Nothing but good news here: Monday January 19, 12:37 pm Eastern Time
Offshore rig demand strong - Global Marine study
NEW YORK, Jan 19 (Reuters) - Demand for offshore drilling rigs remains strong going into 1998 and there are few signs that
the Asian financial crisis or crude oil prices below $17.00 per barrel will derail industry fundamentals.
Driller Global Marine Inc (NYSE:GLM - news) told a press conference that its Summary of Current Offshore Rig Economics
(SCORE), showed rig hire dayrates rose 42 percent.
SCORE measures the relationship between dayrates and the cost of building a new rig, and the end-1997 figure was 71.3,
which shows dayrates are currently 71.3 percent of the level required to justify the cost of new construction.
''Despite financial market concerns about near-term oil and gas prices, most of the world's premium rigs are committed well
into 1998, which gives us confidence that 1998 will be another strong year,'' Global president John Ryan said.
Longer term, Ryan said he believes that oil prices will return to around $19.00 range, plus or minus $2.00 per barrel, where
with the exception of the Gulf War, the benchmark West Texas Intermediate blend has traded for six to seven years.
He noted that demand for hydrocarbons has risen 30 percent over the past 10 years and that oil companies spent $85 billion in
1997 to extract and explore for reserves and will spend 10 percent more this year, which will generate additional revenues for
the oil service industry.
Any reduction in Asian demand for oil is incidental, Ryan said, as the region's projected decline in consumption is just 500,000
barrels per day at a time when global consumption is forecast to rise from 70 million barrels of oil equivalent per day to 93
million over the next 10 years.
Shares in the industry have been hit hard after strong gains due to worries that oil companies would cut spending in light of
lower prices and that the drillers would be tempted to build rigs on a speculative basis.
Of 45 rigs currently under construction representing seven percent of the global fleet, eight are jackup rigs, which are typically
used in shallow waters, while the balance are semisubmersibles, for use in deeper waters.
''This is not a business that is overbuilding,'' said Ryan, adding that the number of jackups would actually shrink over the next
two to three years.
''If there is any problem, it is that demand will exceed supply for at least the next three, four, or five years,'' he said.
The SCORE rating for jackups was 80.65 at the end of 1997 and 63.04 for semisubmersibles.
The highest levels were for the North Sea and West Africa, two key deepwater provinces. |
