Oil Search, High Arctic form JV for Papua New Guinea drilling

July 14, 2017
Oil Search Ltd., Sydney and Port Moresby, and Calgary-based High Arctic Energy Services Inc. have entered into exclusive negotiations to form a joint venture company for work in Papua New Guinea.

Oil Search Ltd., Sydney and Port Moresby, and Calgary-based High Arctic Energy Services Inc. have entered into exclusive negotiations to form a joint venture company for work in Papua New Guinea.

The deal revolves around High Arctic exchanging an equal share of three of its owned rigs—102, 115, and 116—for an equal share of two rigs—103 and 104—that it has historically managed for Oil Search under long-term management agreements. The rigs are to be put into a jointly owned company that has yet to be given a name.

High Arctic will provide the management of the joint company, which will focus exclusively on rig ownership.

The rigs are mainly in the Papua New Guinea highlands. They are of modern design and able to be transported by helicopter.

As part of the proposed arrangement, High Arctic will operate the rigs under a minimum 3-year exclusive call rig services agreement.

To reduce operating costs, High Arctic says first-year rates under the new rig services contract are likely to be 20-23% less than under the previous contract.

High Arctic’s rental equipment business—the provision of rig mats, camps, and drilling support equipment to all its customers including the proposed combine—will continue to be owned by High Arctic and will not be part of the proposed transaction.

Negotiations surrounding details of the JV deal are expected to be completed by yearend. Meanwhile, the current contracts for operation of Rigs 103 and 104 will be extended for 1 year at the new rates.

Mike Maguire, High Arctic president, international, said the JV will be an innovative way of meeting Oil Search’s chief concern of reducing well costs and providing cost-efficient drilling in Papua New Guinea, which is High Arctic’s largest region of operation.