It’s been fifteen years since the catastrophic blow out on the Transocean semi-sub Deepwater Horizon that killed eleven workers and led to massive pollution in the Gulf of Mexico, costing BP over US$60 billion in fines, lawsuits and cleanup.
Drilling is a dangerous business, and so is speculative investment in companies that own drilling rigs. This must be why the ex-drilling company and supply vessel owner formerly known as SD Standard Drilling and SD Standard Supply now is changing its name again, this time to Standard Coin, as owner Oystein Stray Spetalen seeks to make a fortune in Bitcoin and crypto after selling his fleet of platform supply vessels (PSVs) to Evangelos Marinakis’ Capital Offshore in 2023.
Last week also saw another tragic and completely unnecessary accident claim the lives of seven drilling crew in the Red Sea, and a number of financial blow-outs at various rig owners. This will be a two-parter, so stay tuned later in the week.
Norwegians are undoubtedly the masters of speculative offshore investments. They think they understand the oil and gas cycle better than any other nation, and in recent years numerous get rich quick investment schemes in Norway have sought to capitalise on rising charter rates for rigs and supply vessels, and rising asset values.
The clubby and cliquey atmosphere in Oslo, where every shipping magnate is seemingly intermarried to the others, navy blue suits and floppy blonde hair are ubiquitous, and a deep tan is still a marker of status, encouraging a herd mentality, it seems.
The ballsiest was Eldorado Drilling, which hired the former CEO of Borr Drilling, Svend Anton Maier, and was backed by some of Norway’s heaviest hitting investors.
The latter included Tor Olav Trøim (the founder of Borr, chairman of Golar LNG and John Fredriksen’s ex-business partner), Harald Moraeus Hanssen (owner of the PSV HM Flipper and the semi-sub SSV Catarina), Petter Stordalen (art collector, philanthropist, and owner of downmarket hospitality chain Nordic Choice Hotels), Torstein Tvenge, Gunnar Hvammen and Jan Haudemann-Andersen.
The business case was simple – Eldorado would acquire high-specification deepwater drilling rigs stranded at Korean yards for bargain basement prices, rigs that the main drilling contractors could not afford to buy themselves at the time when they already had idle drillships, and that the yards were desperate to sell.
Then the company would wait for the market to continue to recover and make out like bandits, either selling the rigs for a massive mark-up or chartering them for half a million dollars a day.
How hard could that be? This was the same strategy the legendary John Fredriksen had been following with Northern Ocean, which acquired the two high-specification semi-submersible drilling rigs now named Deepsea Bollsta and Deepsea Mira from Hyundai Heavy Industries in 2018 for the “historically low” purchase price of US$296 million per unit.
Covid messed with Fredriksen’s masterplan and Northern backed out of a contract to buy two more seventh generation drillships from Daewoo Shipbuilding and Marine Engineering (DSME) in 2021, West Aquila and West Libra, for US$296 million each, having previously also cancelled an option in 2019 to acquire a third drillship, the former Cobalt Explorer, from DSME at a purchase price of US$350 million (DSME is now known as Hanwha Ocean, FYI).
Even Mr Fredriksen found that catching a falling knife is not so easy in the volatile drilling business, with Northern Ocean losing US$65 million in 2024. Instead, he has placed the two rigs under Odfjell management and settled to paying down Northern’s US$565 million of long-term debt at the end of March through long term charters.
Deep Value Driller (DVD) was then launched in 2021 by a coterie of Oslo’s finest under the leadership of (double take) CEO Svend Anton Maier to buy a distressed 2014-built drillship named Bolette Dolphin (now Deep Value Driller) for $65 million, which the creditors of bankrupt Fred Olsen Energy (now Dolphin Drilling) wanted to sell. DVD’s spring 2021 presentation is a master class in value investment, one which Eldorado was keen to copy.
DVD listed on the Euronext Growth market in Oslo priced at less than NOK8 (US$0.80) in May 2021, and the shares tripled in value in three years, although they have subsequently fallen back to NOK16.32 (US$)1.62.
No matter, doubling your money in four years is nice anyway, we can all agree. But the path was not smooth, with the rig burning through stacking costs of US$20,000 per day from the time of purchase in 2021 until it was bareboated to Saipem under a contract announced in February 2023. It now earns a daily rate around US$150,000 per day drilling in West Africa.
