Daily Archives: February 16, 2020

Image: Ocean Onyx Courtesy: Offshore Energy Today

Diamond Offshore (NYSE:DO) is one of the offshore drillers that I am regularly following on Seeking Alpha.

As I said in my preceding articles, the company presents definitive weaknesses when it comes to its rig fleet, but up until now, Diamond Offshore had its balance sheet quite in order. The fourth quarter is putting a dent on that idea, and I will explain it later in this article.

Diamond Offshore continues to shrink in size, and it is taking a severe toll on its balance sheet, the company is now expecting only $210 million (midpoint) for the first quarter of 2020.

Despite one substantial asset segment called the moored assets class right now (e.g., Ocean Onyx, Ocean Apex, etc.), it seems that the backlog is disintegrating in front of our eyes. Now, less than $1.6 billion remaining and only $50 million added in the last fleet Status.

Looking at the overall situation, they are not more advanced than a quarter ago.

Despite some rare contracts, I am far from being impressed by the pace and the strength of the "recovery".

Thus, I recommend being extremely cautious when it comes to investing in this sector until a time when the recovery is noticeable in the balance sheet with better margins and free cash flow, which is not what is expected by the company in 2020.

Meanwhile, trading the offshore drilling sector short term is highly recommended and perhaps the only way to make a decent profit.

Data by YCharts

Note: Diamond Offshore is 53% owned by Loews Corp. (NYSE:L), which gives some credibility and safety long term.

1,975

1,976

Note: Most of the data indicated above come from Morningstar and company release.

1 - Quarterly revenue of $276.4 million in 4Q'19

Diamond Offshore posted $276.34 million in revenues in the fourth quarter of 2019, an increase of 18.9% when compared to its revenues of $232.522 million in the same period last year.

Diamond dropped to a $74.770 million loss in its 4Q 2019 (EPS $0.54 per share) from a loss of $79.207 million in the prior-year quarter. Adjusted loss per share was $0.45.

During the third quarter of 2019, the average company dayrate was $264K/d, a decrease compared to $315K/d in the corresponding quarter of last year. Utilization was up to 59% from 46% in 4Q'18. However, the dayrate average is up a little sequentially, suggesting some support.

Marc Edwards, the CEO, said in the conference call:

2019 was an unusually heavy CapEx year for Diamond as we focused on strategic upgrades for our most marketable rigs. We believe these investments will be beneficial to Diamond in the long run. Moving forward, we will focus on preserving liquidity and limiting CapEx into 2020 and beyond.

It surmises the issue and why Diamond Offshore is struggling financially with a continual loss in free cash flow, as I have shown below.

2 - Free Cash Flow is a loss of $53.0 million in 4Q'19

Diamond Offshore is generating negative free cash flow yearly. The loss in FCF annually ("TTM") is $369.972 million, with a loss of $53 million in the fourth quarter of 2019.

As we can see, Diamond Offshore is bleeding free cash flow regularly despite the recent new contracts awarded, confirming an uptrend in daily rates. The issue is that the loss in free cash flow is not related to an increased CapEx but a decrease in profit margin.

Scott Kornblau, the CFO, said in the conference call:

Full year 2019 capital expenditures of $326 million came in approximately $45 million less than mid range of the revised guidance of $360 million to $380 million given on our previous calls.

During 2020, Diamond Offshore is planning to undergo three 5-year special surveys that require zero dayrate time and are generally costly.

The first one is already complete as the drillship Ocean BlackRhino spent about two weeks in January performing its survey.

The second one is the drillship Ocean BlackLion, which is scheduled to go into a shipyard in the latter half of the first quarter to conduct its survey and the automation upgrades.

Also, during 2020, the drillship Ocean BlackRhino will go into a shipyard to perform similar upgrades to the other black ships and prepare for its 2021 contract commencement in West Africa.

3 - Quarterly backlog history and discussion

Diamond Offshore released its fleet status on February 10, 2020.

