COLUMN | Quick updates, part one of two: Saudi Arabia; Shell shines; Noble's success; Greatdrill's Pyrrhic victory in India [Offshore Accounts]

We live in strange and uncertain times. As Lord Tennyson put it, as he watched the waves:

“Break, break, break,

On thy cold gray stones, O Sea!

And I would that my tongue could utter

The thoughts that arise in me…”

Even with oil prices sagging back to US$61 per barrel, due to concerns on a sluggish global economy and a possible recession in the USA, the eight OPEC+ nations, including Saudi Arabia and Russia, declared on Saturday that they would make a second consecutive monthly increase of 411,000 barrels of output per day for June. 

The principal thought which arises in me is, “Why?”

Saudi Arabian 4D chess at OPEC+?

Is Saudi Arabia expecting American sanctions on Russia to tighten so it wants to indicate its willingness to provide more production, or is it trying to push down the oil price so that American shale output is reduced? Or does it want to punish some recalcitrant OPEC members (thinking of you, Kazakhstan) for their quota violations. Nobody knows.

The kingdom was already expecting to borrow US$27 billion and run two per cent of GDP as its budget deficit this year. However, weaker oil prices mean lower income at the Saudi treasury and the budget breakeven price projected for Saudi is US$92 per barrel this year. There have been reports of some spending cuts and what is referred to as the “prioritisation of projects” to reduce outlays.

Certainly, ambitions for the futuristic city of NEOM in the Kingdom have been drastically scaled back in the short term. Construction of the 170-kilometre-long, 200-metre-wide linear city known as "The Line" is far behind schedule.

Saudi Arabia’s initial projection was for 1.5 million residents to be living in The Line by 2030. However, Engineering.com now reports that by 2030, “the city might only house around 300,000 people, and even that is uncertain.”

Saudi Arabia plans to host the completely transparently awarded 2029 Asian Winter Games, the 2030 World Expo, and the 2034 FIFA World Cup, so these prestige projects may take priority over The Line.

Perhaps wait on booking your ski trip to Trojena in the mountains of NEOM until this implausible winter sports paradise is actually finished, and the snow machines are delivered and functional.

Saudi Aramco’s wave of jackup rig suspensions in 2024 has reduced offshore activity in the Kingdom and reduced Aramco’s spending. In January 2024, there were 75 rigs working offshore in the Kingdom; by March 2025, the number had fallen to 60 according to Esgian.

Some of the 31 rigs suspended by Aramco last year have now received notice that their suspensions will be increased by another 12 months, boding ill for any imminent increase in activity, whilst 18 have relocated to contracts outside the Kingdom. The owner of ADES, the world’s largest jackup owner, the Public Investment Fund, raised US$1.25 billion in a second debt sale this year.

However, with low levels of government gross borrowing at around 30 per cent of GDP in 2024, and with US$ 437 billion in reserves, the Saudis are well-placed to ride out any turbulence in the oil markets, even if it will be painful to those hoping to sell crystal chandeliers and gold-plated toilets for the World Cup stadiums.

Shell shines

An analyst at Rystad told the Financial Times that, “OPEC+ has just thrown a bombshell into the oil market,” with its production increase.

It isn't exactly a statement to fill anyone working in drilling or oilfield services with delight, but Europe’s largest oil company Shell was bullish when it reported its results.

Like all the oil majors, Shell reported a drop in profits for the first quarter of the year to “only” US$5.6 billion (down 28 per cent), but indicated that it saw buying back its own shares as a better use of capital than buying BP (rather awkward for BP, one would have thought, even for the issue to have arisen in questions).

The Shell CEO reassured investors that the company could and would still continue to pay its dividend at a US$40 oil price, and that even with a US$50 Brent crude price, Shell could still buy back up to US$7 billion of its own shares annually, as well as paying the dividend.

For fourteen quarters in a row, the company has spent more than US$3 billion a quarter on share buybacks, more than it does on exploration.

Noble is also optimistic

Rig owner Noble Corp reported its first quarter results on April 28, and there was solid performance again, with net income of US$108 million, an increase of US$11 million over the preceding quarter.

But of most interest to investors, competitors and rig crews were details of some key contract wins, which seem to suggest resilience in the deepwater drilling market. There was great news regarding long-term programmes from Shell and TotalEnergies in the Americas.

Whilst rates for drillships have not surged above US$500,000 for deepwater drillships, as many of us hoped they would this year, they remain very solid.

The company reported that Noble Voyager and a second seventh-generation drillship have each been awarded four-year contracts with Shell in the US Gulf.

The two contracts, scheduled to commence in mid-2026 and at end of 2027, each include a base day rate value of US$415,000 (inclusive of upgrades and services but excluding additional fees for mobilisation and demobilisation)… but, there is the potential for Noble to earn performance incentive compensation of up to a maximum of 20 per cent of the base value.

The performance incentive is not guaranteed and is contingent upon achieving specific performance targets, so the day rates could come in as high as US$498,000, if Noble hits Shell’s targets.

Additionally, Noble Developer and a second seventh generation drillship have each been awarded 16-well (estimated 1,060 days) contracts with TotalEnergies in Suriname which are expected to commence in late 2026 or early 2027.

