COLUMN | Drill bits and pieces: Foresea and Ventura; Wither Vantage, DVD and El Dorado; Paratus' Mexican fix [Offshore Accounts]

As deepwater drilling rates hover around US$500,000 per day for the most modern dynamically positioned drillships, some uncertainty remains around whether rates will continue to surge through 2025, or whether subdued contracting activity this year will lead to some short-term softness in day rates, and to some of the final stranded rigs remaining stranded in Asian shipyards.

The previous year saw the sector’s consolidation continue with Noble buying Diamond Offshore and its fleet of four seventh-generation drillships, two DP semisubs, and three moored semisubs, one of which, Ocean Onyx, was stacked in Malaysia at closing.

Noble previously also acquired Maersk Drilling in 2022 and Pacific Drilling in 2021, doubling its fleet size in the process.

In October last year, there were rumours, first reported by Bloomberg, that the largest deepwater driller in the world, Transocean, was in talks to acquire Seadrill, the fourth largest deepwater owner. So far nothing substantive has emerged from those discussions.

New merger rumours – Foresea and Ventura

Last week, however, a new merger was reported to be under negotiation – this time an all-Brazilian affair between Foresea and Ventura Offshore. Ventura acquired the former Petroserv, which was founded in 1972, and was listed on the Oslo Børs in June last year after a substantial restructuring in the crisis.

Ventura owns and operates the semi-submersible drillship SSV Carolina and the deepwater drillship Victoria, which are both on charter to Petrobras until 2026. It also acquired the semi-submersible SSV Catarina last year in a complex deal with Norwegian investors. This rig is currently working for ENI in Indonesia, and it operates and manages the deepwater drillship NS Zonda, which was abandoned by Pacific Drilling in the downturn, and is now owned by El Dorado Drilling. The latter vessel is on a three-year charter with Petrobras in Brazil after finally being delivered from the yard in South Korea.

El Dorado jilted by Ventura?

We had assumed that the close connections between Ventura and El Dorado Drilling would have led to a merger between the two after El Dorado’s shareholders sold SSV Catarina to Ventura for US$100 million in cash and US$5 million in Ventura shares last year, and when Ventura took over the management of NS Zonda for El Dorado.

El Dorado has an operational problem. It has two beautiful new seventh-generation drillships stacked in Korea (Draco and Dorado, which were abandoned by Seadrill during its restructuring) but it has no means of managing and running them itself. Whilst the company has a superstar leadership team headed by former Seadrill and Borr Drilling CEO Svend Anton Maier, and says that it is “an experienced and capable drilling contractor” on its website, complete with what appears to be an AI-generated image of a bearded roustabout in a company branded hard hat, El Dorado seems not to actually have any actual employees doing any drilling now. This is why it relies on Ventura to run its one operational rig in Brazil.

A merger between Ventura and El Dorado would have been one of equals and would have given El Dorado a proven track record and the operational setup it lacks today. What the company doesn’t lack is the pile of debt used to acquire the three drillships from the Korean yards, and having cash flow from only one operational rig may stretch the company in the medium term.

It is not clear to me why any charterer outside Brazil would choose Draco and Dorado over two similar Valaris owned units with a similar specification and heritage, DS-13 and DS-14, which are warm stacked in the Canary Islands after Valaris acquired them in December 2023. As Valaris is one of the largest international rig owners in the world, no one can question the company's capability to put those rigs to work quickly and safely.

Foresea’s five rigs

Foresea owns and operates a fleet of five rigs, being the sixth-generation drillships Norbe VIII, Norbe IX, ODN I and ODN II, and the semisub Norbe VI. All of its drilling units are chartered by Petrobras in Brazil.

Whilst neither company has commented on the merger reports, such a union would provide some economies of scale for the merged entity in Brazil and would provide better bargaining power in 2026 when the existing contracts are re-tendered by Petrobras.

Other Brazilian independents

The merger might lead the remaining Brazilian independent deepwater rig owners to partner with El Dorado. These are Etesco and Constellation Oil Services. Etesco owns the drillship Etesco Takatsugu J and clearly lacks scale with just a single unit. It recently offered the Arabia II jack up on behalf of Borr Drilling to Petrobras in a recent bid.

Constellation owns a fleet of two moored semisubmersibles, three dynamically positioned semisubmersibles, and three drillships. Its 1976-built rig Atlantic Star is the oldest rig in Brazil and is the only anchored rig currently operating in the country, working through 2025 on a decommissioning project for Petrobras.

Constellation’s Tidal Action

Constellation has already been partnering with foreign rig owners to operate their units in Brazil. In September, Constellation won two new contracts with Petrobras, worth a total of US$1 billion over three years, for the charter of two ultra-deepwater drillships to Petrobras.

