Did Petrobras sell their Jack-ups P59 and P60 cheap?

Rowan announced last week that it has closed with Petrobras the purchase of the P-59 and P-60  jack ups rigs for US $ 77 million,  US $ 38.5 million for each unit. The rigs, which are stacked at the construction site of São Roque do Paraguaçu, will be deployed to the Middle East in the first quarter.

Petrobras was able to increase Rowan’s own offer for the two rigs by $ 8.5 million at auction of May last year. The US company had offered $ 30 million for each of the drilling rigs.

Rowan’s offer has caused reaction in social networks and criticism by the opposition to the government Michel Temer. The company has been constantly accused of selling the rigs for prices below the construction price. The auction of the units had a minimum price of US $ 40 million for each of the rigs.

And how much did it cost?

Petrobras invested US $ 720 million in the construction of P-59 and P-60. The construction was commissioned by the Rio Paraguaçu consortium, formed by Odebrecht, UTC Engenharia and Queiroz Galvão, in 2008. The consortium later became the Enseada Paraguaçu Shipyard, which is now only the Enseada Shipyard.

The units have capacity to operate in places where the water depth varies from 10 to 106 meters, with capacity to drill wells up to 9,144 meters, under conditions of high pressure and temperature. That is, they can drill wells only in shallow water.

The construction of the units in the country was more expensive than some of the similar units contracted in the same year. In July 2008, Maritime Industrial Services entered into a contract with Mosvold Middle East Jackup (MEJU) to build two jack-ups for $ 335 million,. It generated, however, more than 2,000 direct jobs in Bahia.

And what is the reason for the sale?

The construction of the P-59 and P-60 was a milestone in the resumption of projects of that type in the country. It had been almost 30 years since the country had manufactured jack-up rigs. But with the discovery of the pre-salt, announced by Petrobras in 2007, the company began to focus its operations in deep and ultra-deep waters in the country.

The difficulty of licensing projects in shallow water in the country, due to the correct rigor of IBAMA with these regions, also helped the companies that work in Brazil to focus on the deep waters. Licensing for shallow water is costly and unsuccessful, especially for regions near the coast.

The two rigs were delivered between 2012 and 2013. ANP data indicate that the P-59 has drilled only one well since it was delivered. The P-60  has not drilled any well since its delivery to Petrobras and was eventually used as a floatel that accommodates crews for repair on oil production platforms.

And the sale went cheap?

Five analysts heard by E & P Brasil on condition of anonymity affirm that the price obtained by Petrobras is the possible at the current moment. They all warn that it is necessary to include in the value the cost of maintaining such a platform. In the case of Petrobras, two rigs.

The analysts’ account also includes the current scenario of the global drilling market. There are 633 drilling jack-ups in the world today, with 228 units similar to those sold by Petrobras. More than 110 of these similar units sold by Petrobras are stacked for lack of demand, as the drop in oil prices has had a strong impact on exploration activity worldwide.

Add to this the fact that there are 56 jack-ups equal to P-59 and P-60 under construction in shipyards around the world that will be delivered between 2018 and 2020. This puts more pressure on the sale price of the units, since the supply of rigs will increase in the next years without the demand following.

Analysts pointed out that Rowan was the only company that appeared in the auction made by Petrobras since it was owner for many years of technology LeTourneau, used for the construction of the Petrobras rigs, and  owns a fleet with 16 units with the same technology. The knowledge of the technology must have increased the company’s interest in the rigs, since the units will need adaptation to work in international waters because of the changes made by Petrobras for the project.

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