THE SLOW AND PAINFUL RECOVERY OF THE OFFSHORE DRILLING MARKET
The offshore drilling market shows a slow and painful recovery. According to the data released by HIS (Petrodata rig count) the marketed rig utilization rate is today 76.3% compared to 71.6% a year ago. The number of marketed contracted rigs has increased from 476 to 498. 22 additional offshore rigs are currently contracted but the marketed rig supply lost 12 units during the year. The total offshore drilling rigs supply fell from 800 units in January 2018 to 758 which means that 42 rigs have been retired, converted or scrapped.
Unfortunately with a utilization rate just exceeding 76% the dayrates remain low. The ultra-deeepwater semi-submersibles with a dramatically low ulilization rate keep drilling at dayrates around $150.000. Most of the ultra-deepwater drillships are drilling at $170,000 a day. A sharp increase was noted from December 2018 with new contracts signed at $300.000 a day.
The ulilization rate of the harsh environment jackups in Northwest Europe increased sharply in Q2 2018 but the dayrates remain low due to the over suplly ($60,000). The utilization rate of the 300ft/400ft jackups in Southeast Asia remains below 40% and dayrates seldom exceed $40,000.
Ensco’s CEO Carl Trowell said: “We have seen an uptick in direct discussions with customers regarding new contracts and extensions of current contracts. Not all of these tenders and inquiries will result in additional work, but we have seen a noticeable shift in our customers’ attitudes toward offshore projects recently, which we expect will provide a healthy pipeline of work in the years to come.”
Senior Rig Analyst at IHS Markit Cinnamon Edralin said: “Right now, operators are looking at their budgets for next year. Over the past few years, there has been a lot of pressure on companies to meet shareholder requirements, so they have really had pressure to keep costs down.”
Rick Von Flattern, contributor at Drilling Contractor commented: In 2019, the global offshore drilling market seems destined to not differ substantially from 2018, as operators labor to control costs even as global demand for oil continues to grow. The result is likely to be a slow and steady growth, constrained by an oversupply of drilling units but encouraged by steady oil prices and cautiously optimistic operators.
The offshore rig market is also paying today the frantic race to build new state-of-the-art units that culminated in the early 2010s. The oversupply is set to last as new units will hit the water in the next coming years. Keppel Offshore and Marine in Singapore plans to deliver up to 10 jackups in 2019, 7 jackups and one semi-submersible in 2020.
(Source: IHS, Keppel O&M/Image: Newbuild jackups abandoned by Perisai and Oro Negro idle in Singapore PPL Shipyard in January 2019/Rene P.)