Together, the firm revenue of the two contracts is US$753 million, being US$355,000 per day, which sounds terrible until you realise that the contracts in Suriname allow for an additional US$297 million in revenue tied to collective operational performance program with TotalEnergies. This equates to US$140,000 per day and brings those two rigs potentially within touching distance of that US$500,000 per day target.

I think we can see how the Noble marketing team’s logic works.

The company also confirmed that the semi-sub Noble Discoverer received a 390-day extension from Petrobras in Colombia on top of the 400-day firm period underway, thus extending the rig from July 2025 to August 2026 at its existing (undisclosed) day rate.

In December, Petrobras announced it had made the biggest gas discovery in Colombia’s history with the Sirius-2 well, which the Noble rig drilled in 830 metres of water. Clearly the appraisal is going well.

You can view the Noble fleet status report from last week here.

Greatship's Pyrrhic victory with ONGC

One of the most shocking stories of last week was not Aussie opposition leader Peter Dutton losing his seat in the general election, nor (surprise!) the People’s Action Party winning a landslide in Singapore’s general election, but the results of a tender for a jackup drilling rig for ONGC, India’s state owned-offshore oil and gas producer.

When the bids were opened, ONGC found that local player Aban Offshore had proposed US$63,000 for the 2008-built Aban VIII, while Oslo-listed Shelf Drilling bid a day rate of US$65,000 for the 1983-built jackup Parameswara.

So far, so normal. These are not great rates, but India is a low-cost market and ONGC’s specifications are typically loose (hence Shelf offering a 42-year-old unit without disqualification).

But then, writing in Upstream, Nishant Ugal described how the winning bidder offered a rate so low that one wonders whether someone had made some kind of mistake:

“Greatship surprised other contenders in this category by offering the lowest operating dayrate of $35,587 for its jackup Greatdrill Chitra, one source said….

"Next in line was compatriot Jindal Drilling, which quoted an operating day rate of US$45,850 for its jackup Jindal Explorer, while Dynamic Drilling offered a day rate of $55,450 for its jackup Victory Driller, sources said.”

What? There must be some mistake, surely?

No, Mr Ugal’s source followed up with a devastating quote:

“We haven’t witnessed such low day rates being offered in long-term ONGC rig tenders since 2017.”

Bidding 25 per cent lower than the second bidder is never a good sign. Bidding a rate of US$35,587 for a 16-year-old rig in 2025 is nuts, especially as ONGC has now asked Jindal and Dynamic to match the dreadful Greatship price.

It’s not just Chitra

What’s alarming is that Greatship also owns eight platform supply vessels (PSVs) and nine anchor handling tug supply vessels, seven at 80 tonnes BP and two 150-tonners, as well as two small subsea vessels. The company also operates three other jackups, so it is not as if it was forced to place its only asset in its home market.

Greatship’s parent company is Great Eastern Shipping, India’s largest, founded in 1948 and owned by the Sheth family, which operates a fleet of 38 conventional wet and dry cargo vessels including crude tankers, product tankers, dry bulk carriers and LPG carriers.

Is the controlling family anxious about a global depression and eager just to lock in charters so long as they are not loss-making? What does the Sheth family see that the rest of the industry does not? Or are they just being irrationally conservative?

I do note that in the last year the company has sold seven of its deepsea vessels and acquired only three, but does that mean anything?

The company’s most recent financial results showed it was profitable for the quarter to the end of June 2024; indeed, highly profitable, making US$96 million for the quarter, although offshore was much weaker than the wet and dry ships, but the company has been profitable for the whole year and it pays a regular dividend.

What is going on in Mumbai to warrant such low bidding to ONGC?

The industry really does not need desperate owners low-balling rigs and boats to increase utilisation and just cover cash costs. After the miserable years of the downturn from 2015 to 2021, Greatship’s rate for this ONGC tender fills me with dread.

Yes, the suspensions in Saudi Arabia and ongoing terminations and suspensions in Mexico have reduced jackup rig pricing, but not to the extent of dropping rates too close to the cash breakeven operating costs for the rig.

When Tidewater bought 37 PSVs from Solstad in 2023, its CEO Quintin Kneen said his ambition was to create “the safest, most sustainable, most reliable, most profitable high-specification OSV fleet in the world."

Mr Sheth and team, please take note.

Some markets are depressing pools of bad contract terms, low rates, low standards, and weak profitability. Mexico and Egypt have long been like that. Greatship’s pricing for ONGC further reinforces the perception that India is now the lowest of the low in terms of offshore jackup rates.

Some bids aren’t worth winning and I suspect this ONGC tender is one of those. Perhaps Greatdrill Chitra should be renamed Greatdrill Pyrrhic?

Later in the week, we will return for a brief overview of the sale and purchase market and review a judgement in Singapore.

Tidewater to follow

Supply vessel giant Tidewater will release financial results for the three months ending March 31, 2025, on Monday, May 5, 2025, after this piece comes out.

Is Noble’s optimism or GreatDrill’s pessimism warranted? Find out at tdw.com.

Let’s close with Tennyson again:

"Break, break, break

At the foot of thy crags, O Sea!

But the tender grace of a day that is dead

Will never come back to me."