Savanna Energy Services Corp. (TSX:SVY) ("Savanna") is updating the status of its hybrid drilling rig retrofit and relocation program, reflecting progress on the Company's strategy to become a deeper-focused driller. Over the past 18 months, Savanna has been progressively increasing its North American depth capability. This is being accomplished by reducing the number of shallow CT1500 hybrid drilling rigs operated in North America through both relocation of the rigs to Australia and conversion into fit-for-purpose deeper capacity TDS3000 drilling rigs.
The TDS3000 Drilling Rig
The TDS3000 is an automated, high-capacity, range III single drilling rig specifically designed to participate in long-reach horizontal drilling (to 4000 meters) from a highly mobile platform. Savanna expects to have completed the conversion of 15 of its original 38 shallow hybrid fleet to this platform in 2012. The 9th rig on this conversion program was delivered for field use on February 1, 2012, with the 10th rig expected to be delivered and in service in March, 2012. Three of the TDS3000 rigs have been deployed to Savanna's U.S. oil based operations in Texas under contract, with the remainder operating in Canada under contract.
Savanna remains on track to deliver an additional 5 TDS3000 rigs in 2012, which is consistent with the committed 2012 capital program.
To date, Savanna's TDS3000 platform has generated substantial utilization and margins, providing superior returns on otherwise idle capital. The first 10 TDS3000 rigs are all subject to term contracts, and Savanna is optimistic it will be able to contract the 5 remaining 2012 conversions as well.
In Q3, 2011 Savanna operated 4 TDS3000 drilling rigs which generated $2.7 million of operating margin on utilization rates of 81%. The operating margin contributed accounted for 8% of Savanna's total Q3, 2011 drilling margin yet the TDS3000 drilling rigs only accounted for 4% of the operational drilling fleet.
The Australian Hybrid and Workover Rig Status
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