Nice, except for the fact that it took DVD over seven months to prepare the rig for the charter and cost US$60 million of additional capital in upgrades, so the company had to hold the asset for more than two years before it saw a dollar of revenue. DVD has also granted Saipem the option to buy the rig for US$300 million.
So, it would be true to say that much of Eldorado’s strategy was not original, not even its choice of CEO. Yes, Svend Anton Maier appears to be CEO of both companies at the same time, and, no, its clearly not a conflict of interest under Norwegian governance.
I guess that sending out a once a month bareboat charter hire invoice to Saipem from DVD and then checking that the funds have arrived from Milano cannot be that taxing. If he was a single mom, there would no doubt be a heartwarming Hollywood film of the hardworking millionaire hero holding down two stressful jobs to make ends meet.
Eldorado's Chief Financial Officer Rune Magnus Lundetræ also previously served as CEO and as CFO and Deputy CEO at Borr. The band was back together, even if the tune played at Borr has proven somewhat discordant in recent times, as we shall see later in the week in part two.
In early 2023, Eldorado made its play. Fearnley Securities helped the company raise US$70 million in a private placement in April 2023, which it used to pay as deposit for the purchase of the drillships ex-Pacific Zonda (abandoned by Pacific Drilling) and West Dorado (abandoned by Seadrill) from Samsung Heavy Industries.
The timing seemed auspicious. Stena Drilling had just announced a new five-year contract with Shell for its reactivated drillship Stena Evolution, the former Ocean Rig Crete, which it bought from Samsung Heavy Industries for a price reported to be US$245 million (hold that number in your mind).
In August 2023, there was another private placement by Eldorado with investors ponying up another US$130 million to finalise the purchase of the two rigs… and success!
Zonda was awarded a three-year contract with Petrobras in Brazil that same month on a dayrate of around US$450,000 with local player Ventura providing the management and crew.
Unfortunately, execution is hard, especially when your customer is Petrobras. The rig needed extensive upgrades and modifications to bring it into service (surprise!) after years of lay-up at the yard.
Zonda finally sailed from Singapore in October 2024, but was only eventually accepted onhire by Petrobras, a notoriously finickity demanding client in April 2025, a full twenty months after contract award. That is twenty months in which Eldorado had been funding the full operating costs for the unit, of at least US$20,000 per day, plus all the capital and mobilisation expenses estimated at more than US$70 million.
Ouch.
In July 2024, the company made a move on its third drillship, the former West Draco, another Seadrill orphan, and existing lender Beal Bank chipped in another US$275 million of loans to close the deal. Beal Bank is like the A-Team of ship finance, if you have a problem and no one else can help, you turn to this privately owned lender named after its founder.
Unfortunately, commercial success with Dorado eluded Eldorado, and one suspects that by early this year, Beal was perhaps getting a little anxious about the prospects of its loans being repaid, with charter hire from Petrobras from Zonda likely only being received last month.
Other abandoned drillships, including Aquila, bought by Transocean and the former West Libra, managed by Constellation Oil Services but still owned by Hanwha and now renamed Tidal Action, took Petrobras contracts, and went on hire in 2024. Dorado and Draco sat first in Korea then in Labuan, offhire.
Last week, Eldorado folded its hand and sold them for a loss to the Turkish state oil and gas company TPAO for a reported price of US$245 million per rig. This is self evidently not a great deal for Eldorado, but having two rigs offhire is a horrible holding cost to bear, and both rigs probably require another US$80 million each to bring into service.
This is cash that Eldorado does not have, and would be unlikely to be able to access, except at punitive rates of interest or in yet another equity raise. Unfortunately, wealthy Norwegians really dislike equity raises, as there is no point in being wealthy if you have to reinvest cash in your companies rather than getting lenders or an IPO to contribute funds.
For the other deepwater drillers, the sale of the two drillships to TPAO is great news, as TPAO’s other four deepwater rigs – the two former Deepsea Metro rigs, ex-Sertao (acquired in 2020 for a mere US$37.5 million) and the former Cobalt Explorer, which it acquired in 2021 – have so far only worked in Turkish waters, or waters claimed by Turkey, and they have never been bid to third parties.
