Stena DrillMAX, one of Stena Drilling’s four deepwater drillships, is chartered to Tullow Oil and positioned outside the coast of West Africa.

Stena Drilling

EXTENDED CONTRACTS AND TWO RIGS ORDERED

Stena Drilling is one of the world’s leading independent drilling rig operators. The company operates globally from its head office in Aberdeen, Scotland, with four drillships for ultradeep water and three midwater drilling rigs. With several successful newbuildings and refurbishment projects, Stena Drilling has been a pioneer in several areas of technological development and innovation in the offshore industry.

In 2013, Stena Drilling contracted the construction of two midwater drilling rigs from Samsung Heavy Industries with the right to cancel one unit. The estimated cost is MUSD 800 per rig, with delivery of the first rig scheduled in April 2016 and the second in September 2016.

A commercial highlight during the year was the contract extension for Stena Forth. The new, five-year agreement includes cancellation rights, but extends at least until year-end 2015. The contract was signed with Hess Corporation, and Stena Forth will be operating in US waters outside the Gulf of Mexico.

Several contracts for Stena Drilling’s other units were signed during the year. After a new contract signed with Statoil, Stena Carron will operate in the waters outside Angola beginning in the first quarter of 2017. Stena DrillMAX’s three-year contract with Tullow Oil took effect in 2013, and it is now operating outside West Africa.

During the year, Stena Drilling installed a second blowout preventer (BOP) on Stena DrillMAX and Stena Forth to increase safety in connection with oil drilling. Stena Spey and Stena DrillMAX underwent routine Special Periodic Services (SPS) during the year to maintain their mandatory classification.

Safety

Safety on the drilling units is of critical importance to Stena Drilling. A tragic accident on board Stena Clyde in 2012 killed two of our crew members. Until and since then, Stena Drilling has avoided serious incidents.

Safety work is organised at the staff level, but critical measures are handled in the line organisation on the drilling units. The company monitors developments through statistical feedback and other reporting, and takes initiatives to ensure that the personnel focus on safety work. To maintain safety, employees regularly receive training to be prepared if the unexpected occurs.

Since people are involved, there is always a risk of error, but Stena Drilling is working to gradually eliminate hazards. This applies to the safety culture as well as practical measures such as properly maintaining processes, machinery and materials.

In the last year the staffing on board Stena Clyde has been reviewed and the safety department has been reorganised. Stena Drilling’s safety work is continuing with the aim of reducing the number of incidents to zero.

A crew member standing beside the drilling tower on the drillship Stena Forth.

Market development

The oil exploration and extraction market has changed in the last 20 years. Previously, it was 80% controlled by international oil companies, but today it is dominated by state-owned enterprises. Twenty years ago, no one would have thought that Chinese national oil companies would become important partners, but that has changed. Stena Clyde will operate in the waters outside Australia for Sinopec of China in 2014. Although this market shift has affected the business, the fundamental needs are still the same: oil companies need financing and technology.

Market analysts are forecasting a production increase of 2–3% per year in the long term, but in 2014 there will probably be a slight decline in production. The oil companies’ marketing strategy had previously been to increase revenue, but now many are giving profitability higher priority. Because of this, many are planning to reduce their exploration activities. To be profitable, they have invested more in production instead.

The market for ultradeep water will have difficulty raising capacity in coming years, and not before 2016–2017 are capacity shortages expected to be relieved by the arrival of new drilling units. The market has plenty of older rigs that are being phased out and replaced by modern rigs.

 

CEO Comment

Oil is a cornerstone of our society and will remain so for a long time to come. It is energy rich, easy to transport and easy to use. On that basis, Stena Drilling views the market positively.

Thanks to the contracts it has signed, Stena Drilling is secure through both 2014 and 2015.

The years ahead look strong, especially with regard to operations in the North Sea and in particular the Norwegian and UK sectors, which are characterised by older rigs that will be phased out and replaced by new rigs. As a result, we anticipate a year of profitable contracts and will therefore focus on first-rate operational and safety performance on our vessels and rigs. In the future, we will accept nothing short of performance perfection.

TOM WELO CEO Stena Drilling

Stena Drilling • Case Hess

Alignment brings out the best in each other

Hess have a long standing and successful relationship with Stena Drilling dating back to the early 1990’s with the Stena Spey drilling unit in the UK North Sea. More recently the Stena Forth and Stena DrillMAX drillships have worked for Hess. The Stena Forth is in the 5th year of a long term contract and is currently operating in the Gulf of Mexico on Hess’ Tubular Bells deepwater development. The Stena DrillMAX drilled six successful exploration wells for Hess in Ghana in 2012/2013 and is contracted to return to Ghana in 2014 for a further three wells.

“The Hess/Stena relationship is a partnership built on shared values and aligned expectations on safety, reliability and operating performance”, says Mr Brown, who is the Director of Drilling and Completions Offshore Americas and West Africa at Hess Corporation. He went on to say that in addition to the alignment between the two companies, a strength is that issues are tabled and worked by both companies in an open and constructive manner.

“Hess challenge Stena and Stena challenge Hess, which brings out the best in both companies”, Mr Brown says. He approves of the way Stena maintain and operate their drilling units:

“Stena are a very well-run company who continually invest in their drilling units and their personnel to improve safety, reliability and operating performance.”

Sam Brown

Director of Drilling and Completions Offshore Americas and West Africa at Hess Corporation

Next in Annual Review

STENA BULK

GOOD BUSINESS LEADS TO RAPID EXPANSION OF THE FLEET