Gulf of Mexico: Petrobras: Cascade, Chinook reach 40,000 bopd mark

Brazil’s state-controlled oil company Petrobras has announced that on March 4, 2014, oil production from the Cascade and Chinook fields in the Gulf of Mexico, reached 40,000 of barrels of oil per day level.

This is a production record for the fields so far. Petrobras said that this output level was reached due to the fact that two new wells , Chinook-5 and Cascade-6, have entered into production, which added 28,000 barrels per day to the previous production level of 12,000 barrels per day.

The Cascade and Chinook fields are located in the Walker Ridge area of the Gulf of Mexico, approximately 300 km (180 miles) south of the Louisiana coast, at a distance of 24 km from each other. Water depth in the area is 2,590 m (8,500 ft).

Oil is produced through the BW Pioneer FPSO, the first floating production, storage and offloading unit approved to operate in the U.S. Gulf of Mexico.

Source

Worldwide Field Development News Aug 17 – Aug 23, 2013

This week the SubseaIQ team added 13 new projects and updated 30 projects. You can see all the updates made over any time period via the Project Update History search. The latest offshore field develoment news and activities are listed below for your convenience.

Europe – North Sea Statoil Makes Find at Smorbukk North Aug 22, 2013 – Statoil announced a gas and condensate discovery at its Smorbukk North prospect in the Haltenbanken area of the Norwegian Sea. Well 6506/9-3 was drilled to a depth of 15,393 feet by the Transocean Leader (mid-water semisub). A 130-foot gas and condensate column was encountered in a down-to situation in the middle Jurassic Garn formation. Additionally, a thin gas and condensate section was proven in the deeper Ile formation. Initial studies indicate recoverable volumes of 25 to 47 MMboe. Smorbukk North is located directly north of the Asgard field and could potentially be developed quickly through a tie-in to existing infrastructure, extending the production life of the Asgard facilities. Project Details: Asgard Lundin Comes Up Dry with Biotitt Wildcat Aug 22, 2013 – Lundin Petroleum’s Biotitt wildcat was drilled to total depth without any sign of hydrocarbons. Well 16/4-7 was drilled by the Bredford Dolphin (mid-water semisub) to 8,530 feet measured depth and is being plugged and abandoned as a dry hole. Over 300 feet of excellent quality Jurassic and Triassic sandstone was drilled but was found to be water bearing. Biotitt was the first well to be drilled in PL544 which was awarded in 2009. Lundin Petroleum (40%) serves as operator on behalf of partners Bayerngas (30%) and Explora Petroleum (30%). Project Details: Biotitt S. America – Brazil Petrobras Reports Light Oil from Muriu Appraisal Aug 22, 2013 – Light oil was encountered while drilling an appraisal well in the Sergipe Basin off the coast of Brazil. Well 3-SES-175D was drilled by the Petrobras 10000 (UDW drillship) to appraise the 2012 Muriu discovery in blocks SEAL-M-347 and SEAL-M-424. The well was drilled to a depth of 18,461 feet and discovered almost 80 feet of reservoir with good porosity. Petrobras, 100% owner of the blocks, plans to conduct a formation test to verify the productive characteristics of the reservoir. A Discovery Evaluation Plan has been submitted for approval by Brazil’s Petroleum, Natural Gas and Biofuels Agency (ANP). S. America – Other & Carib. Noble Energy Ready to Spud Nicaraguan Prospect Aug 22, 2013 – Diamond Offshore’s Ocean Saratoga (mid-water semisub) is on location and preparing to spud the PS1 exploration well at the Paraiso Sur prospect in the Tyra Concession off Nicaragua. Noble Energy, operator of the concession, has allotted 90 days to drill the well. If successful, a second well will be drilled to determine the commerciality of the discovery. Paraiso Sur is estimated to hold P25 gross unrisked resources of 1,220 MMboe. Project Details: Paraiso Asia – SouthEast Anao Phase 4 Compression Project Complete Aug 23, 2013 – Work on the Anoa Phase 4 project is complete and production from the field has resumed. Phase 4 was implemented to enhance gas compression capacity to handle the increase of associated gas production and offset the decline of oil production at the field. The extra capacity allows for an additional 200 Bcf of undeveloped reserves being delivered from the field. Project Details: Anoa Premier Updates Progress at Pelikan and Naga Fields Aug 23, 2013 – Progress continues on the Pelikan and Naga gas projects in Natuna Sea Block A offshore Indonesia. Construction of the Pelikan and Naga wellhead platforms (WHP) is almost complete. Load-out and installation of the units will take place in 3Q 2013. Planning of the development drilling program is in the final stages and a suitable rig has been secured. Drilling will commence at the end of the monsoon season in 1Q 2014 from the Pelikan and then Naga. Production startup at both platforms is expected to take place in the second half of 2014. Project Details: Naga – Pelikan Santos Acquires Interest in Northwest Natuna PSC Aug 22, 2013 – Santos announced its acquisition of a 50% interest in the Northwest Natuna Production Sharing Contract (PSC) from operator AWE. The PSC is located off Indonesia and contains the undeveloped Ande Ande Lumut oil field which has been independently assessed to contain gross 2P oil reserves of roughly 100 million barrels. Currently, the proposed development concept consists of the installation of a wellhead platform and a permanently moored FPSO with oil take-off via shuttle tankers. A final investment decision is expected in 2014. Execution of the acquisition requires Indonesian regulatory approval. Project Details: Ande Ande Lumut Otto Expects