The accumulating benefits of the company’s fledgling joint venture (JV) with Saudi Aramco were highlighted by US rig operator Rowan in late July. While delivering otherwise-gloomy interim results, the company announced the new order and updated investors on future expansion plans in the kingdom.
Compatriot National Oilwell Varco (NOV), which finalised a partnership with the Saudi giant last month, likewise used a half-year performance statement to enumerate the ensuing anticipated financial rewards. Meanwhile, Aramco’s shipping affiliate Bahri reported a surge in quarterly income on the back of expansion of the firm’s pre-eminent very large crude carrier (VLCC) fleet.
Houston-based Rowan and Aramco agreed in late 2016 to establish a rig-operating JV – named ARO Drilling – to own, manage and operate a fleet of offshore rigs for use in the kingdom. Operations formally commenced in October of that year.
On July 31, Rowan announced that the company had been awarded three-year contracts by Aramco for six rigs – four of which would be leased to ARO by the end of the year and the remaining two of which would be sold to the JV in October. The American firm agreed in April to lease four idled jack-ups to ARO under three-year contracts. The company’s reported a three-month loss of US$76.7 million on the back of a sharp decline in revenues Discussing the partnership following the presentation of interim results on August 1, Rowan CEO Tom Burke noted that the partnership would operate 16 rigs by the year-end, nine of which would be on lease from Rowan, and hailed the arrangement as a core earner during difficult times for the offshore industry.
“We believe this joint venture will provide better utilisation to Rowan in these tougher times and a significant growth profile over the next several years from the newbuild programme,” he reassured investors.
The agreement with Aramco included a commitment to order 20 newbuild rigs over the next 10 years – the bulk of which will be manufactured at a rig-manufacturing facility being developed by the Saudi firm as part of the planned Ras al-Khair maritime services complex near Jubail in the Eastern Province.
Burke revealed that ARO was planning to order two newbuilds during the fourth quarter, which would use the ‘LJ43’ design.
Exemplifying Aramco’s drive to develop an integrated local energy services industry, ARO in March announced the selection for the newbuild programme of the new LJ43 design developed by UAE-based Lamprell. The latter is also a shareholder alongside Aramco in the maritime services complex and is set to operate the venture’s offshore rig-manufacturing facility.
Aramco’s offshore partnerships with Rowan and Lamprell are mirrored by onshore tie-ups with rig operator Nabors and manufacturer NOV, both of the US.
The JV with NOV, entailing the establishment of an onshore rig fabrication facility at Ras al-Khair with capacity of 10 onshore rigs per year, was finalised in late June.
In late July, the American firm reported a return to profitability in the second quarter – earning net income of US$21 million – and revealed having booked new rig orders worth around US$2 billion over the three months, of which US$1.8 billion were associated with the Aramco JV and the resultant “largest land rig order ever placed”. The JV – owned 70% by NOV and 30% by Aramco – is underpinned by a commitment from the Nabors/Aramco rig-operating partnership to purchase 50 onshore rigs over a ten-year period. First deliveries are expected in 2021.
Aramco’s locally-listed shipping affiliate Bahri is also a shareholder alongside the upstream giant, Lamprell and South Korean shipbuilder Hyundai Heavy Industries (HHI) in the Ras al-Khair offshore services complex – which will include a shipbuilding zone capable of manufacturing up to three VLCCs per year.
Bahri has become the world’s largest operator of the vessels by dint of serving the world’s largest crude exporter, and took delivery in May of a tenth and final VLCC under a three-year agreement with HHI subsidiary Hyundai Samho Heavy Industries signed in 2015 – taking its total fleet of the carriers to 46.
The shipping firm suffered a sharp downturn in profits last year as a result of lower spot transportation rates and increased bunkering charges.
However, interim results published on July 30 showed strong recovery in the second quarter – with net income of 185.4 million riyals (US$49.4 million) representing a 20.5% year-on-year increase and 50.6% higher than in the first quarter.
Bahri attributed the improvement to the effects of fleet expansion offsetting lower transport prices. Nonetheless, six-month profits remained 42.1% lower than in the first half of 2017.
The company made an unusual appearance in global headlines in late July when two of the firm’s vessels, carrying Aramco crude, were attacked by Yemen’s Houthi rebels in the Bab el-Mandeb strait in the Red Sea – with one suffering minor damage. Shipments through the key waterway were temporarily halted by Aramco – resuming on August 4.