Samsung Heavy Industries could be down to just one orphaned drillship newbuilding by the end of the next financial year, according to one analyst.
In the third quarter of 2022, the South Korean shipbuilder had five newbuilding drillships in its inventory, which led to occasional one-off costs on layup expenses and losses from revaluations.
However, late last year Italian offshore vessel operator Saipem exercised a purchase option for one of the drillships it had initially taken on a two-year bareboat charter.
The Milan-based company purchased the 2021-built seventh-generation drillship Santorini for $230m in a deal financed entirely from available cash.
Saipem said the investment decision was based on an expected return on investment of over 15%, with a payback period of five years.
It said the current level of daily market rates for seventh-generation drillships, which continue to show a robust growth trend, were around $400,000 per day in 2022 and are expected to grow to levels above $450,000 per day by 2025.
Saipem said the business prospects are determined by the favourable trend in demand in the offshore drilling segment and in particular deepwater.
“The significant growth of the deepwater market now offers interesting opportunities for the deployment of the fleet,” it added.
The company added that the situation is helped by the limited availability of technologically advanced assets, in a global market environment where demand for drillships significantly exceeds supply, a trend expected to strengthen.
Samsung’s management said at the recent fourth quarter results conference call that two further vessels have been contracted to be sold, while a memorandum of understanding has been signed for the sale of a fourth drillship.
“Thus, by the end-2023, only one drillship inventory will remain,” Nomura’s South Korea industrials analyst Eon Hwang said in a recent note to investors.
“Drillship inventory push-out will help reduce one-off costs/ financial risks as each drillship inventory delivery leads to KRW 300bn ($122m) cash inflow.”
The five drillships were originally ordered at Samsung by John Fredriksen’s Seadrill (two), the former George Economou-backed Ocean Rig (two) while the fifth rig was originally contracted by Idan Ofer-backed Pacific Drilling.