Galoc Gas in November 2013 Aug 22, 2013 – Otto Energy made the decision to call total depth while drilling the 6-H well in the Galoc field off the Philippines. An 853-foot section of high quality reservoir was intersected and a 5 ??” completion liner was run over the interval. The well is being suspended prior to running a completion assembly. Wells 6-H and 5-H are being drilled by the Ocean Patriot (mid-water semisub). The rig will now re-enter the 5-H well to drill through the reservoir section and run the completion. Once drilling and testing operations are complete, the Skandia Hercules construction vessel will be brought in to install the subsea equipment and hook up both wells to the Rubicon Intrepid FPSO. Otto anticipates production start-up in November 2013. Project Details: Galoc G11/48 Partners Reach Nong Yao Investment Decision Aug 22, 2013 – Mubadala Petroleum and its partner KrisEnergy have come to an agreement on the final investment decision for the development of the Nong Yao oil field in the G11/48 contract area in the Gulf of Thailand. The field was discovered in 2009 when the Emerald Driller (350′ ILC) drilled the Nong Yao-1 wildcat. Initial development of the field will involve drilling 23 wells, installation of two wellhead platforms and a floating, storage and offloading (FSO) vessel. The facilities will have the capacity to produce 15,000 bopd along with 30,000 bopd of produced fluids. First oil is anticipated in 1H 2015. Project Details: Nong Yao N. America – US GOM Ardennes Well Fails to Deliver Aug 22, 2013 – No hydrocarbons were encountered while drilling the Ardennes-1 exploratory well in Green Canyon Block 896. The Cobalt-operated well was drilled by the Ensco 8503 (UDW semisub) to 36,552-feet total depth. Both the Miocene and Inboard Lower Tertiary reservoirs were encountered but neither contained commercial quantities of hydrocarbons. Ardennes-1, which is the deepest well drilled to date in the US Gulf of Mexico, will be plugged and abandoned and the rig will mobilize to Cobalt’s Aegean prospect in Keathley Canyon Block 163. Cobalt owns a 42% working interest in Ardennes with partners ConocoPhillips (30%) and Total (28%). Project Details: Ardennes Asia – Far East Roc Oil Completes Beibu Gulf Drilling Program Aug 22, 2013 – Roc Oil announced the completion of a 5-well development drilling campaign at the WZ 12-8 field in the Beibu Gulf. Conclusion of the program marks the completion of the final stage of development drilling in Block 22/21. In all, 15 wells were drilled within the block to improve existing production and to tap into additional reserves discovered during the 2012 exploration effort. All 15 wells are expected to be on-stream in 3Q 2013 at a rate of approximately 15,000 bopd. The COSL HYSY 931 (300′ ILC) carried out the drilling program and has now been released. Project Details: Beibu Gulf Africa – West Total Reveals Gabon Deepwater Pre-Salt Discovery Aug 22, 2013 – Total Gabon, operator of the first deepwater pre-salt well in Gabon, announced the discovery of between 160 and 180 feet of net gas and condensate pay while drilling the Diaman-1B well in the Diaba block. The well was drilled by the Ocean Rig Olympia (UDW drillship) to a depth of 18,323 feet and confirmed the existence of a working petroleum system. Diaman-1B is a sidetrack to the Diaman-1 well which spud in April 2013 and is over 60 miles away from the nearest commercial pre-salt discovery. Total (42.5%) serves as operator of the block with partners Marathon (21.25%), Cobalt (21%) and Gabon Oil (15.25%). Project Details: Diaman MidEast – Persian Gulf Barzan Development Drilling Phase Complete Aug 22, 2013 – RasGas completed its 30-well development drilling campaign for the $10.3 billion Barzan Gas Project. The drilling program required the use of three jackups that combined for a total of 4,740 working days. Technologies such as Pressurized Mud Cap Drilling were utilized to safely drill the wells in the challenging formation. Completion of the drilling phase clears the way for installation of subsea pipelines to carry gas to the Barzan onshore facilities that are 50% complete. Project Details: Barzan Australia Woodside Proposes FLNG for Browse Aug 22, 2013 – Woodside recommended floating LNG (FLNG) technology to the Browse joint venture partners as the best option for the Browse LNG Development off Western Australia. In April 2013, the decision to not proceed with onshore development was determined after the concept did not meet commercial requirements for a positive final investment decision. If approved, the joint venture will rely on Shell’s FLNG knowledge and Woodside’s offshore development expertise. The project comprises the development of the Brecknock, Calliance and Torosa fields with combined contingent gas volumes of 15.9 Tcf and 436 million barrels of condensate. Project Details: Browse LNG MEO Announces the Presence of Ramble On Aug 22, 2013 – MEO Australia, the 100% participant in permits AC/P50 and 51, completed its initial assessment of the permit area. Prospects were identified using reprocessed data from the 2012 Zeppelin 3D seismic survey and the older Onnia 3D survey. A likely drilling candidate is the Ramble On prospect in the southern portion of the block. MEO estimates the prospect to contain unrisked prospective resources of 56 MMstb (mean, recoverable). A successful well could significantly upgrade several other prospects within the area including Stairway and Kashmir. Ramble On is located in AC/P51 in close proximity to the Montara and Talbot fields. AC/P51 is currently in its 5th permit year. The 6th permit year begins in April 21, 2014 and requires the drilling of one exploration well. Project Details: Ramble On

