Shelf Drilling secures $558M contracts in Nigeria, others amidst Saudi suspension

Shelf Drilling, a Dubai-headquartered provider of shallow-water drilling services, has announced a significant boost to its order book, securing over half a billion dollars in new contract awards and extensions during the third quarter. Despite facing recent suspensions of rig charters in Saudi Arabia, the company remains optimistic about its prospects, citing strong customer relationships and a leading position in key global markets.

The drilling contractor secured new firm contracts and extensions totaling $558 million in Q3, including agreements with operators in Nigeria, Chevron in Thailand, and Equinor in the North Sea. A highlight of the quarter was the commencement of a multi-year contract in late October for a rig redeployed from Saudi Arabia to West Africa. Shelf Drilling is optimistic about additional opportunities for its rigs in the West African region, which remains a key area of growth.

Navigating Challenges in Saudi Arabia

Although the recent suspension of five rigs in Saudi Arabia has posed short-term challenges for Shelf Drilling, CEO Greg O’Brien expressed confidence in the company’s long-term outlook. “While the rig suspensions in Saudi Arabia have created some short-term challenges and uncertainty, we are confident that our strong customer relationships, proven operating track record, and leading position in key markets will allow us to capitalise on the right long-term opportunities in our sector,” O’Brien said in a statement on Wednesday.

The suspensions come as Saudi Aramco issued a notice of suspension for Shelf Drilling’s High Island IV rig, which is expected to be off-charter for up to a year starting later this month. However, the company maintains the right to market the rig during its downtime, potentially mitigating some of the impact.

In addition to these challenges, Shelf Drilling also completed the sale of its Baltic rig for $60 million in the quarter. The company also obtained regulatory approvals for its Shelf Drilling Barsk rig in Norway, which is set to begin a charter with Equinor later this month and extend through mid-2026.

Read also: COP29: Oil majors pledge $500m to boost energy access

Solid Financials and Utilisation Rates

Shelf Drilling’s third-quarter results show a steady financial performance, with adjusted EBITDA of $114 million—nearly unchanged from the same period last year. The company’s effective fleet utilisation dipped slightly to 77% from 80% in the second quarter, reflecting the impact of the suspended rigs in Saudi Arabia and other planned maintenance activities.

While the suspension of rigs in Saudi Arabia and the sale of the Baltic rig weighed on utilisation, Shelf Drilling was able to offset some of the losses with the commencement of a new contract in Vietnam. The company’s contracted backlog remains strong at $2 billion, with 32 out of 35 rigs under contract, representing a marketed utilisation rate of 91% as of September 30.

Looking Ahead

Despite some near-term challenges, Shelf Drilling is optimistic about the future. The company’s average earned dayrate for the third quarter was $81,800, a slight decrease from the previous quarter. Operating and maintenance expenses for the quarter were $132.6 million, a 6 percent decrease from the prior period, driven by reduced costs related to the suspended rigs and the sale of the Baltic.

Looking forward, Shelf Drilling remains focused on its key markets, including West Africa, the North Sea, and Southeast Asia, where it sees strong demand for its drilling services. With a robust order backlog and an improving outlook in regions outside Saudi Arabia, Shelf Drilling is well-positioned to navigate through current market challenges and continue capitalising on long-term opportunities.