Costs.

In a film about land well drilling produced by a large oil&gas company in 1975, it was stated that the average drilling cost per production well at that time was $600,000. In modern times, these prices in Russia and Saudi Arabia average $1,000 per 1 meter of land based drilling.

 

Offshore drilling increases costs significantly. If in terms of fuel we reach approximately equal figures with land drilling, the price of CAPEX on offshore is always several times higher. The derrick needs to be installed in slightly larger size, but it must be placed on a metall floating structure built by shipyard in advance. Additionally, there are solid costs of subsea equipment : marine riser, tensioners, divertor, subsea wellhead. Additionally, offshore drilling requires more personnel costs. For example, if one land drilling rig has from 6 up to 15 people on the crew shift, any offshore figures average in the range of 40-60+ people per rig. At the same time, working at sea in terms of working conditions presents much more challenges and requires better quality of training. The work is carried out autonomously, in a limited space, and in the case of semi-submersible rigs and drillships the rig swings on the water which presents extraordinary difficulties. Additionally, in many countries drilling from water is significantly burdened by government regulation, which is associated with increased safety requirements for both personnel and the environment.

 

If we talk about average figures, then one production well from us costs 6+ million USD (same figure as from our colleagues). But everything in our case is tied not to the day-rate claims, but to the issue of amortization of modern equipment on which we build partnerships with Customers. As a result, the specifics of our business are such that we are significantly dependent on the financing of the well construction by the Financial organisations and by our Clients in the location of drilling and in the location of equipment manufacturing.

 

So we do not benefit from contracts focused on limited wells and we strive to secure any our drilling rig for operation for the longest possible period in order to pay off the entire ship's CAPEX from one contract and from one place, disregarding where this project will be - Nigeria, Angola, Mexico, Brasil, China, Iran, Indonesia, etc.. This implies a full understanding of the Oil&Gas Operator about the formation of our costs and the stability of the terms of payment to our staff. As for the use of helicopters, we consider them exclusively as an emergency means of access to our facility and we strive to minimize their use.

 

Our focus is on joint planning of all actions together with the Operator and in partnership with him. In turn, each oil-producing Country has its own local shipyard with a different level of experience in creation of offshore drilling equipment, and our partners can easily compare their budgets with ours. Based on the business proposal of their Country's local shipyard, which (this must be understood by sides) will only be a fraction of total costs for the construction of the well by us, we can come to an understanding of what exactly we will work on.

 

In other words, we ourselves want to calculate project's figure together with our customers since this concerns our repayment proceedings and cost of our personnel. On multi-year frame basis.