our financial condition of the oversupply of oil, and the substantial decline in demand for oil as a result of COVID-19 and related mitigation steps, raises significant uncertainty as to whether we can remain in compliance throughout 2020," Noble said.

Commenting on the state of the offshore drilling industry, Robertson, said: "The reduction in demand as a result of the COVID-19 pandemic and the precipitous escalation in global crude oil supplies have placed the oil and gas industry in a state of heightened duress. The consequences of this combination of detrimental events are increasingly visible, and the offshore drilling industry will endure another period of depressed business activity for a duration of time that remains difficult to forecast."

https://www.oedigital.com/news/478276-saudi-aramco-suspends-noble-corp-jack-up-rig?utm_source=AOGDigital-ENews-2020-05-07&utm_medium=email&utm_campaign=OEDigital-ENews

[El Nikko + 2,145]

I can almost smell $100 oil in the not too distant future

[0R0 + 6,251]

Not at all far fetched. The far out contracts for WTI trade at $50, having fallen to $43 at the bottom. 

Some of the oil producers will not be coming back. Venezuela and Iran, for one. Not till their collapse emerges with a capable new government in each case. For much of the rest, the production will take a while to come back, much of it only funded at higher oil prices. Some offshore production is expected to take up to 2 years to come back. So as soon as the inventory starts fading, then prices will spike higher. The technicals off the negative spike suggest an eventual spike to $75-80 next year. 

[El Nikko + 2,145]

[Tom Kirkman + 8,860]

1 hour ago, El Nikko said:

 

Saudi Triples VAT Rate in Austerity Drive Against Oil Slump, Virus

RIYADH/DUBAI (Reuters) - Saudi Arabia will triple its value added tax rate and suspend a cost of living allowance for state workers, it said on Monday, seeking to shield finances hit by low oil prices and a slump in demand for its lifeline export worsened by the new coronavirus.

Historic oil output cuts agreed by Riyadh and other major producers have given only limited support to prices after they sank on oversupply caused by a war for petroleum market share between the kingdom and its fellow oil titan Russia.

Saudi Arabia, the world's largest oil exporter, is also being hit hard by measures to fight the new coronavirus, which are likely to curb the pace and scale of economic reforms launched by Crown Price Mohammed bin Salman.

"The cost of living allowance will be suspended as of June 1, and the value added tax will be increased to 15% from 5% as of July 1," Finance Minister Mohammed al-Jadaan said in a statement reported by the state news agency.

"These measures are painful but necessary to maintain financial and economic stability over the medium to long term...and to overcome the unprecedented coronavirus crisis with the least damage possible."

The austerity measures come after the kingdom posted a $9 billion budget deficit in the first quarter.

The minister said non-oil revenues were affected by the suspension and decline in economic activity, while spending had risen due to unplanned strains on the healthcare sector and the initiatives taken to support the economy.

"All these challenges have cut state revenues, pressured public finances to a level that is hard to deal with going forward without affecting the overall economy in the medium to long term, which requires more spending cuts and measures to support non-oil revenues stability," he added.

The government has cancelled and put on hold some operating and capital expenditures for some government agencies, and cut allocations for some reform initiatives and projects worth a total 100 billion riyals ($26.6 billion), the statement said.

Central bank foreign reserves fell in March at their fastest rate in at least 20 years and to their lowest since 2011, while oil revenues in the first three months of the year fell 24% from a year earlier to $34 billion, pulling total revenues down 22%.   ...

 

... About 1.5 million Saudis are employed in the government sector, according to official figures released in December.

In 2018, Saudi Arabia's King Salman ordered a monthly payment of 1,000 riyals ($267) to every state employee to compensate them for the rising living costs after the government hiked domestic gas prices and introduced value-added tax.  ...

 

[Douglas Buckland + 6,308]

$159,000/day for a jack-up?

[Dan Warnick + 6,100]

1 hour ago, Douglas Buckland said:

$159,000/day for a jack-up?

Yeah, I saw that too.  I just figured my knowledge is too limited to know if that was really a REALLY HIGH NUMBER!  So, is it?

[Douglas Buckland + 6,308]

2 hours ago, Dan Warnick said:

Yeah, I saw that too.  I just figured my knowledge is too limited to know if that was really a REALLY HIGH NUMBER!  So, is it?

In my days in the field, that is an astronomical rate for a jack-up....but maybe that is the going rate.

[El Nikko + 2,145]

Here's the average jack-up rig rate according to statistica. I have no idea how accurate that site is.

https://www.statista.com/statistics/981678/global-average-jackup-day-rate-by-region/

[Dan Warnick + 6,100]

3 minutes ago, El Nikko said:

Here's the average jack-up rig rate according to statistica. I have no idea how accurate that site is.

https://www.statista.com/statistics/981678/global-average-jackup-day-rate-by-region/

All I got was a paywall popup to subscribe, effectively hiding the graph at the top.  So, what were the numbers? (or take a snapshot of the graph and paste it below.)

[El Nikko + 2,145]

4 minutes ago, Dan Warnick said:

All I got was a paywall popup to subscribe, effectively hiding the graph at the top.  So, what were the numbers? (or take a snapshot of the graph and paste it below.)

That's odd, here it is

 

[Dan Warnick + 6,100]

5 hours ago, El Nikko said:

That's odd, here it is

 

Thanks.  So the number is quite high, like Douglas thought, but we don't know what penalties may or may not be included in the number given.

Edited May 11, 2020 by Dan Warnick

[John Foote + 1,135]

What Aramco pays for goods and services would make a fifty year old prostitute blush. That doesn't mean the end provider got it. A lot of commissions along the way, if you catch my drift. And requirements that boosts costs that need to be paid. Nobody who has spent time there believes the low cost ARMACO story. The IPO books were cooked with what was allocated where to get their low cost lift cost. Monies are not internally tracked as required for a public company in the West, GAAP, general accepted accounting procedures is the term in the USA. There are international equivalents. The IPO team would have had to extrapolate the monies because they are not tracked as required. Doesn't mean fraud in the western sense, just a good faith estimate in leu of having access to the actual allocated spend. T

With the big service providers, often Aramco is such a big customer, if they are a public company you can go the the annual reports of the providers. The rigs are often listed.