In rig analyst parlance, once Draco and Dorado are named after mighty Ottoman sultans and mobilised to Turkey, they will be “non-competitive.”
The all-inclusive, in-service cost of, say, US$325 million per rig for the TPAO duo also provides a comfortable valuation point for the other deepwater rigs in the global fleet. Indeed, US$325 million per rig is a valuation point higher than the value of the rigs implied in the share prices of Seadrill, Valaris and Noble, and similar to the implied value of the Transocean fleet.
It is also great news for Turkey, signalling that there is substance to TPAO’s recent claim of a 75 billion-cubic-metre natural gas reserve after the successful Göktepe-3 well in the Black Sea. President Recep Tayyip Erdoğan announced the discovery on May 16, hailing it as, “a pivotal development for Türkiye’s strategic energy future.”
Göktepe-3 is located 69 kilometres west of the existing 540 billion-cubic-metre reserve Sakarya gas field, which entered production in 2023, at a time when 98 per cent of the country’s gas was imported. Göktepe-3 lies 165 kilometres offshore, and was drilled in water depths of 2,100 metres by Abdulhamid Han, the former Cobalt Explorer.
According to the Turkish press, all four of TPAO’s existing drillships are working on the development drilling of Sakarya field, so the two extra rigs acquired from Eldorado can be assigned to appraisal of Göktepe or TPAO’s other exploration projects.
The increased prospectivity of the Black Sea is good news for the other littoral states, especially Bulgaria and Romania, both of which have deepwater drilling programmes planned or ongoing. We covered the Black Sea dash for gas last November.
If Russia finally ends its brutal war and there is finally peace in Ukraine, then Ukraine might also be a deepwater exploration candidate again, as will Russia when sanctions are lifted. Russia itself lacks any deepwater drilling rigs and will be reliant on foreign support.
ExxonMobil had announced an alliance with Rosneft to drill in the Russian sector of the Black Sea in 2011, but President Putin’s aggression in Crimea put an end of this.
In 2021, OMV Petrom signed a production sharing contract with the state of Georgia for Block II, an oil and gas concession located in the exclusive economic zone of Georgian Black Sea, although the swing of the current Georgian Dream government to oligarchy and authoritarianism may prevent any actual drilling occurring.
So where does this leave Eldorado? It has one rig on hire in Brazil, and it joins the single drillship club of DVD, Vantage, Hanwha and Singapore’s Keppel (with its speculative Can Do), all owners of just one deepwater drilling asset.
Single-vessel owners are vulnerable to shocks – one breakdown and all the charter hire disappears. This is not a happy place for shareholders or lenders.
I believe that it cannot be long before Ventura and Eldorado merge in an all-stock deal to provide some more liquidity to Ventura and a lifeboat for the rich Norwegian backers to escape in, and to chalk up the whole venture as a learning experience.
Rule number one of Eldorado is that all that glistens is not gold, and rule number two is that naming your speculative venture after a mythical city of unlimited riches in South America might be just a little arrogant.
Background reading
We covered the constellation of smaller Brazilian drillers in our January “Drill bits and pieces” article.
Looks like Russia has its own Ferry Fiasco to rival the Scottish, New Zealand and Tasmanian ones that we have covered and that are still ongoing.
Last week, the Organised Crime and Corruption Reporting Project (OCCRP) reported that Timur Ivanov, aged 49, the former Russian deputy defence minister responsible for military construction and logistics, was convicted by the Moscow City Court for embezzling over RUB216 million (US$2.8 million) in a scheme involving the purchase of the ferries Agios Lavrentius and Maria-Elena for service in the Kerch Strait between Russia and occupied Crimea.
OCCRP stated that he was also found guilty of laundering RUB3.9 billion (US$49.5 million) stolen from the now-defunct Interkommerts Bank and was sentenced to 13 years in prison for embezzlement and money laundering, as well as having multiple properties and cash confiscated. Corruption in Russia: who would have guessed?
Turn up your speakers and click this link to turn our Rig Roll into a genuine Rick Roll. Mr Astley’s quote that, “Inside, we both know what's been going on, we know the game, and we're gonna play it,” could perhaps be a quote from an Eldorado investor presentation.