'The rig fleet in Brazil is at 100% occupancy'

Constellation, the owner of the largest offshore drilling rig fleet operating in Brazil, is confident of further growth.  

Among its key strategies are projects involving the operation of third-party rigs, such as a contract for a unit owned by a South Korean company. 

In addition to strong demand from federal oil giant Petrobras, private companies – including IOCs and independent operators – will keep the market heated in the coming years, predicts Constellation's CEO, Rodrigo Ribeiro.  

In this interview, Ribeiro provides an overview of the offshore rig market and explains why, after emerging from bankruptcy protection, Rio de Janeiro-based Constellation listed its shares on the Euronext Growth Oslo market in Norway.  

BNamericas: What is the aim of listing shares on Euronext Growth Oslo? What do you expect from it?  

Ribeiro: This is part of a process. We've been working in the drilling market in Brazil for 45 years. From 2018 to 2022, we went through a long judicial recovery process. In the last six months of 2024, we repriced five of our contracts.  

During the [oil and gas industry] crisis [that began in 2014], daily rig rates were significantly suppressed. As part of our business plan, we restructured our contracts, increasing our backlog by US$1.2bn. Our total backlog is now US$2.1bn.  

In December, we completed a recapitalization and debt refinancing, attracting new shareholders and creditors who have greater confidence in the company's business plan. As a result, we now have a cleaner and more organized capital structure, with net debt below US$500mn.  

We saw this as an important opportunity to provide our shareholders with greater liquidity. With the Euronext Growth Oslo listing, they moved from trading over-the-counter to a more dynamic, controlled and secure trading environment.  

BNamericas: What are the prospects for rig contracts in Brazil?  

Ribeiro: Brazil is the best and largest offshore drilling market in the world. By the end of 2025, there will be 37 drilling units in the country, representing more than 30% of active floating drilling unit contracts worldwide. We hold a 22% market share in the country, with seven active units.  

In recent years, operations have intensified, and we've seen rig rates rise. We don't expect additional rate increases moving forward, mainly due to some project delays, especially outside Brazil. The market is currently in a period of stability.  

Companies are exercising strong discipline in supply control, while demand remains solid, with Petrobras leading the way. There is strong demand for well activities in the coming years, not just drilling, but also intervention, workover, and P&A [plugging and abandonment].  

This creates opportunities for various types of rigs, not just dual-tower drillships but also semi-submersibles and even anchored units for shallow-water drilling.

BNamericas: Are there any bottlenecks in the market?  

Ribeiro: The numbers today indicate some stability. However, at the same time, the rig fleet in Brazil is at 100% occupancy. There are no available units. So, any increase in demand could create opportunities for new rigs.  

BNamericas: Besides Petrobras, is there demand from private oil companies?  

Ribeiro: Petrobras' divestments have opened opportunities for other companies. At least 10% of Brazil's rig demand, three or four rigs, will be driven by companies other than Petrobras. The market remains healthy.  

We have one rig whose contract with Petrobras will end later this year, and it will transition to Brava Energia. In addition to independent operators, major players like Shell, TotalEnergies, and Equinor will also generate opportunities.  

BNamericas: What is the status of the main rig contract bidding?  

Ribeiro: Petrobras has published the ranking for a jack-up rig contract, so we're eagerly awaiting the outcome. We ranked first in the qualification process, but the process is still ongoing.  

Additionally, Petrobras has announced plans to tender rigs for fields such as Búzios and Mero.  

BNamericas: What are Constellation's growth prospects?  

Ribeiro: We have plans for organic growth through third-party units, as we offer significant expertise and cost synergies. We've already attracted partners. For example, we'll bring in a seventh-generation drillship, the Tidal Action, owned by Hanwha Drilling, which we'll begin operating for Petrobras in the second half of the year.  

We have important growth avenues through organic expansion, without the need to invest in newbuild construction. This will result in a major increase in our Ebitda, which was around US$200mn over the past 12 months. We forecast reaching US$400-500mn in 2026.  

BNamericas: Are you looking for opportunities abroad? 

Ribeiro: Our units are certified for international waters. I'm very pleased to see Petrobras announcing projects outside Brazil, such as Colombia, and we're closely monitoring these developments.  

Meanwhile, we await the outcome of the Equatorial Margin, which Brazil should not overlook – especially given the success of our neighbors, Guyana and Suriname.  

We previously conducted a six-year project on the east coast of India, which concluded last year, helping the country transition from shallow-water to deepwater exploration. So, we have the know-how and expertise for such projects.