Titanium Explorer Drillship Starts Petrobras Contract in U.S. Gulf

The ultra-deepwater drillship, Titanium Explorer, started  its drilling contract with Brazil’s Petrobras in the U.S. Gulf of Mexico, on Friday, December 7. 

The Titanium Explorer, formerly known as the Dragonquest, owned by Vantage Drilling, is contracted for eight years.

Under the contract, Brazilian-state controlled oil company Petrobras has the right to re-locate and utilize the Titanium Explorer on a worldwide basis.  Expected revenues over the eight-year contract term, excluding revenues for mobilization of the rig and costs escalations, are approximately $1.6 billion.

The drillship is a self-propelled, dynamically positioned vessel suited for drilling in remote locations because of its mobility and large load carrying capacity. It is currently equipped for drilling in water depths up to 10,000 feet, and is designed to drill in water depths up to 12,000 feet.

Related:

Titanium Explorer Drillship to Start Petrobras Contract in December

USA: Vantage Drilling Acquires Titanium Explorer Drillship

Titanium Explorer Drillship Starts Petrobras Contract in U.S. Gulf| Offshore Energy Today.

Other articles

• New Ultra-Deepwater Drillship Laguna Star Arrives in Brazil
• USA: Maersk Secures Contract for Deepwater Advanced 2 Drillship
• Gulf of Mexico: Quest Offshore Sees Bright Future for Deepwater GoM (USA)
• Total: Significant Oil Find in U.S. Gulf of Mexico
• Noble Energy Makes Oil Discovery at Big Bend Prospect in U.S. Gulf
• Ingleside,TX: Shell’s Olympus Hull Begins Journey to US Gulf Coast

New Ultra-Deepwater Drillship Laguna Star Arrives in Brazil

The Laguna Star, QGOG Constellation’s new ultra-deepwater drillship, arrived, Nov. 7,  in Brazil. Samsung Heavy Industries shipyard, located in South Korea, built the Laguna Star as well as the Amaralina Star drillship, which is currently in operation by QGOG.

The unit will be operated by its subsidiary, Queiroz Galvão Óleo e Gás (QGOG), in water depths of up to 10,000 feet and well depths of up to 40,000 feet. It is equipped to operate in ultra-deepwater including the Brazilian pre-salt area.

The Laguna Star is the second drillship to be operated by QGOG, after Amaralina Star, which arrived in Brazil in August, 2012. The unit contributes to expanding and diversifying QGOG’s portfolio in ultra-deepwater drilling.

