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Ezra Secures USD 65 Million Contracts in GoM and West Africa

Ezra Holdings Limited (Ezra, the Group), a leading global offshore contractor and provider of integrated offshore solutions to the oil and gas (O&G) industry, today announced that its subsea construction division, EMAS AMC, has secured contracts worth more than US$65 million, including options, for projects in the Gulf of Mexico and West Africa.

The Gulf of Mexico work will see EMAS AMC introduce the Lewek Falcon, a versatile subsea construction vessel, into the Gulf of Mexico for a long-term campaign on the Walker Ridge Gathering System (WRGS), which is an ultra-deep (2500 metres) setup to provide natural gas gathering services. The scope of work will consist of the transportation and installation of suction piles, manifolds and jumpers along with pipeline pre-commissioning support, and work is expected to commence first half of 2013.

The West Africa-Equatorial Guinea contract extends an existing general service agreement with ExxonMobil for subsea engineering, subsea construction and ROV support activities in West Africa through mid-2014.

Mr Lionel Lee, Managing Director of Ezra Holdings, said: “These project wins demonstrate that our subsea focus is paying off. We have been building a strong track record for our subsea construction division the past year, with past and recent project awards in remote areas and ultra-deep waters. Our continuous investment in people and key assets will reinforce our ability to efficiently and reliably support our growing global client base.”

Project management and engineering will begin immediately from EMAS AMC’s Houston office.

Subsea World News – Ezra Secures USD 65 Million Contracts in GoM and West Africa.

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USA: Maersk Secures Contract for Deepwater Advanced 2 Drillship

With the signing of a contract for the newbuild drillship Deepwater Advanced 2 Maersk Drilling adds USD 694 million to its contract backlog. Five out of seven newbuild drilling units have now secured contracts..

Maersk Drilling has signed a contract with ConocoPhillips Company a wholly owned subsidiary of ConocoPhillips and Marathon Oil Company a wholly owned subsidiary of Marathon Oil Corporation for the second ultra deepwater drillship in a series of four identical drillships currently under construction.

The estimated total contract value is USD 694 million including mobilization, but excluding cost escalation compensation. The contract duration is three years, with options for up to an additional two years and commencement of operations is expected by mid-2014 upon delivery from Samsung Heavy Industries in South Korea, mobilization to the US Gulf of Mexico and acceptance testing. The drillship will be equipped with two Blow-Out-Preventers (BOPs).

The drillship will be employed by ConocoPhillips and Marathon Oil for their respective drilling programs in the US Gulf of Mexico.

We are pleased to having been able to customize a drilling contract with ConocoPhillips and Marathon Oil combining their respective drilling programmes into a three year drilling contract providing security of deepwater rig availability for the two companies while leaving some flexibility in regards to the timing of their drilling programmes. In addition, merging the two programmes provides us with a contract with an attractive duration,” says Claus V. Hemmingsen, CEO of Maersk Drilling and member of the Executive Board of the A.P. Moller – Maersk Group.

Strong demand for advanced drilling rigs

Since 2011 Maersk Drilling has invested USD 4.5 billion in seven new drilling units currently under construction; three ultra harsh environment jack-ups at KeppelFELS in Singapore and four ultra deepwater drillships at Samsung Heavy Industries in South Korea. With the latest contract for the second drillship five out of the seven newbuild rigs have now secured contracts.

We are pleased to see continued strong demand for our advanced drilling rigs. This contract brings further evidence to our strategic focus on ultra harsh and deepwater drilling and provides firm ground for our ambitious growth plans,” says Claus V. Hemmingsen, CEO of Maersk Drilling and member of the Executive Board of the A.P. Moller – Maersk Group.

Maersk Drilling has performed deepwater operations in the US Gulf of Mexico since 2009 with the ultra deepwater semi-submersible Mærsk Developer. In June 2012, Maersk Drilling secured a contract for the first drillship under construction with commencement in the US Gulf of Mexico expected by end 2013.

The US Gulf of Mexico remains a focus area of Maersk Drilling, and we are pleased to further expand our presence in this attractive market positioning us with three ultra deepwater rigs by 2014,” says CEO Claus V. Hemmingsen.

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API: Oil & Gas industry pays the government nearly $90 million dollars a day

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WASHINGTON, March 2 (UPI) — U.S. President Barack Obama has it backward when he says the government is backing a billion-dollar oil subsidy, the American Petroleum Institute said.

Obama told an audience in New Hampshire that the oil industry was the recipient of $4 billion in subsidies backed by U.S. taxpayer dollars.

“Every time you go to the gas tank or fill up your gas tank, they’re making money. Every time,” the president said. “Now, does anyone really think that Congress should give them another $4 billion this year?”

