Samsung Finds a Buyer for Canceled Ocean Rig Drillship

Italian offshore services company Saipem has bought the seventh-gen drillship Santorini from Samsung Heavy Industries for a deeply-discounted cash price of $230 million, unwinding one of the last of the yard's canceled offshore orders. 

The Santorini was one of two unwanted drillships that SHI has been seeking to dispose of, and the decision by Saipem to exercise the purchase option will come as a relief for the South Korean shipbuilder. 

The drillship, together with sister ship Ocean Rig Crete, was originally ordered by defunct contractor Ocean Rig in an ill-timed deal in 2014, just before the oil market downturn. Ocean Rig went bankrupt in 2017, and it was bought by Transocean in 2018, along with the rights to the Crete and the Santorini. 

In 2019, seeing limited prospects for a swift market recovery, Transocean canceled the orders for Santorini and Crete for an estimated savings of $1.1 billion. Samsung was left holding both ships. 

The company found takers for both vessels in 2021. An option to finish and buy Crete was arranged with Stena Drilling, and Santorini was finished up and leased to Saipem on a bareboat-charter basis.

Santorini's charter included an option to purchase, which Saipem has now exercised. The offshore oil and gas industry is finally on an upswing, and day rates for drillships have risen above $400,000 per day - high enough to justify the favorable $230 million cash purchase price. The newly-finished vessel was worth more than twice as much at the time of its order.

According to Saipem, the decision to invest in the drillship is based on an expected return on investment of over 15 percent, with a payback period of five years. Saipem is sitting on a $1.5 billion backlog of contracts, its most in six years, and its fleet commitment stands at 80 percent for 2023 and about 60 percent for 2024.

Saipem says is in talks with its clients in areas of potential use of the Santorini and more announcements are expected soon.