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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Michael Acuff

the first half of 2020. With the demand we see in the U.S. and Mexico next year we believe rates will continue to strengthen as they have already beaten last quarter's prediction of surpassing the $200000 per day mark with the announcement of the $202000 per day contract in the third quarter earlier this year. In a moment I will walk you through our fleet update where I will further discuss rates. Looking at the visible demand this past quarter we received 14 new tenders representing 7.1 rigs years of firm work with 9.9 years of associated options; as compared to the second quarter when we received 8 new tenders representing 9.3 rigs years of firm work and four, five years of associated options. In addition as Bernie stated in Q3 we received 19 requests for information for contemplated drilling programs compared to 13 RFIs for Q2.

We also continue to be engaged in direct negotiations in addition to the tenders and RFIs I've noted. We currently have in house more than 26 high-spec drillship opportunities in the active procurement stage with 24 scheduled to start in 2020. This demand visibility along with the discipline seen amongst the contractors regarding additional supply entering the market gives us confidence that the high-specification drillship segment of the market will see meaningfully higher dayrates for the best equipment in the second half of next year. Turning to our working fleet the Pacific Khamsin is finalizing the customer acceptance testing and loadout in the U.S. Gulf of Mexico and is expected to commence its 3 firm well plus 1 well option contract with Equinor in December. I would like to remind you that Total will be utilizing the Khamsin for the first option well. We are excited to begin work with these two performance-driven customers that are returning to the U.S. Gulf of Mexico after several years outside the basin. We are truly honored that they have chosen Pacific to partner in delivering key exploration wells in 2020 for what we hope is the beginning of a long and mutually beneficial partnership with each.

Equinor has recently exercised a second option well of the contract at a base rate of $215000 per day which excludes additional compensation for NPD and integrated services with the potential for the base rate to rise to $235000 per day if the well is spud after August 15 next year. With this announcement we expect the rig to be occupied until at least October 2020 with one additional option remaining on the current contract. The Pacific Sharav is currently completing the first well of the new contract extension with Chevron in the U.S. Gulf of Mexico. Yesterday Chevron exercised the first option at $185000 per day firming up the rig until at least the end of February 2020 with 2 options remaining. The Pacific Santa Ana recently completed Total's Senegal and Mauritania exploration program followed by the successful execution of the planned change-out of the rig's thrusters in Las