Maersk unit eyes 7 oil rigs
Denmark's Maersk Drilling will invest up to $8 billion to buy seven new oil rigs by 2017, undeterred by waning global energy demand and a 20 percent drop in crude prices in the last four months, the chief executive told Reuters on Thursday.
The drilling unit of A.P. Moller-Maersk plans to place the first order within the second half of 2013 as part of its campaign to double its fleet to 30 over the next five years.
"We are pursuing this plan despite the world economic situation. So far, we haven't found a reason to change," Claus Hemmingsen said during a visit to the company's office in Singapore.
Oil production is moving deeper offshore with untapped reserves found further and further from the coasts of the United States, West Africa, Brazil and Asia, keeping demand strong for rigs owned by Maersk Drilling, Transocean (RIG.N) and others.
"Over a 20-year period, (the world) needs to find new oil to the tune of four to five times the production of Saudi Arabia," Hemmingsen said. "We do not foresee the oil price being below $100 in the long term."
Oil prices need to average above $70 to $75 a barrel to keep deepwater projects economically viable, Hemmingsen said. Brent crude traded near $100 on Thursday, but has plummeted to as low as $36.20 during the last four years.
Maersk's expansion plans come on top of the firm's current $4.5 billion order for seven platforms, which will be delivered by the end of 2015.
South Korea's Samsung Heavy Industries (010140.KS) is building four of Maersk's ultra-deepwater drillships, which can operate at depths of more than 3,500 metres. The platforms are used for exploration and production in West Africa, the Gulf of Mexico and Australia.
The firm also has Singapore's Keppel (KPLM.SI) constructing three ultra-harsh environment jack-ups, which are likely to be used to drill in the volatile waters of the North Sea.
Hemmingsen expected the new orders would also be built in Singapore and South Korean shipyards.
The company's 16 large offshore drill rigs now in operation are fully contracted out this year, 85 percent so far for 2013, and more than 50 percent in 2014, he said.
Hemmingsen expects the daily deepwater rig rate to stay between $500,000 and $600,000 over the next decade. Maersk Drilling reported it would receive $548,000 a day, its highest daily rate to date, for a Gulf of Mexico project to begin in 2014.
The 40-year-old firm expects profits for the drilling unit to steady near last year's $495 million.
Shares in Maersk Drilling's parent company closed Wednesday up nearly 1 percent. The stock has risen more than 7 percent year-to-date, outperforming a drop of 9 percent in the Copenhagen exchange's bluechip index.