Freeport-McMoRan’s oil and gas division, FM O&G, has decided to idle three drillships in the Gulf of Mexico in order to cut costs.
Freeport-McMoRan announced in December it would be reducing its rig utilization from three deepwater Gulf of Mexico drillships to one drillship.
As the company continues to manage oil and gas costs and capital expenditures aggressively, FM O&G is undertaking a near-term deferral of exploration and development activities by idling the three deepwater drillships.
The three drillships Freeport-McMoRan has under contract are Noble Corp’s Noble Tom Madden and Noble Sam Croft and Rowan’s Rowan Relentless. Noble’s two drillships are under contracts until November and July 2017, respectively, while Rowan’s drillship is under contract till June 2017.
Noble Tom Madden’s dayrate is $637,000 while Noble Sam Croft’s is $643,000. Rowan Relentless’ dayrate is $596,000.
According to the company, past investments are expected to enable production to be increased from fourth-quarter 2015 rates of 144 thousand barrels of oil equivalents (MBOE) per day to an average of 157 MBOE per day in 2016 and 2017, and cash production costs to decline to approximately $15 per BOE in 2016 and 2017.
FM O&G says it expects to incur idle rig costs associated with its drillship contracts totalling an estimated $0.6 billion in 2016 and $0.4 billion in 2017.
Freeport-McMoRan’s capital expenditures totalled $1.3 billion for fourth-quarter 2015, including $0.5 billion for oil and gas operations, and $6.35 billion for the year 2015, including $3.0 billion for oil and gas operations.
During 2015, Freeport-McMoRan took aggressive actions to enhance its financial position in response to market conditions, including a 29 percent reduction in estimated 2016 capital expenditures.
Capital expenditures for the year 2016 are expected to approximate $3.4 billion, including $1.5 billion for oil and gas operations, and excluding $0.6 billion in idle rig costs.
Offshore Energy Today Staff