Valaris Takes Delivery of “Newbuilds” as Builders Sell Laid-Up Drillships

 

The resurgence in the offshore energy market has been good news for shipyards primarily in Asia that were holding long-delayed drillships hoping they would find a market. In the latest development, Hanwha Ocean has completed the clear-out of vessels long ago contracted by Daewoo Shipbuilding & Marine Engineering with Valaris confirming it has exercised a purchase option for two decade-old vessels.

Valaris reported that it has taken delivery of the two “newbuilds” after exercising a purchase option reached with the shipyard in August and eight years after the vessels were initially scheduled to be delivered. The company reports that the vessels, which are now known as Valaris DS-13 and Valaris DS-14, were acquired for an aggregate purchase price of approximately $337 million.

“We are delighted to add these two rigs, the highest specification drillships remaining at the South Korean shipyards, to our fleet,” said Anton Dibowitz, President and Chief Executive Officer of Valaris. “These additions increase our drillship fleet to 13 rigs, reinforcing its position as one of the most technically capable in the industry. Based on our positive market outlook, growing future demand, and strong customer interest in these rigs, we believe that the purchase of these high-specification drillships at compelling prices will generate attractive returns.”

Valaris gained the option to acquire the vessels in August 2023 after reporting a strong increase in activity. Since mid-2021, the company which had gone through bankruptcy and consolidation due to the market downturn, reports the contracting of six of its stacked drillships.

DS-13 and DS-14 were originally ordered in 2012 by Atwood Oceanics from DSME during a continued market boom. The construction contract called for delivery of the vessels in 2015 but with the market slide, Atwood deferred delivery. Ensco acquired Atwood in 2017 gaining the rights to the two vessels and two years later it in turn merged with Rowan to form Valaris. The company renewed the purchase option in August citing the vessels as among the best options remaining at the South Korean shipyards.

Each of the vessels which is 104,000 displacement tons, was designed with a maximum 40,000-foot drilling depth. They are double-hull vessels with two blowout preventers, a design feature the company said would require $50 million to add to other vessels. 

The delivery of these two vessels follows a similar agreement in September between the shipyard and Transocean. The company purchased another decade-old drillship originally ordered by Seadrill, then anticipated to be sold to Northern Drilling, before Transocean stuck a deal with DSME in late 2022 that led to it taking delivery of the vessel now known as Deepwater Aquila during the third quarter of 2023.

Valaris’ Dibowitz recently told investors that he believed the yards were close to clearing out the last of the idle tonnage. He predicted it was unlikely that any other vessels would be ordered because of the high cost of construction and long delivery times. Valaris got a “bargain price” for the vessels and expects to see a tight market and increasing demand for drillships going forward.

DS-13 and DS-14 will be mobilized from South Korea to Las Palmas, Spain, where the rigs will be stacked until they are contracted for work. Valaris anticipates a further capital expenditures of approximately $35 million in 2024 primarily related to mobilization costs.