Pacific Drilling S.A. (NYSE:PACD) Q3 2019 Earnings Conference Call - Final Transcript

Nov 06, 2019 • 11:00 am ET


Pacific Drilling S.A. (NYSE:PACD) Q3 2019 Earnings Conference Call - Final Transcript


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Bernie G. Wolford

Mexico. We anticipate commencing work for Equinor in December. Our crew and operations support team have done an excellent job of preparing the rig which with MPD is one of the highest specification seventh-gen drillships in the world. It is noteworthy that this is our second smart-stacked rig to return to work after the Pacific Santa Ana again demonstrating the quality of our competitive fleet. The Pacific Santa Ana finished a well for Total in Mauritania earning a performance bonus on its second well after ramping up from smart-stacked mode. The rig then mobilized to Las Palmas for a thruster change-out and installation of integrated services equipment in preparation for our Petronas program in Mauritania with an anticipated duration of 12 months. Turning to the market for our fleet of sixth and seventh-generation drillships we continue to see a positive trend in terms of new tenders and average durations for tendered programs.

To provide some context in the third quarter we received 14 new tenders or bid opportunities as compared to the second quarter when we received 8 new tenders. In addition in Q3 we received 19 requests for information or RFIs for contemplated drilling programs as compared to 13 RFIs for Q2. We also continued to be engaged in direct negotiations in addition to the tenders and RFIs noted. This improved opportunity rate continues in this early part of the fourth quarter with 4 new tenders and 5 RFIs received. In our second quarter call we noted that approximately 6 deepwater tenders were outstanding for anticipated award in the balance of 2019. All 6 of those plus 2 additional tenders have since been awarded. Through the remainder of 2019 we expect at least 4 additional deepwater tenders to be awarded. Turning to the supply side of the 11 sixth and seventh-gen drillships warm-stacked and available on a global basis we see 4 in advanced stages of discussion to be awarded work in Q4 4 available warm-stacked and 3 that will not compete outside of limited regional niches.

Beyond those we see up to 10 currently contracted rigs with potential availability through the first half of 2020; all of this against a backdrop of near-term demand represented by the current 26 opportunities in the active procurement stage. With the demand picture improving our high-spec smart-stack rigs the Pacific Meltem and Pacific Scirocco have significant contract opportunities as they are among the most technically capable rigs available for these programs. For the market overall this supports an expectation that the current 86% marketed utilization is headed meaningfully north of 90% in the first half of 2020. Another key indicator I would draw your attention to is the virtual elimination of sublets or farm-outs of ultra-deepwater drillships by our clients. The current number of drillship sublets is at or near zero the level last seen in late 2012. This less visible past source of supply is no longer a factor in the market. Options exercised new contracts improving rates and a demonstrably