“The arrival of Laguna Star is another key milestone for the QGOG Constellation’s ultra-deepwater operations and, together with Amaralina Star, reinforces our operational track record,” said QGOG Constellation CEO Leduvy Gouvea.

These two drillships are chartered to Petrobras under six-year contracts, with options to renew for six additional years. Drilling services will be provided by QGOG.

Shipbuilding Tribune – New Ultra-Deepwater Drillship Laguna Star Arrives in Brazil.

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• USA: Maersk Secures Contract for Deepwater Advanced 2 Drillship
• South Korea: Samsung Yard Bags $ 600 Mln UDW Drillship Order
• Gulf of Mexico: Quest Offshore Sees Bright Future for Deepwater GoM (USA)
• Brazil: InterMoor Completes Conductors for Papa Terra Project
• UK: PEMEX E&P and BP to Share Technology, Expertise for Deepwater Well Cap
• Oceaneering Charters Subsea Support Vessel from Otto Candies (USA)

• Atwood Oceanics Orders Third Ultra-Deepwater Drillship (gcaptain.com)
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• Shell Hires Four Transocean’s Newbuild Drillships (USA) (worldmaritimenews.com)

Worldwide Field Development News Oct 9 – Oct 15, 2012

This week the SubseaIQ team added 0 new projects and updated 7 projects. You can see all the updates made over any time period via the Project Update History search. The latest offshore field development news and activities are listed below for your convenience.

S. America – Brazil

Petrobras Announces Farfan Discovery

Oct 11, 2012 – Petrobras announced the discovery of light hydrocarbons at its Farfan prospect in block SEAL-M-426 offshore Brazil. Well 1-BRSA-851-SES is being drilled in 8,923 of water by the Deepsea Metro II (UDW drillship). A hydrocarbon bearing zone of 144 feet was discovered at a depth of 18,314 feet and was confirmed by wireline testing and fluid sample analysis. The rig will continue drilling to the target depth of 19,685. Petrobras and partner IBV Brazil hold 60% and 40% interest in the well respectively.

Jupiter Might be a Gas Giant

Oct 11, 2012 – Petrobras released preliminary drilling results concerning appraisal well 3-RJS-683A at the Jupiter prospect confirming a discovery of natural gas and condensate. The discovery has proven a continuous reservoir between 3-RJS-683A and the Jupiter discovery well. A 577-foot oil column has also been detected in rocks displaying excellent permeability and porosity. Further appraisal is needed to determine the size of the field but initial estimates suggest that Jupiter could hold as much as 1 billion cubic feet of gas. To this point, the well has reached a depth of 17,834 feet and drilling will continue in an effort to reach deeper targets.

Project Details: Jupiter

Europe – North Sea

Lundin Announces Albert Results

Oct 11, 2012 – The Bredford Dolphin (mid-water semisub) wrapped up drilling operations at Lundin’s Albert prospect offshore Norway. Well 6201/11-3 was drilled to 9,760 feet and penetrated a thin Cretaceous oil bearing reservoir. The reservoir was found at a depth where the primary target was expected to be encountered. Due to the makeup of the structure and uncertain distribution, an estimation of resources in place cannot be made at this time. A minor column of movable hydrocarbons was encountered in a Paleocene secondary target. Further geophysical and geological studies are required to clarify the potential of the discovery.

Project Details: Albert

Heerema Delivers Andrew Process Module

Oct 11, 2012 – Heerema Fabrication recently completed construction of the new 750 ton process module for BP’s Andrew platform in the UK North Sea. The module was designed to be a “bolt-on” addition to the platform facilitated by the use of two large hinge pins that engage hooks welded to the existing structure. Heerema’s Hartlepool yard benefited from the project by the creation of 180 jobs. In addition, the module was delivered without a single lost time incident.

Project Details: Andrew (UK)

Providence Encouraged by Barryroe Development Modeling

Oct 9, 2012 – Providence Resources recently completed a suite of static and dynamic modeling of the main Basal Wealden oil bearing reservoir interval within the Barryroe complex offshore Ireland. Data from the new models was incorporated with maps made from the recent 3D seismic survey of the area allowing Providence to establish oil recovery factors ranging from 17% to 43%. A modeled recovery factor of 31% over 25 years was achieved based on a development scenario which implemented 41 horizontal production and 22 horizontal water injection wells. Also, the company awarded the Barryroe Concept Development Engineering Study to Procyon Oil and Gas. Procyon will help determine the best development plan for the field based on the different scenarios recently modeled by Providence.