What happened since the last fleet status?

The company added a total of over $50 million in the backlog.

Below is the backlog repartition per year:

And below is the contract backlog repartition per year indicating that the drillship segment is the most significant at $994 million in the contract backlog:

The backlog now stands at $1.6 billion as of January 1, 2020, with about ~$664 million in 2020 (not including the effect of the projected out-of-service time for the remainder of the year).

Diamond's average dayrate in 4Q 2019 dropped to $264k/d from $315K/d in the fourth quarter of 2018. However, utilization increased to 59% from 46% in 4Q 2018.

From PR

CEO Marc Edwards said on the conference call:

It is clear that since the trough in 2016, day rates have risen for all asset classes. However, upward pricing momentum remained slow due to ongoing rig capacity overhang, especially in the drillship market as well as the short-term nature of the awards.

4 - Net Debt is $1.82 billion in 4Q'19

Net Debt is now $1.766 billion, with a net debt-to-EBITDA ratio of 23.8x, which is very high and means that the company can repay its net debt in about 24 years based on its EBITDA ("TTM"), which is $76.414 million.

Scott Kornblau said in the conference call:

We finished 2019 with $156 million of cash and nothing drawn on our revolver. However, we soon expect to start drawing on our revolver likely in the second quarter and we expect to be cash flow negative during 2020 and end the year with a drawn revolver balance

The street did not react well to this news, and the stock plunged significantly.

Diamond Offshore's recent results were again not inspiring with a contract backlog continuing to degrade now below $1.6 billion (estimated at $1.57 billion in February). However, they were above analysts' expectations. Still, reading between the lines push the market to think twice before investing in this stock, especially with first-quarter 2020 anticipated contract drilling revenues in the range of $205-$215 million.

As I said above, 2020 is going to be another "expensive" year in terms of CapEx with about three to four drillships 5-year special survey SPS. However, for 2020, the company anticipates CaPEx to be $190 million and $210 million. I am a little skeptical and find it a little light.

The big issue with Diamond Offshore is that the company is accumulating free cash flow losses regularly and warn that it will be the same in 2020. Worse, the company will have to tap into its revolver after indicating that cash flow will be negative in 2020. Total cash is now well below what it was the same quarter a year ago.

Technical Analysis

DO is showing a descending channel pattern with successive lower lows, which is bearish. Line support is at about $3.85 now, and line resistance is $7.3. However, I see a new intermediate resistance at $5.00 now.

The trading strategy is to buy and accumulate at around $3.90 or lower, assuming no damaging news coming from the oil prices. The first sell target is $5, at which point it is a good idea to take about 20% off the table.

If oil prices recover from the coronavirus' Black Swan event, I believe DO will have a resistance breakout at $5 with a potential retest at $7.00 later.

The worst-case scenario could be a mounting scare about the virus and a significant drop in oil prices. In this bearish case, the next support is around $2.50. Trading DO is risky, watch oil prices like a hawk.

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Additional disclosure: I am trading short term DO

Go here to see the original:

Diamond Offshore: The Slide Continues - Seeking Alpha

NEW LONDON, Conn. (WTNH) Improvements to the state pier in New London are going forward. Governor Ned Lamont says the project will bring more jobs and a world-class offshore wind center.

Governor Lamont announced Tuesday the state and its partners at Gateway Terminal, Orsted and Eversource, have reached a final agreement on a harbor development plan for the state pier in New London through a combined public-private investment of $157 million.

We got to think about a renewable carbon free future and wind power is our future, said Governor Ned Lamont.

Connecticut can be the Saudi Arabia of wind power, offshore wind generating power in a cost, very economical with everything else, at a price thats coming down dramatically.

This pier allows us to greatly accelerate maritime traffic in and out, interconnecting the rail service coming in.

The governor said the project will expand the use of carbon-free energy sources.

Danish-based company, Orsted, has built offshore wind centers around the globe.

