CLINTON ABBATE, LLOYD’S REGISTER ENERGY, HOUSTON
CONSIDERING THE ROLE OF CONDITION ASSESSMENT IN OFFSHORE DRILLING ASSET VALUATION
Drilling asset valuations
REFINING THE ROLE of asset condition as an element of asset
valuation is an area ripe for improvement. The vast majority of
current practice undersells the ability of a detailed condition assessment to materially improve assumptions for uptime, opex, and
comparable alternatives. Quantitative industry data as a tool for
improving these projections is in its relative infancy and much
additional work is needed on a variety of fronts for it to provide
reliable comprehensive failure rate and cost histories.
Qualitative condition assessments take a comprehensive approach to assessing the technical condition of offshore drilling
assets and have been providing drilling contractors, operators, and
trusted advisors with actionable 360-degree results that have allowed for decision making optimization no matter the context.
Regardless of capacity, it is important that all parties involved
understand the role of asset condition assessments as part of a
thorough valuation. While projections for market rate and utiliza-
tion are material elements of modeling the financial performance
of an asset, relatively little attention is typically given to uptime
performance projections as a component of financial
We frequently hear from clients that their valuation framework
will include an assumption for uptime – commonly pegged to a
contractually mandated performance metric – with a single prob-abilistic control for variance. As players seek optimization in nearly
every corner, it is important to consider the emphasis placed on
condition assessment as an element of asset valuations.
To characterize the current approach to asset valuation as
non-technical is reasonable given the relative lack of technical
input into what is otherwise a financial exercise. The question
becomes then how it can be that the technical complexities and
condition of sophisticated offshore hardware become so subordinate in an evaluation of performance? Aren’t the technical condition
and capability of the asset material to the asset’s operational and
therefore financial performance?