Project Details: Barryroe

Ithaca Adds to Resources in UK North Sea

Oct 9, 2012 – Ithaca Energy has acquired interest in the Cook and MacCulloch fields in the UK North Sea through the acquisition of two Noble Energy subsidiaries. The Shell-operated Cook field is located in block 21/20a and is processed through the Anasuria FPSO. The acquisition will bring Ithaca’s stake in the field to 41.345%. The ConocoPhillips-operated MacCulloch field is found in block 15/24b and was developed through 4 subsea wells tied back to the North Sea Producer FPSO. Finalization of the acquisition, expected in early 2013, will give Ithaca a 14% stake in the field. With the addition of these assets, Ithaca’s net production – largely oil – should increase by 1,100 boepd. The company’s total consideration in the arrangement is $38.5 million.

Project Details: MacCulloch

Asia – Far East

Lufeng FSOU Gets an Upgrade

Oct 9, 2012 – InterMoor completed its first permanent mooring project in the Lufeng field in the South China Sea. The company was contracted by CNOOC to handle project management, engineering, procurement and installation of a new buoy turret mooring system for the Nanhai Sheng Kai FSOU. Installation of the new mooring system should allow CNOOC to get an additional 15 years of service life out of the vessel which was first deployed in 1992. Included in the work scope was the addition of a new 8-inch flexible flowline and riser between the mooring system and LF13-2 wellhead platform. The FSOU was previously anchored in the LF13-1 field but has been moved to the 13-2 field since the upgrade to expand development there.

Australia

Scarborough Partners Still Mulling Development Options

Oct 11, 2012 – ExxonMobil said a decision on how to develop the Scarborough gas field is not likely until the second half of 2013. Scarborough is considered one of the most difficult fields off Western Australia to develop. Water depth in the area is around 4,700 feet and the closest land is 170 miles away. The company is evaluating several options with its joint partner BHP Billiton. Some of the options include building a floating LNG platform or supplying gas to companies that have existing LNG plants.

MEO Ready for Farmout in Joseph Bonaparte Gulf

Oct 9, 2012 – MEO Australia announced its intention to launch the farmout of exploration permit WA-454-P on Nov. 1. The farmout is scheduled to conclude by the end of 1Q 2013. WA-454-P, located in the Joseph Bonaparte Gulf, contains the Marina-1 discovery and the sizable Breakwater prospect. MEO describes Marina-1 as a “gas and probably oil” discovery with 3C contingent gas resources of up to 3.2 Bcf and 3C contingent oil/condensate resources of up to 29.5 MMstb. Gas-only perspective resources for Breakwater are up to 2.7 Tcf with 87 MMstb condensate. In addition, Breakwater is situated in an area near proven gas discoveries that are planned to be developed with floating LNG technology. MEO was awarded WA-454-P in June 2011 and holds 100% interest in the permit.

Project Details: Marina

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Brazil: InterMoor Completes Conductors for Papa Terra Project

InterMoor, an Acteon company, has completed installation of the drilling and production conductors for the Papa Terra project, announced Global President Tom Fulton. Petrobras serves as the operator of the Papa Terra concession with a 62.5 percent interest; Chevron holds the remaining 37.5 percent interest.

InterMoor was responsible for the design, procurement, fabrication and installation of 15 conductors for the project. Fabricated at InterMoor’s 24-acre, Morgan City, La., facility, the conductors are 36 inches (91 centimeters) in diameter and 187 feet (57 meters) long.

InterMoor chartered the Skandi Skolten, DOF Subsea’s Construction Anchor Handling Vessel, and the installation barge with a customized conductor launch system. For conductor driving, InterMoor used MENCK’s MHU-270T DWS which included a deepwater hydraulic hammer capable of providing a driving energy of 270 kilojoules at a water depth of 3,281 feet (1000 meters) combined with MENCK’s girdle-type electro-hydraulic power pack and umbilical support system. Generating hydraulic power at depth, rather than at the surface, means no hydraulic hose, therefore minimalizing environmental impact and energy loss.

The conductors were installed in water depths of 3,937 feet (1,200 meters) in the southern Campos Basin off the coast of Brazil. The installation took place in April 2012. InterMoor’s conductor services optimize conductor design to meet project-specific load and fatigue requirements, and the unique patented installation method allows installation without the need of a construction vessel. A standard Anchor Handling Vessel is sufficient, leading to a more economical installation off the rig’s critical path.