Thomas Brostrom, the CEO of Orsted, told News 8, It basically takes a lot of fossil fuels away and replaces fossil fuels. It is as clean as you get. It basically harvests the strong winds that you see at sea and you bring them to shore.

The project will create hundreds of permanent jobs and is planned to become a transportation hub for companies. The first phase of the project will be infrastructure upgrades.

There will be a lot of transportation. A lot of the vessels will be coming out of there, supplies coming out of there so we see a lot of other needs.

Whether it is catering transportation needs, we are going to do some dredging there and of course port enhancements for a vessel that will be 500 feet long, 150 wide.

Construction is expected to begin in early 2021 and be completed by August 2022.

Originally posted here:

State pier project to bring more jobs, offshore wind center to New London - WTNH.com

Union GMB Scotland has accused the UK government of washing its hands of the responsibility to deliver local offshore wind jobs.

The workers group was responding to comments made by Scottish Secretary Alister Jack (pictured) who told parliament on Wednesday that fabrication taking place overseas is the market economy.

Jack was addressing a question about the fabrication in Indonesia of jacket foundations for EDF Renewables 450MW Neart na Gaoithe wind farm.

He also said the UK needs to find a better way of efficiently delivering offshore wind components.

GMB Scotland organiser Hazel Nolan said: Alister Jack has unwittingly revealed the truth: the UK government has washed their hands of their responsibility to deliver renewables jobs here in the UK.

Far from the market economy, what we are seeing is yards here in the UK being abandoned by our government and left to compete with heavily state subsidised yards abroad.

The Scottish and UK governments have failed to produce an industrial strategy to match the rhetoric on green jobs and its energy consumers here in the UK that are propping up this rigged market with spiralling energy bills.

EDF Renewables UK chief executive Matthieu Huesaid:We dont recognise many of the statistics being quoted here. However, only this week, we have outlined details of four supply chain events to be held in Scotland at which Scottish companies will be introduced to the Tier 1 contractors for Neart na Gaoithe."

He added: "We are committed to generating as much work as possible here in Scotland. The full extent of the benefit to the Scottish supply chain will become clear once all Tier 2 and Tier 3 contracts have been awarded.

Here is the original post:

UK has 'washed its hands' of offshore jobs - reNEWS

Transmission systems operator TenneT has entered into an innovation partnership with a number of companies to develop a 2GW offshore grid connection system.

Given that such a platform does not exist, a new platform design and a high voltage direct current (HVDC) transmission system that allows increased power transfer is required, TenneT said.

To realise such a system, TenneT launched the design phase with five HVDC suppliers on the basis of an innovation partnership: ABB Power Grids, GE Renewable Energys Grid Solutions (Netherlands), Consortium Global Energy Interconnection Research Institute Co. Ltd. (GEIRI) & C-EPRI Electric Power Engineering Co. Ltd. (C-EPRI) (China), Siemens (Germany), and Xian Electric Engineering Co., Ltd (China).

The first two grid connections of this kind will be installed in the IJmuiden Ver offshore wind area in the Dutch North Sea.

Given the combination of the large distance to the coast and the size of the IJmuiden Ver wind energy area, a 2GW direct current (HVDC) solution, based on 525 kilovolts, appears to offer most economical advantages, according to TenneT.

The selected suppliers will develop this 2GW 525 kV HVDC solution based on criteria set by TenneT.

They will provide specific information on this to Iv-Offshore&Energy b.v., which is carrying out the Front-End Engineering Design (FEED) study on behalf of TenneT. On this basis, a standardised platform design will be developed for all HVDC solutions.

The information from the joint R&D innovation phase will be used for the final design of the platform. TenneT will use this standardised design for the contracting of several 2GW grid connections, including IJmuiden Ver Alpha and Beta in the Dutch North Sea, the first two grid connections of this kind to be built

TenneT also plans to realise at least four 2GW offshore grid connection projects in Germany from 2029 onward.

