Ensco dayrates fall in US Gulf

Dayrates for Ensco floater rigs in the US Gulf of Mexico are falling, according to the company's latest fleet status report, as several of the units are set to come off contract soon.

Deep-water rig rates fell between around $5000 and $15,000 on five of the nine floaters working in the US Gulf, including four of the 8500 series of semi-submersibles, Ensco said.

Rigs with the biggest swing in dayrate included the Ensco 8500, on contract to Anadarko and Eni. That rig is now drilling in the "low 300s" compared to last month when it was drilling in the "high 310s".

The Ensco 8506, under contract to Anadarko, is now on a dayrate in the "mid 530s" compared to the "high 540s" last month.

Ensco 8505 (Anadarko/Apache/Noble Energy), Ensco 8501 (Noble Energy) and drillship Ensco DS-5 (Petrobras/Repsol) also saw reductions in dayrate this month.

"Rate adjustments are fairly common due to different labour requirements from different customers and on projects, insurance, and shifting pass-through costs," analysts at Cowen & Company said in a note. "However, seeing five adjustments in the GOM all at once was a bit of a surprise."

Cowen pointed out that Ensco is "fighting to keep its GOM rigs utilised, particularly its 8500-series rigs which have been replaced in several cases by the newest, most-capable drillships".

Contracts expire within the next five months for each of the 8501, 8502, 8503 and 8505, and Ensco could be facing a tough sell on some of those rigs for higher dayrates, Cowen, said.

"We expect the company will be hard-pressed to find work for each without realising significant downtime between contracts," the analysts said. "We also expect that one or more of these rigs will exit the GOM entirely and look for work internationally."

Recent dayrates for the 8500 series have been in the mid-to-high $300,000 range. The Ensco 8503 recently got to work for Llog Exploration at a dayrate in the "mid-370s". That contract expires next month and has two one-well options.

Ensco's three drillships in the US Gulf remain under contract through the summer of 2016. However, Ensco revealed that the DS-5 suffered an additional seven days off dayrate, presumably due to a top drive failure on the rig while drilling Repsol's Leon wildcat in Keathley Canyon Block 642. The rig lost 34 days of income in the second quarter.

In more positive news, Ensco inked contracts for a pair of older jack-up rigs, one of which was in the US Gulf.

The Ensco 86 will work for one month for ExxonMobil at $125,000 per day until August.

"The rate is very attractive in a GOM market that has seen the number of working jack-ups dip below 30 for most of the year," Cowen said. "GOM jack-up rates could fall as we head into hurricane season but have held up very well considering the current demand softness."

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