“We are proud to have successfully completed this important installation for Petrobras and to be part of the first offshore tension-leg, wellhead platform in Brazil,” said Fulton. “Our collaboration with sister company MENCK proved to be an effective partnership, and InterMoor remains the only company worldwide to offer a full conductor installation service in deep water.”

“InterMoor has been developing its strength in the Brazil market through our office in Rio de Janeiro, and this project completion confirms the breadth of our capabilities in the region,” added John Riggs, Managing Director for InterMoor do Brasil.

Subsea World News – InterMoor Completes Conductors for Papa Terra Project (Brazil).

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Hornbeck Expands OSV Newbuild Program (USA)

Hornbeck Offshore Services, Inc. announced today that it has expanded its OSV Newbuild Program #5 and has commenced a new 200 Class OSV Retrofit Program, among other recent developments.

Expansion of OSV Newbuild Program #5:

The Company has exercised the first four of its 48 options to build additional HOSMAX vessels at an aggregate incremental cost of approximately $180 million, excluding construction period interest, for vessel deliveries in the fourth quarter of 2014 and first quarter of 2015. These four new vessels will expand the Company’s fifth OSV newbuild program, which was announced in November 2011, from 16 vessels to a total of 20 U.S.-flagged HOSMAX class DP-2 new generation offshore supply vessels (“OSVs”) for its Upstream business segment.

These 20 vessels are being built at two shipyards in the United States, which qualifies them for coastwise trade in the U.S. Gulf of Mexico (“GoM”) under the Jones Act; however, the Company expects them to service the anticipated increase in deepwater and ultra-deepwater drilling activity in all three of the Company’s core geographic markets of the GoM, Brazil and Mexico. The HOSMAX class DP-2 vessel designs contemplated by this newbuild program feature three different size vessels (300, 310 and 320 feet in length) each with cargo-carrying capacities ranging from 5,650 to 6,200 deadweight tons and more than 20,000 barrels of liquid mud. The Company considers the option vessel pricing to compare favorably with all other recently announced newbuild programs for vessels of similar size and specifications.

In connection with exercising the first four shipyard options under this high-spec OSV newbuild program, the Company was able to extend the exercise dates for its 44 remaining options by approximately 60 days each without changing the favorable pricing and original delivery dates. Accordingly, the Company’s decision with respect to the exercise of the next option at each of the two shipyards is now not due until February 1, 2013 and February 19, 2013, respectively. These exercise date extensions afford the Company more time to assess market conditions before determining whether and to what extent to exercise additional options. In addition to the 20 newbuild vessels already committed that are scheduled to be placed in service on various dates between the second quarter of 2013 and the first quarter of 2015, the delivery dates for the remaining 44 vessels, if such options are exercised, will be approximately 24 to 26 months following the date of each respective option exercise, with the last potential newbuild vessel under this program (the 48th optional and 64th overall) to be delivered in January 2018. The Company currently intends to exercise all of its remaining 44 options to build additional HOSMAX class vessels should future market conditions, the pace of permitting in the GoM and its company-wide fleet complement continue to warrant their construction, providing the Company a very attractive, strategic five-year organic growth opportunity.

The Company expects the aggregate cost of the first 20 vessels committed under this potential 64-vessel construction program, including the four option vessels announced today, to be approximately $900 million, excluding construction period interest. At June 30, 2012, the Company had a cash balance of approximately $392 million and added net cash proceeds of approximately $266 million to the balance sheet from its 1.500% convertible notes offering, which closed on August 13, 2012. Together with cash on-hand and available capacity under its currently undrawn $300 million revolving credit facility, and based on the key assumptions outlined in the Company’s August 3, 2012 earnings release, the Company expects to generate sufficient cash flow from operations to cover all of its growth capital expenditures for the first 20 HOSMAX vessels under construction, all of the capital costs related to its new six-vessel 200 class OSV retrofit program discussed below, the planned retirement of its 1.625% convertible notes in November 2013, and all of its annually recurring cash debt service, maintenance capital expenditures and cash income taxes for the remainder of fiscal 2012 and for the full duration of the currently committed 20-vessel HOSMAX newbuild program.

In summary, the Company’s fifth OSV newbuild program now consists of vessel construction contracts with two domestic shipyards to build four HOSMAX 300 class OSVs, six HOSMAX 310 class OSVs (up two from the previously announced four), and ten HOSMAX 320 class OSVs (up two from the previously announced eight).