See the rest here:

TenneT Gathers 2GW Offshore Grid Connection Team - Offshore WIND

SPT Offshore has received an order from a Chinese client for the design, supply, installation, and support services for two meteorological mast structures.

The two met masts, designed by KCI the engineers B.V., are intended to measure the meteorological and oceanographic data required for the future offshore wind farm developments.

These masts are intended to be installed 30 kilometres offshore in the Yellow Sea at water depths of ~ 31 metres.

The support structure will be a mono-pod supported by a three-suction pile cluster due to its cost-efficiency for these soil conditions, according to KCI.

The advantages of suction pile foundations are less structural steel required compared to the traditional foundations, no necessity of the revolving heavy offshore cranes, no hammers, no mud mats, no pile guides, no levelling systems required, and silent installation, KCI said.

The foundation installation is reversible to enable relocation for re-use or decommissioning purposes.

Read the original here:

SPT Offshore to Deliver 2 Met Masts in China - Offshore WIND

]]> The Government of South Africa has approved Africa Oils acquisition of a 20% participating interest and operatorship of Block 3B / 4B from Azinam. Credit: Steph Lee.

The Government of South Africa has approved Africa Oils acquisition of a 20% participating interest and operatorship of Block 3B / 4B from Azinam.

Situated in the Orange basin in offshore South Africa, Block 3B / 4B covers an area of 17,581km2. It has a maximum water depth of 2,500m.

Africa Oil will assume operatorship for the joint venture (JV) partners Azinam and Ricocure. They will respectively own a 20% and 60% participating interest in the block.

Operators are intending to drill several exploratory wells in the mid-Cretaceous oil play, the location of Block 3B / 4B.

Africa Oil president and CEO Keith Hill said: Together with our equity interests in Impact Oil and Gas and Africa Energy Corp., Africa Oil has a significant footprint in several emerging plays extending from South Africa to Namibia, where both Total and Shell plan to drill potential play-openers in 2020 and at the same time are increasing their positions in other blocks adjacent to Block 3B/4B.

From existing 3D seismic surveys, we have identified a number of similar prospects to those that the majors are targeting.

Africa Oil also said that it will participate in a $40m capital raising by Impact Oil and Gas. Impact intends to use these proceeds to fund its interest in high-impact 2020 drilling programmes.

These programmes include drilling the Venus-1 exploration well on block 2913B in offshore Namibia. They also include the drilling of Luiperd-1 well on block 11B/12B in offshore South Africa.

In February 2018, Africa Oil signed agreements to acquire a 25.2% equity interest in Impact Oil and Gas.

Read the original post:

Africa Oil receives approval to acquire interest in South Africa's block - Offshore Technology

More needs to be done to push geothermal development in Taiwan. Despite great potential, challenges remain and current development target is not sufficient for the renewable energy targets by the government.

Taiwan is progressing on its 20% renewables goal, but it becomes obvious that there are shortcomings of solar and wind. Land use for solar is a challenge and offshore wind is too costly and environmentally disruptive, so a recent article from Taiwan.

Another key challenges is the intermittency of those technologies in the power supply. With its focus on solar and wind, Taiwan has been neglecting other forms of renewable energy, such as geothermal energy, biofuel and marine power.

Taiwan has set itself a target of eliminating nuclear power by 2025, a rather tight deadline, as it also has a significant capacity of coal fired power plants.

Geothermal energy is therefore an attractive option for Taiwan with resources and development ambitions, we have been reporting on over the years.

Several geological surveys have been conducted by the government indicating a potential of up to 32 GW, which seems a bit high, yet highlights great potential for geothermal energy development in Taiwan. The geothermal goal of the government is though rather modest with a planned 200 MW geothermal power generation capacity by 2025.

