Borr Drilling, a recently established offshore drilling company is getting bigger by the day, amassing a sizable jack-up fleet in a short space of time.
The Oslo-listed company, as reported on Monday by Offshore Energy Today, has ordered a fresh batch of jack-up rigs – nine – from Sembcorp Marine’s PPL Shipyard for $1.3 billion, adding to the rigs it had already bought from Transocean and Hercules.
While the sheer fact that someone is buying drilling rigs in a depressed offshore drilling market is news for itself, there is something else Borr is working on that has raised the industry eyebrows.
Innovative drilling contracts
Namely, the driller last week said it would team up with Schlumberger, the world’s largest oilfield services company to offer performance-based drilling contract in the offshore jack-up market.
However, in its announcement the company stopped short of fully explaining what the ‘innovative business model’ really meant, so Offshore Energy Today reached out to Borr Drilling CEO Simon Johnson, to seek more info.
Johnson, who took over as the CEO in August, previously serving as a senior vice president of marketing & contracts at Noble Corporation, said that offshore drilling contractors were paid a dayrate for provision of their services, with little, if any, connection between the quality of service delivery and the remuneration received.
“It could be argued in fact that we are at odds with each other because we make more money the longer the contract takes to perform. This lack of alignment is at the heart of the lack of predictability in outcomes and variations in wellsite performance observed by oil and gas companies. We want to create better alignment between our clients goals and our own – and we want a share of the value that we deliver,” the CEO explained.
According to Johnson, time is the most critical element in the drilling process, and if “we are incentivized to be as efficient as possible then we will focus our efforts accordingly.”
Open mind to various models
The drilling contractor is the largest (and probably the most strategic) contractor at the wellsite. We effectively manage the workflows that are undertaken by a multitude of service companies so we have the most to offer in terms of improving performance and efficiency, Johnson said in a statement given to Offshore Energy Today, adding that there were many models that support this approach ranging from lumpsum/turnkey approach to dayrate bonuses based on a time/depth curve and/or well objectives curve.
He said: “We have an open mind on these commercial models and believe that different clients will be attracted to different models EG – a National Oil Company will have a different appetite to a small independent. What is important is that we are willing to engage in a discussion with operators who want better performance – and are prepared to use a gainshare model to obtain it.”
Borr Drilling believes that Schlumberger’s broad spectrum of technical capability meshes perfectly with its “premium asset base and entrepreneurial spirit.”
Johnson feels that a combination of the two companies capabilities and characteristics will be uniquely powerful.
“We will be in a position to offer integrated projects with a minimum of interfaces for the end client. Schlumberger’s ability to characterize geological and reservoir risk is unparalleled,” he said.
“Borr Drilling’s willingness to consider new commercial models is in dramatic contrast to most/all other drilling contractors who have a narrow view of how they should be paid. If you can understand the risk from an oil company perspective and are willing to align yourself commercially with their goals then you have a recipe for success. This combination has the potential – through time – to fundamentally change the way business is conducted in this part of the upstream industry.”
Johnson said that using the new approach, Borr and Schlumberger hope to accelerate drilling demand and ‘unlock’ stranded projects.
“The biggest challenge that we will face will be the tactical approach of the supply chain groups within our customers who, in my experience, are almost purely tactical. This new way of working requires a strategic outlook that the oil companies frequently opine on but rarely can evidence. We need some forward looking customers who want to help us win back the marginal barrel of oil,” Johnson said.