Shelf Drilling Stock

Shelf Drilling, Ltd. operates as an international shallow water offshore contractor providing services and equipment for the drilling, completion, maintenance and decommissioning of oil and natural gas wells.

The company solely focuses on shallow water operations in depths of up to 375 feet. Its fleet consisted of 30 independent-leg cantilever (ILC) jack-up rigs as of December 31, 2021.

The company’s main customers are national oil companies (NOCs), international oil companies (IOCs), and independent oil and natural gas companies, who contract its rigs for varying durations.

All operations are conducted through Shelf Drilling Holdings, Ltd. (SDHL), an indirect wholly owned subsidiary of the company. The company’s corporate offices are in Dubai, the United Arab Emirates (UAE), geographically close to its operations in the Middle East, North Africa and the Mediterranean (together, ‘MENAM’); Southeast Asia; India; and West Africa.

During the year ended December 31, 2021, the company completed the sale of Shelf Drilling Journey, High Island VII, Trident 15, Key Hawaii, Galveston Key and Randolph Yost. As of December 31, 2021, the company had no rigs recorded as assets held for sale and 28 of the company’s 30 rigs were under contract.

Operations

The company’s primary operations are providing services for the drilling, completion, maintenance and decommissioning of oil and natural gas wells and associated services using the rigs in its fleet and related equipment. A significant portion of its revenues are dayrates related to the provision of these services earned from its customers, including NOCs, IOCs and independent oil and natural gas companies. Additionally, the company may earn lump-sum fees relating to contract preparation, capital upgrades, mobilization, demobilization and/or termination revenues in certain contracts. The company also provides catering, additional equipment and personnel, consumables or accommodations at the request of the customer; and the company may use third parties for the provision of such goods and services.

The company has one reportable segment, Contract Services, which reflects how the company manages its business, which its fleet is mobile and that its market is dependent upon the worldwide oil and natural gas industry.

Customers and Customer Contracts

The company’s contracts are typically awarded on an individual basis and vary in terms and rates depending on the operational nature and duration of the contract, amount and type of services and equipment provided, geographic area served, market conditions and other variables. The company’s customer contracts can contain multiple dayrates, including specified dayrates for contracted operations and reduced dayrates for rig movements, adverse weather, equipment downtime, or other instances of scheduled or non-scheduled events, including for circumstances both within and outside of its control.

The company’s customer base includes Saudi Arabian Oil Company (Saudi Aramco), Chevron Corporation, Oil and Natural Gas Corporation Limited, Ente Nazionale Idrocarburi S.p.A (ENI), and TotalEnergies SE, who contract its rigs for varying durations.

In the year ended December 31, 2021, of the 21 contracts or extensions the company entered into, 14 represented contract renewals with the existing customer. Based on customer contracts in place as of December 31, 2021, 14 were scheduled to expire during 2022, three during 2023, two in 2024, and nine in 2025 or later. As of December 31, 2021, the company’s shortest remaining contract term was approximately one month and the longest remaining contract term was nine years.

Properties

The company’s properties consist primarily of its mobile fleet of jack-up rigs and related equipment that is located and operates across four core operating regions: MENAM, India, West Africa and Southeast Asia. The company also owns or leases office space for its corporate headquarters in Dubai, the UAE; and shore-based facilities in the UAE, Saudi Arabia, Bahrain, Egypt, Italy, Hungary, Indonesia, Malaysia, Vietnam, Singapore, Thailand, Mauritius, India, Nigeria, and Angola to support rig operations.

Strategy

The company’s strategy is to maintain a sole focus on shallow water drilling services, leveraging decades of industry experience and an outstanding track record to provide best-in-class operations for its customers.

The company’s three strategic priorities are as follows:

Focus – Jack-up operations are the company’s sole focus.

Reliability – With safety and operational performance at the forefront of everything the company does, it strives to create an environment where no one gets hurt.

Relationships – The company’s goal is to develop long-term and mutually beneficial relationships with customers and suppliers.

The company provides development for its people to support their long-term career goals.

The company’s ‘fit-for-purpose’ strategy is exemplified by its large and high-quality fleet, operated in its core geographic regions by a right sized organization with centralized, low cost operations and high national content.

Regulation

International Maritime Organization (IMO) regulations have been widely adopted by United Nations member countries, and in some jurisdictions in which the company operates, these regulations have been expanded upon. International conventions, laws and regulations applicable to the company’s operations include the International Convention for the Prevention of Pollution from Ships of 1973, as amended (MARPOL); the International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended (CLC); and the International Convention on Civil Liability for Bunker Oil Pollution Damage of 2001, as amended (BUNKER) that impose compliance obligations and liability related to the use, storage, treatment, disposal and release of petroleum products and hazardous substances.

The company’s rigs are also subject to BUNKER, which holds the company strictly liable for pollution damage caused by discharges of bunker fuel in jurisdictional waters of ratifying states.

History

Shelf Drilling, Ltd. was founded in 2012. The company was incorporated in 2012 in the Cayman Islands.