Based on the above schedule of projected vessel in-service dates, the Company expects to own and operate 51, 56, 69 and 71 new generation OSVs as of December 31, 2012, 2013, 2014 and 2015, respectively. These vessel additions result in a projected average new generation OSV fleet complement of 51.0, 52.2, 63.0 and 70.9 vessels for the fiscal years 2012, 2013, 2014 and 2015, respectively. The aggregate cost of the Company’s fifth OSV newbuild program, excluding construction period interest, is expected as noted above to be approximately $900.0 million, of which $242.2 million, $429.8 million, $178.5 million and $6.9 million is expected to be incurred in 2012, 2013, 2014 and 2015, respectively. From the inception of this program through June 30, 2012, the Company had incurred $120.4 million, or 13.4%, of total expected project costs, including $41.0 million that was spent during the second quarter of 2012.

Commencement of 200 Class OSV Retrofit Program:

In addition to the expansion of its HOSMAX newbuild program, the Company has decided to move forward on a new retrofit program that will upgrade and stretch six of its 200 class DP-1 new generation OSVs converting them into 240 class DP-2 OSVs. The vessels the Company has committed to this program are six of its ten Super 200 class DP-1 vessels, four of which are the vessels that recently completed two-year charters with Petrobras in Brazil. These new generation OSVs were built in 1999 and 2000 and were acquired by the Company in 2007. Due to their 56-foot wide beams, the planned 40-foot mid-body extensions and DP-upgrades are expected to add approximately 600 tons to the vessels’ 2,250 tons of current deadweight capacity and roughly double the vessels’ current liquid-mud capacity to approximately 8,000 barrels. The Company is now in the process of finalizing negotiations with a domestic shipyard it has selected and expects to enter into a definitive contract in the very near future. Based on preliminary estimates, the Company expects the yard to complete two of the six vessels in each of the following redelivery months: May 2013, August 2013 and December 2013, respectively.

The project costs for these discretionary vessel modifications are expected to be approximately $50.0 million, in the aggregate, and the Company expects to incur approximately 762 vessel-days of aggregate commercial downtime for the six vessels (127 vessel-days each), as follows:

Other than a modest amount of cash outlays and commercial downtime in the third and fourth quarters of 2012, this retrofit program is not expected to materially impact the Company’s financial results for fiscal 2012. However, upon completion of this program in 2013, the Company expects the newly retrofitted 240 class DP-2 vessels to command higher dayrates, higher margins and higher returns-on-invested-capital than they would have as 200 class DP-1 vessels, such that the Company anticipates a cash-on-cash pay-back of its additional capital investment within approximately 2.5 years. Given the market’s preference for high-spec DP-2 vessels and the Company’s relatively low pro forma net book value for its retrofitted vessels compared to the construction costs of comparable newbuilds in the market today, the Company should be even more competitive in meeting customers’ demand for high-spec vessels at very attractive relative economics.

Prospectively, the Company will report the projected cash outlays for its 200 Class OSV Retrofit Program under the caption “Maintenance and Other Capital Expenditures,” rather than “Growth Capital Expenditures.” Accordingly, the following figures will update and supersede the forward-looking guidance the Company provided in its earnings release on August 3, 2012. The Company now expects maintenance capital expenditures and other capital expenditures to be approximately $58.2 million and $17.4 million, respectively, for the full-year 2012. The Company now expects maintenance capital expenditures and other capital expenditures to be approximately $39.2 million and $50.0 million, respectively, for fiscal 2013, with the cash outlays relating to the 200 Class OSV Retrofit Program included in the latter category. For fiscal 2014, the Company expects that its annually recurring maintenance capital expenditure and other capital expenditure budget, in the aggregate, for its company-wide fleet of vessels will range between $45.0 million and $55.0 million.

GAAP Treatment of Recently Issued 1.500% Convertible Notes:

In accordance with ASC 470-20, convertible debt that may be wholly or partially settled in cash is required to be separated into a liability and an equity component, such that interest expense reflects the issuer’s nonconvertible debt interest rate. Upon issuance, a non-cash original issue discount (“OID”) is recognized as a decrease in debt and an increase in equity. The debt component accretes up to the principal amount over the expected term of the debt. ASC 470-20 does not affect the actual aggregate principal amount of the convertible notes that the Company is required to repay, nor does it impact the actual amount of cash coupon that the Company is required to pay with respect to the convertible notes.

