Drillship company warns inflationary pressures may drive up costs of services

Mar 19, 2024 News

One of Noble’s drillships working offshore Guyana

…says Guyana-Venezuela controversy could affect day-to-day operations

Kaieteur News – American drilling company, Noble Corporation Plc., a prominent player in offshore drilling, has issued a cautionary comment regarding challenges its operations face at several locations, including Guyana.

The company, which serves as a contractor for ExxonMobil Guyana Limited operations in the Stabroek Block, expressed concerns over inflationary pressures that may lead to increased costs of services. Noble had explained that market-based day rates are resent twice per year (March 1, and September 1) to the projected market rate at that time.

The company in a document highlighted the persistent nature of these pressures and highlighted ongoing supply chain disruptions exacerbated by geopolitical crises, including the Guyana-Venezuela border controversy.

The company stated, “We expect inflationary pressures to persist, which has led or may lead to increased costs of services. Additionally, we expect supply chain disruptions to continue, and potentially accelerate, as geopolitical crises…and their respective regional and global ramifications have the potential to negatively impact our ability to conduct our day-to-day operations.”

Notably, since the signing of the Joint Declaration of Argyle for Dialogue and Peace on December 14, 2023, following a meeting between the Presidents of Guyana and Venezuela, there has been a decrease in tensions. The border controversy case is currently before the International Court of Justice (ICJ).

Moreover, Noble acknowledged the complex energy landscape, noting that recently oil prices have generally remained at levels that are supportive of offshore exploration and development activity and global rig demand is increasing. It was explained that the increasing demand has been caused by the combination of growing confidence in commodity prices, heightened focus on energy security, and relative attractiveness of offshore plays with respect to both cost and carbon emissions.

To this end, the company said, “This increase had a positive impact on day rates for certain of our rig classes.”

The company also stated, “Our business depends on the level of activity in the oil and gas industry. Adverse developments affecting the industry, including a decline in the price of oil or gas, reduced demand for oil and gas products, and increased regulation of drilling and production, have in the past had and may in the future have a material adverse effect on our business, financial condition, and results of operations.”

Kaieteur News has reported that ExxonMobil Guyana has a Commercial Enabling Agreement (CEA) with Noble Corporation for four drillships that are being used in the Stabroek Block. Under the CEA, there are four state-of-the-art drillships operating namely the Noble Bob Douglas, Noble Sam Croft, Noble Tom Madden, and Noble Don Taylor. Last year, Noble made some US$703 million from its operations in Guyana. Notably, the company generated an income of US$2.589 billion in 2023, compared to US$1.413 billion in 2022 – that year the company earned US$469 million from its operations in Guyana. Last year, it was announced that Exxon had extended its CEA with Noble for the drillships from the fourth quarter of 2025 to the second quarter of 2027.

“Operations in Guyana, the Gulf of Mexico, and the North Sea accounted for approximately 27.2%, 16.9%, and 17.0%, respectively, of our consolidated operating revenues for the year ended December 31, 2023,” the company stated.

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border controversy, drillships, Guyana, Noble, Oil and Gas

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