There are though challenges due to the geology of Taiwan. Li Yi-heng, a senior researcher at the Industrial Technology Research Institute (ITRI)s Energy & Environment Research Laboratories, sees the islands complex geological formations and vertical faults pose a major obstacle. The most accessible geothermal resources are adjacent to volcanoes, which means for Taiwan only at the volcano at Datum Mountain in the north of the island.

Additional, the areas with the most potential are within aboriginal lands, national parks, or slope lands essentially off limits to development. Another challenges are the lack of clear rules related to the ownership of the resource once it is descovered.

Taiwan has established attractive feed-in-tariffs for renewable energy, including geothermal energy. We reported on the update for 2020 in January of this year. A push for higher FIT by the Taiwan Geothermal Association was not fruitful.

Today, several small exploration proejcts are ongoing by state-owned enterprises Taiwan Power Co. and CPC Corp. Taiwan together with ITRI. The largest projects is at Datun Mountain has a planned development target of 150 MW of the total 200 MW goal for Taiwan.

Source: Amcham.com.tw

Here is the original post:

With focus on solar and offshore wind, Taiwan should not neglect geothermal - ThinkGeoEnergy

The EDF Group has acquired a 50% interest in the 1GW Codling offshore wind farm project in Ireland from Hazel Shore.

Its subsidiary EDF Renewables, dedicated to wind and solar energy across the globe, will now partner with Fred Olsen Renewables Ltd, which already owns 50% to develop and build the project.

The Codling project is located south of Dublin 13 kilometres off the coast of County Wicklow.

The initial development work started in 2003. Codling is spread across two sites, one of which, Codling 1, is consented. As an indication, the capacity of the project should be around 1 GW of installed capacity.

This acquisition comes after the Irish government set out the countrys clear commitment to reduce carbon emissions. In fact, in July 2019, it adopted a Climate Action Plan which specifies, among other things, to grow renewables in order to provide 70% of electricity generation by 2030.

And offshore wind is expected to deliver at least 3.5GW in support of reaching this target.

Over the next couple of years, project development will continue with the intention that Codling will make a significant contribution to achieving the Irish Climate Action Plan targets.

EDF Renewables has a portfolio of offshore wind projects that exceeds 6GW under operations, under construction and in development in the United Kingdom, in France, in Belgium, in Germany, in China, and in the United States.

Bruno Bensasson, EDF Group Senior Executive Vice-President Renewable Energies and Chief Executive Officer of EDF Renewables, said: We are very pleased to join the Codling offshore wind project in partnership with Fred Olsen Renewables. We are committed to contributing to the Irish governments renewables goals. This important project clearly strengthens our strong ambition to be a leading global player in the offshore wind industry. This is consistent with the CAP 2030 strategy that aims to double EDFs renewable energy generation by 2030 and increase it to 50 GW net.

More here:

EDF Takes 50% Stake in 1GW Irish Offshore Wind Farm - Offshore WIND

A WORKER on a North Sea oil platform off Shetland who recently visited Thailand has tested negative for coronavirus.

Operator of the Tern Alpha platform TAQA confirmed on Saturday evening that the worker no longer needs to be kept in isolation.

However, the company said the worker who was said to have been displaying mild symptoms is being kept in voluntary isolation while their return to shore is arranged.

A further four workers on TAQA-operated platforms off Shetland have also been kept in isolation as a precautionary measure relating to coronavirus as they had recently visited affected regions.

However, they had no symptoms and are also due to return to shore.

Two of those four workers were on the North Cormorant platform, one was on Cormorant Alpha and another on Harding.

A TAQA spokesperson said on Saturday evening: TAQA can confirm that the individual on its Tern Alpha platform has tested negative for coronavirus and is well.

Health Protection Scotland have advised that there is now no need for ongoing isolation and that the individual can go about normal activities.

However, in line with other crew who have recently returned from the affected regions, the individual remains in voluntary isolation while we arrange his return to shore.

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The rest is here:

Offshore worker tests negative for coronavirus - Shetland News