Laguna Star is part of Constellation’s fleet, but Constellation also offered the drillship Tidal Action. This is the former West Libra, which was abandoned by Seadrill and is now owned by its Korean builder, Hanwha. The pair of rigs will start work in the Roncador field in the Campos Basin later this year. Constellation also proposed the ADES Holding-owned jackup rig Admarine 511 to Petrobras in a recent tender, Upstream reported last week.

Deep Value Driller’s bareboat solution

El Dorado is not alone in facing the problems of a subscale fleet and a inadequate operating structure reliant on third parties to actually crew and work its rigs. Deep Value Driller (DVD) got around this problem by simply bareboating its seventh-generation drillship Deep Value Driller to Saipem for long term work in Ivory Coast with ENI.

Saipem does all the operations and maintenance on the rig and DVD just sends a monthly bill to Milan without the hassle of ordering spares, retaining crew, and fixing equipment when it breaks. Long term, we anticipate DVD will sell the rig to Saipem if the price is right.

Vantage is too small

Following the sale of its jackup rigs, Vantage Drilling might also appear to be the solution for El Dorado. Vantage now owns just one sixth generation drillship outright (Platinum Explorer) and manages Tungsten Explorer in a joint venture with TotalEnergies in which Vantage holds only 25 per cent of the shares.

The sale of Aquadrill to Seadrill meant that Seadrill has taken back management of the rigs that Vantage used to manage there, and it now has only two jackups under management.

Longer term, a merger of El Dorado and Vantage would solve Vantage’s chronic problem of a lack of scale, and El Dorado’s problem of a lack of operating capability.

Vantage might also provide a marketing channel for Keppel in Singapore. Keppel is stuck holding two harsh environment semisubs originally ordered by Awilco and the modern drillship Can Do, which it ordered speculatively in 2013 with spectacularly bad timing. Vantage might also extend the same courtesy to the Chinese state entities that own the former Opus Tiger drillships, which await completion and commissioning, and the abandoned Beacon Pacific and North Dragon semisubs.

Northern Ocean questions

There is also a longer term question over the future of Northern Ocean, the John Fredriksen-owned Norwegian driller that owns the harsh environment semisubs Deepsea Mira and Deepsea Bollsta. These two Moss Maritime CS60 design units are managed by Odfjell and longer term, a union of Odfjell and Northern Ocean would make sense.

As we continue to be on the lookout for the next mega-merger, let us not forget there is a still a lot of work to do on the fringes of the drilling market with too many subscale rig owners like El Dorado holding assets that they cannot credibly operate themselves but that are now too valuable to be considered distressed assets.

Mexican Mystery – Paratus Factors its Pemex debt

Now onto another legacy Seadrill fleet.

We have been following the slow-motion train wreck of Mexican state oil company Pemex’s failure to pay its suppliers for several weeks now. Rigs have been suspended by Pemex, rigs have been cancelled, DOF pulled a subsea vessel from the country, and unpaid bills have been mounting. The Mexican president has assured anxious contractors that Pemex will be paying its suppliers in March.

The latest turn of the screw was the announcement that Norwegian-listed company Paratus Energy Services, which owns five former Seadrill rigs in Mexico (four of which are working for Pemex and one of which is suspended) has turned to factoring. Factoring is a mechanism whereby Paratus assigns its overdue bills to a third party at a discount, and receives an upfront payment from the factoring company, which is then responsible for collecting the cash owed from Pemex. If it takes six months or a year, it doesn’t matter to Paratus, as the time lag is the problem of the factoring company, not of the rig owner anymore.

The company issued a stock exchange release last Friday stating that “Paratus Energy Services announces that its wholly owned subsidiary Fontis Holdings has entered into an agreement with a leading international bank that will facilitate payment to Fontis of approximately US$209 million of outstanding overdue invoices with its client in Mexico (the "receivables payment"), whereby Fontis will receive the funds from its client before the end of this month. The receivables payment is subject to an undisclosed upfront fee that is well below 10 per cent of the gross amount. Confidentiality provisions requested by the counterparty prevent further disclosure of the fee details.”

There was some added blah blah blah from Robert Jensen, CEO of Paratus, but with a depressing lack of clarity over how much of a haircut the company is taking on the deal or how long the receivables have been outstanding (my guess would be up to eight months or more already), as per page nine of its investor presentation in November, Paratus is billing Pemex at between US$125,000 and US$142,000 per rig per day, depending on the unit.

From Paratus’ point of view, the deal makes sense as it provides cash this month that can then be used to support the company’s promised dividend payments. It may set a precedent for other hard-pressed contractors to monetise their overdue invoices from Pemex.

"The company will continue to opportunistically evaluate its alternatives to optimize its receivables balance in the future," Mr Jensen concluded.

Even after the factoring deal to bring in US$209 million, Paratus says it was still owed another approximately US$140 million from Pemex as of December 31, 2024. The road to full recovery is going to be a long one for all of the Mexican company’s contractors.

Background reading

We updated the torrid saga of Keppel and its armada of abandoned rigs in December.