But Jack Gerard, president and chief executive officer at trade group API, said the president had it wrong.

“The president has it backwards, our industry pays the government nearly $90 million dollars a day — the biggest contributor of government revenue than any other industry in the United States,” said Gerard.

U.S. lawmakers are sniping over domestic energy policies as gasoline prices in most U.S. markets move closer to $4 per gallon. Republican critics of the White House say Obama is blocking domestic energy production, which means higher oil prices.

Analysts, however, said tensions in the Middle East are likely contributors to escalating prices.

The White House states that U.S. dependence on foreign oil has gone down every year since Obama came into office in 2009. The president has said there “are no short-term silver bullets when it comes to gas prices.”

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Brazil: Schahin Group Receives USD 692 Million Loan for New Deepwater Drillship

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In one of the most significant cross-border financings involving Brazil’s offshore energy sector this year, Milbank, Tweed, Hadley & McCloy LLP​ has represented a consortium of major international lenders providing a US$692 million debt facility for the purchase of the Black Diamond I deepwater drillship by Schahin Group.

The Brazilian energy and construction conglomerate is purchasing the drillship – to be built by Korea’s Samsung Heavy Industries – and will then charter it to Brazil’s Petrobras (Petróleo Brasileiro SA). Schahin Group has also entered into an operating agreement with Petrobras. Milbank advised joint lead arrangers The Export-Import Bank of Korea (Kexim), Mizuho Corporate Bank, WestLB AG and Standard Chartered Bank​ – along with a group of five other lenders from Europe and Asia.

A series of recent offshore discoveries by Petrobras have catapulted Brazil to the front ranks of energy-rich nations – industry watchers project that the country could become the world’s fourth-largest oil producer over the next decade. The Black Diamond I drillship – vital in the pursuit of capturing deepwater oil and gas reserves – has the capacity to operate in sea depths up to 3,000 meters (9,800 feet), and drill to a depth up to 10,000 meters, including area beneath the seabed (32,800 feet).

Milbank project finance partner Daniel Bartfeld led the firm’s representation, along with project finance senior associate Roland Estevez and associates Anne Shutkin, Alyssa Frederick and Jeeseon Ahn.

“International interest in the Brazilian offshore sector continues to be very strong, as major new fields continue to be identified, solidifying Brazil’s importance as a critical source of global energy for decades to come,” Mr. Bartfeld said. “We are pleased to work with some of the world’s leading international institutions in the financing of a new drilling rig to be used by Petrobras. The transaction highlights that leading lenders such as KEXIM, Mizuho, Standard Chartered, WestLB and the others have strong capacity for financing well-structured projects in Brazil’s offshore energy sector.”

Mr. Estevez added, “The international lending community is keenly interested in supporting major energy projects throughout Latin America, and nowhere is that appetite more acute right now than in Brazil. This deal, involving several of the key energy players in the country, is another example of Milbank’s ability to help leading Brazilian companies raise significant capital.”

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USA: Hercules Offshore Posts USD 17 Million Loss in 3Q 2011

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Hercules Offshore, Inc. today reported a loss from continuing operations of $17.0 million, or $0.12 per diluted share, on revenue of $163.0 million for the third quarter 2011, compared with a loss from continuing operations of $16.1 million, or $0.14 per diluted share, on revenue of $157.6 million for the third quarter 2010.

John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, “Activity levels in the U.S. Gulf of Mexico Shelf are on the rise, as operators increasingly focus on liquids rich drilling opportunities. Concurrently, several jackup rigs have departed for international opportunities, resulting in a tight environment for rig availability in the region. Hercules Offshore has been the primary beneficiary of the improving fundamental trends in the shallow water U.S. Gulf of Mexico, which have accelerated during the third quarter. Average dayrates in our Domestic Offshore segment have increased by nearly $10,000 per day over the past year, with leading edge rates suggesting further upside for our domestic jackup fleet.

“Our International Offshore segment was recently successful at securing several contracts, including attractive, long term extensions for the Hercules 261 and Hercules 262 in the Middle East. These contracts are a testament to our strong performance and relationship with the customer, Saudi Aramco. Tempering our international success was the recently announced damage to the Hercules 185, where we are anticipating approximately six months of downtime for repairs.”

