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Two of Saudi Arabia's biggest drillers said on Thursday that they will temporarily suspend operations of their offshore rigs that were under contract. Earlier this week, Dubai-based Shelf Drilling received notice of suspension of operations of four jack-up rigs from a customer in the Middle East.
While Saudi-based ADES Holding Company and Shelf Drilling didn't name their client, Arabian Drilling said it is currently in discussions with Saudi Aramco regarding "contract suspensions relating to three of its offshore rigs".
In a statement on Saudi Tadawul bourse on Thursday, Arabian Drilling said the suspensions are for a period of up to 12 months. The impacted rigs and the timing of the suspensions are yet to be confirmed, it added.
ADES Holding Company, also in a Thursday statement to Tadawul, said it has mutually agreed with its (unnamed) client in Saudi Arabia to temporarily suspend operations on five offshore jack-ups out of the 33 operating in the kingdom for a period of up to 12 months.
Arabian Drilling shares were trading nearly 2% lower at SAR 166.2 while ADES was down 4.5% at SAR19.02 shortly after trading opened on Tadawul.
In January this year, the state-backed Aramco announced it was pausing plans to raise its crude production capacity from 12 million barrels per day to 13 million barrels per day. In a statement, the world’s largest crude exporter said it had been directed by the Saudi energy ministry to maintain its Maximum Sustainable Capacity (MSC) at current levels.
Oliver Conner, an analyst at Citi Research, in a recent note said Shelf Drilling’s announcement regarding the suspension of four offshore rigs out of the total nine "highlights the ongoing market risk from a pull-back in activity by Aramco."
He said Aramco's now-postponed Safaniyah project would have been a major source drilling demand into the late 2020s, and in its absence, there appears little need to maintain the fleet at 90 rigs.
Both Arabian Drilling and ADES have maintained their revenue guidance for 2024. ADES said one of the suspended rigs will be deployed in Thailand while a second rig is poised for "another imminent opportunity in the region". Arabian Drilling said it had already assumed a "potential downsizing in the offshore segment".
(Reporting by Brinda Darasha; editing by Seban Scaria)
