In a far corner of the Caribbean Sea, billions of dollars worth of the world’s finest oil equipment bobs quietly in the water.
They are high-tech, deepwater drillships. They’re packed tight in a cluster, nine of them in all. The engines are off. The 20-ton anchors are down. The crews are gone. For months now, they’ve been parked here, 12 miles off the coast of Trinidad & Tobago, waiting for the global oil market to recover.
The ships are owned by Transocean, the biggest offshore-rig operator in the world. And while the decision to idle a chunk of its fleet would seem logical enough given the collapse in drilling activity, Transocean is in truth taking an enormous, and unprecedented, risk. No one, it turns out, had ever shut off these ships before. In the two decades since the newest models hit the market, there never had really been a need to. And no one can tell you, with any certainty or precision, what will happen when they flip the switch back on.
Warm-stacking (parked in a safe harbor and manned by a skeleton crew) costs of about $40,000 a day was not sustainable for Transocean reason why they switched to Cold-stacking—when the engines are cut—costs as little as $15,000 a day. Huge savings, yes, but the angst runs high because “These drillships were not designed to sit idle,”.
For now, cold-stacking has been a huge success for Transocean, a long-time Texas powerhouse that’s based today in Switzerland. The company reported a profit of $77 million in the second quarter, surprising investors who had been bracing for a loss. Within minutes the next morning, its stock price had jumped 8.5% in New York trading.
Still, there are any number of deepwater rig operators unwilling to turn the engines off: Noble Corp., Rowan Cos. and Pacific Drilling, to name a few. They’re paying anywhere from $30,000 to $50,000 a day to store their out-of-work ships. Chris Beckett, the CEO of Pacific Drilling, said the unknowns of cold-stacking are just too great and the cost to keep the ships running too manageable—about $10 million a year—to turn them off. He likes the peace of mind that comes with his approach. “We don’t worry about how you start them again,” Beckett said in an interview at the company’s Houston headquarters.
The cold-stack versus warm-stack dilemma doesn’t figure to go away anytime soon.