Offshore

Domestic Offshore revenue increased to $60.2 million in the third quarter 2011 from $25.1 million in the comparable period in 2010. Approximately 70% of the revenue increase is attributable to the acquisition of the Seahawk rigs, while higher utilization and dayrates on the legacy fleet contributed to the remaining revenue growth. Average revenue per rig per day increased by $9,722 per rig per day to $49,060 in the third quarter 2011 compared to $39,338 in the prior year period. Utilization in the third quarter 2011 increased to 74.2% from 62.9% in the third quarter 2010. However, operating days rose by more than 90%, largely as a result of the acquisition of the Seahawk rigs. Domestic Offshore operating expenses increased to $53.2 million in the third quarter 2011 from $38.7 million in the third quarter 2010, due to costs associated with the acquired Seahawk rigs. Domestic Offshore recorded an operating loss of $12.8 million in the third quarter 2011 compared to an operating loss of $32.1 million for the respective prior year quarter.

International Offshore revenue declined to $49.0 million in the third quarter 2011 from $74.4 million in the third quarter 2010. The decline was primarily driven by new contracts at lower market rates on the Hercules 208, Hercules 258, Hercules 260 and Rig 3, as well as the downtime related to transition between contracts. The reduction in revenue related to these aforementioned rigs was partially offset by the increased utilization on the Hercules 185. Overall, average revenue per rig per day declined to $96,388 in the third quarter 2011 from $138,344 in the third quarter 2010, and operating days declined to 508 days from 538 days, in the respective periods. Third quarter 2011 operating expenses were $29.1 million compared to $31.1 million in the third quarter 2010, as lower costs associated with new contract terms on the Hercules 258 and Hercules 260 were partially offset by higher costs on the Hercules 185. International Offshore general and administrative expenses during the third quarter 2011 include an $8.0 million benefit, compared to a $1.5 million benefit during the third quarter 2010, from the reversal of an allowance for doubtful accounts related to payments received from a customer in Angola. Operating income decreased to $12.9 million in the third quarter 2011 from $26.9 million in the third quarter 2010.

Inland

Inland revenue for the third quarter 2011 increased to $8.1 million from $5.7 million in the third quarter 2010, primarily driven by an increase in average revenue per rig per day to $31,008 in the third quarter 2011 from $21,357 in the third quarter 2010. Utilization of 94.9% during the third quarter 2011 is comparable to 97.5% for the prior year period. Third quarter 2011 operating expenses were $3.5 million, which includes approximately $2.6 million in gains for asset sales, compared to $8.3 million in the comparable period in 2010. Year ago results include an accrual of approximately $3.0 million related to a multi-year state sales and use tax audit. Inland recorded operating income of $0.9 million in the third quarter 2011 compared to an operating loss of $8.6 million in the third quarter 2010.

Liftboats

Domestic Liftboats generated revenue of $16.7 million in the third quarter 2011 compared to $24.6 million in the third quarter 2010. Year ago results were positively impacted by coastal remediation work related to the BP-Macondo incident. The absence of the BP-Macondo related work led to a decline in utilization to 69.8% during the third quarter 2011 from 91.6% for the prior year period. Average revenue per liftboat per day was down slightly to $7,443 in the third quarter 2011 compared to $7,684 in the third quarter 2010. Operating expenses were essentially flat at $11.4 million in the third quarter 2011. Operating income for Domestic Liftboats was $0.6 million in the third quarter 2011 compared to operating income of $9.4 million in the comparable prior year period.

International Liftboat revenue increased modestly to $28.9 million in the third quarter 2011 compared to $27.8 million in the third quarter 2010, largely due to higher utilization, which rose to 64.1% in the third quarter 2011 from 56.6% in the prior year period. This was partially offset by a decline in average revenue per liftboat per day to $21,325 from $23,176 in the same periods, respectively. Operating expenses increased to $14.1 million in the third quarter 2011 versus $13.0 million in the prior year period due to higher labor and maintenance costs. Operating income for International Liftboats was $8.5 million in the third quarter 2011, compared to $9.4 million in the same period of the prior year.

Discovery Offshore S.A. Investment

Since Hercules Offshore’s initial $10 million investment in Discovery Offshore S.A. (Oslo Axess: DISC), which gave the company an 8% ownership stake, the Company has completed several purchases of Discovery common stock, totaling approximately $24.2 million. The most recent purchase on September 13, 2011 increased Hercules’ holding in Discovery to 18.4 million shares, corresponding to 28.0% of Discovery’s share capital.

Additional Information

Headquartered in Houston, Hercules Offshore, Inc. operates a fleet of 49 jackup rigs, 17 barge rigs, 65 liftboats, two submersible rigs, and one platform rig. The Company offers a range of services to oil and gas producers to meet their needs during drilling, well service, platform inspection, maintenance, and decommissioning operations in several key shallow water provinces around the world. Hercules Offshore currently holds 28.0% of share capital in Discovery Offshore, a pure play, ultra-high specification jackup rig company.

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