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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: energyplay who wrote (825)	4/30/2001 1:10:36 AM
From: Tomas	Read Replies (1) \| Respond to of 206358

Speculation trend continues to divide as orders stack up Upstream, this week's issue By Blake Wright Recent rig orders placed by driller Santa Fe International have raised the eyebrows of the company's competition and customers alike, and have kicked off new debates in industry circles over the historical taboo of speculative newbuilding. While most drillers publicly thumb their noses at the idea of building a rig without a contract in place, past detractors of the practice battered with predictions of continued strong global demand and the prospects of a return to 1997-style dayrates may be having a change of heart. A number of drillers, including Noble Drilling and Ensco, are sticking to their guns about spec building but both have recently conducted pricing exercises for new rigs. Noble is speaking to yards about its triangular Super EVA semisub design and estimates the rig could be built for between $250 million and $300 million. Noble has also priced one of its jack-up designs at $125 million. Will we ever order newbuilds? Yes we will, but it would be against a contract. We've made no commitments to do anything to date, says Noble boss Jim Day. Dallas-based driller Ensco has also shown an interest in adding to its current floating rig fleet of one. While it has said that it will not move forward with construction of another semisub without a contract in hand, this has not prevented it from testing the pricing environment for another unit. There are a handful of contractors moving forward with substantial upgrade/conversion work without the security of a contract in hand. Diamond Offshore is well into its fourth Victory-class semisub upgrade at Keppel Fels yard in Singapore. The driller is pouring an estimated $180 million into upgrading the once second-generation unit to compete with the newbuild fifth generation floaters. Diamond has yet to secure a contract for the rig, which is expected to rejoin the active fleet during the first quarter of 2002, but interest is growing. We are talking with a number of operators and have a couple of real opportunities, says Diamond Offshore executive vice president David Williams. One is fairly short, about six to 12 months, and one is two years plus. I think the odds on us landing one or both of those are pretty good. Diamond has a slew of other Victory-class rigs it could queue up for conversion and has said it would consider starting on the next one, expected to be the Ocean Rover, prior to completion of the Baroness work. Noble has commenced steel work on its semisub Clyde Boudreaux. The contractor has committed $20 million to bring the hull, formerly the Illion, up to speed in preparation for being completed as a fourth generation semisub. Current dayrates for most classes of rigs have yet to reach the peak rates of the last boom. Drillers that launched newbuild programmes during that time suffered through a series of delivery delays and cost overruns. Now that the industry knows these rigs cost more than originally anticipated, strong-willed contractors who elect to wait for dayrates to reach the level to justify newbuilds may miss the boat. However, at least one rig boss believes rates will get there. I think, barring a significant slowdown in the world economy, the peaks of 1997 will be passed, says Transocean Sedco Forex boss Michael Talbert. They'll be passed for a couple of reasons. First of all, the general market outlook for commodities prices, especially for natural gas, is a lot more bullish than it was in 1997. Secondly, particularly for deep-water rigs, in 1997 the real cap on rates was 'what would people bring new rigs to the market for'. Those of us that built new rigs this last cycle now recognise that those rigs cost a lot more money than we thought they would. Therefore, if we're going to build another one, the rates will have to be higher.