On August 13, 2012, the Company closed on the issuance of $300 million in aggregate principal amount of 1.500% convertible senior notes due 2019 (the “1.500% convertible notes”). The Company’s estimated nonconvertible debt interest rate on such date was 5.75%, based on indicative market quotes for the Company’s publicly traded 5.875% senior notes due 2020. Therefore, as of the date of issuance of the 1.500% convertible notes and in accordance with the GAAP treatment described above, the Company recognized $73.3 million of non-cash OID, which decreased the book carrying value of the 1.500% convertible notes and increased the Company’s additional paid-in-capital equity account by a like amount. Such non-cash OID will be amortized through interest expense over the seven-year life of the 1.500% convertible notes. Accordingly, while the incremental annual run-rate of cash interest expense for the 1.500% convertible notes will be a constant $4.5 million, the gross book interest expense for such notes for financial reporting purposes will vary from year-to-year. The initial annual run-rate of GAAP interest expense for such notes is expected to be approximately $13.3 million. However, GAAP interest expense is expected to fluctuate based on the levels of capitalized construction period interest.

Due to changes in the timing of certain cash interest payment dates associated with the Company’s recent retirement of its 6.125% senior notes in March and April 2012, the issuance of its 5.875% senior notes in March 2012, and the issuance of its 1.500% convertible notes in August 2012, aggregate annual cash debt service for the full fiscal-year 2012 is expected to be $42.2 million. However, inclusive of the planned redemption of its 1.625% convertible notes in November 2013, the Company expects to incur aggregate annual cash debt service for the full fiscal-year 2013 in the amount of $52.3 million, excluding any cash interest expense related to potential revolver draws. Commencing with fiscal 2014 and beyond, the Company’s aggregate annual run-rate of cash debt service should revert to $48.0 million, excluding any cash interest expense related to potential revolver draws.

Hurricane Isaac Update:

The Company experienced no damage to any of its vessels as a result of Hurricane Isaac, including those currently under construction or in drydock at various GoM shipyards, although such yards may claim force majeure delays that may have occurred as a result of the storm. In addition, Hurricane Isaac did not result in customer cancellations of any pre-storm spot or term vessel charters. The Company’s new generation Upstream fleet continues to operate in-line with its pre-storm utilization guidance reported on August 3, 2012, which remains subject to, and primarily driven by, the pace of permitting in the GoM. No physical damage related to Hurricane Isaac occurred to the Company’s corporate headquarters in Covington, LA, which remains fully operational with all electrical power, Internet connectivity and telecommunications service. In addition, HOS Port, the Company’s logistics shore-base in Port Fourchon, LA, is fully operational.

ATP Reorganization Proceeding:

ATP Oil and Gas, Inc., a customer of the Company, initiated a reorganization proceeding under Chapter 11 of the United States Bankruptcy Code on August 17, 2012. As of the date of the bankruptcy filing, ATP was indebted to the Company in the amount of approximately $4.8 million. While the Company believes that its claims are secured by liens arising under law, it is too early in the proceeding to assess ATP’s plans and ability to repay the Company. ATP has indicated its plan is to reorganize and to that end has received post-petition financing. The Company will pursue all rights in the bankruptcy case in order to maximize its recovery.

Hornbeck Offshore Services, Inc. is a leading provider of technologically advanced, new generation offshore supply vessels primarily in the U.S. Gulf of Mexico and Latin America, and is a leading short-haul transporter of petroleum products through its coastwise fleet of ocean-going tugs and tank barges primarily in the northeastern U.S. and the U.S. Gulf of Mexico. Hornbeck Offshore currently owns a fleet of 80 vessels primarily serving the energy industry.

Source

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Houston, TX: Petrobras Awards Subsea Supply Contract to Dril-Quip (Brazil)

Dril-Quip, Inc. today announced that Dril-Quip do Brasil LTDA, its wholly owned subsidiary, has been awarded a four-year contract by Petrobras, Brazil’s national oil company, for the supply of subsea wellhead systems and associated tools to be used in the drilling of deepwater wells offshore Brazil.

Based on current exchange rates and after Brazilian taxes, the contract is valued at $650 million if all of the equipment under the contract is ordered. Amounts will be included in Dril-Quip’s backlog as purchase orders are received under the contract. Dril-Quip expects to begin delivering products under the contract in the second half of 2013.

The contract is subject to customary terms and conditions for agreements of this type, including termination, extension, product inspection, local content requirements and price adjustment provisions.

Dril-Quip is a leading manufacturer of highly engineered offshore drilling and production equipment, which is well suited for use in deepwater, harsh environment and severe service applications.

Subsea World News – Petrobras Awards Subsea Supply Contract to Dril-Quip (Brazil).

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