Rig struggle in deep end
Upstream, Friday May 2
By Blake Wright
Rig utilisation in the deep-water Gulf of Mexico has slumped by 43% since the highs reached in late 2001.
The US Minerals Management Service (MMS), the agency which governs offshore activity, touted the achievement at the time, stating that the number of rigs working in more than 1000 feet of water in the Gulf had reached 47, up from the 39 at the beginning of the year.
The MMS also noted that nine rigs were working in 5000 feet of water or greater, including one at a Unocal-operated well on its Trident prospect that remains the water-depth world record holder at 9727 feet.
Records for activity levels, water-depth operations and well counts were being broken as fast as they were set. For contract drillers with floating assets in the region, times were good. Then something went wrong.
Utilisation for US Gulf floating rigs, chiefly semisubs, took a pronounced dip during the first quarter of 2002 -- going from a 46-rig fleet that was 85% utilised at year-end 2001 to a like-size fleet that was 65% utilised in April 2002.
Seasonality played a minor role but the typical recovery following the turn of the year did not materialise due, in part, to unstable commodities prices, the looming threat of conflict with Iraq and an air of heightened uncertainty that plagues this historically volatile and cyclical market.
As operators grew more cash-conscious and overall more cautious, floating rig utilisation languished.
Today, there are only 27 rigs working in more than 1000 feet of water in the region, a 43% drop from the highs of late 2001. Only three units are drilling in more than 5000 feet of water, a 67% plunge from the same period.
Most of the softness in the deep-water Gulf market can be attributed to a lack of demand for so-called mid-water-depth rated semi-submersible rigs, units that can work in waters up to around 3500 feet. Of the roughly 20 mid-water-depth semisubs in the region at the moment, seven are cold stacked with another three ready stacked.
The driller with the most exposure to the mid-water sector is Diamond Offshore. The contractor owns 11 rigs in this class and five are cold stacked.
Four of the company's units that are being actively marketed experienced a combined 149 days of downtime during the first quarter of 2003 due to the competitive, well-to-well nature of the current market.
One of the company's fourth-generation semisubs, the Ocean Valiant, was down for almost the entire quarter after rolling off an $80,000 per day job. The downtime equated to roughly a $7 million loss of revenue in the quarter.
The deeper rated semisubs have not been immune to the soft market. At press time, three units rated to drill in 5000 feet of water or greater were idle.
When deep semisubs have trouble finding work, they can affect the mid-water market by taking some shallower water jobs. The result is additional downward pressure on dayrates.
According to the drillers, the deep-water fleet needs to be fully deployed to relieve pressure on the mid-water market and move dayrates higher across the sector.
"Rates are not going to move much in a well-to-well market with rigs down," says Diamond executive vice president David Williams.
"In the mid-water depth range, you just don't have the pipeline infrastructure and so the smaller reservoirs are not as attractive if you have to drill the well, complete the well, set a tree and then lay a pipeline."
Williams adds: "As that becomes more fully developed, which it will with more deep-water work that passes through the shallow-water areas, that is something that will lead to better opportunities."
Diamond's competitors are also feeling the pinch. Transocean, the world's largest offshore driller, has two of its eight US Gulf semisubs cold stacked. One of its high-spec units, the Transocean Richardson, is stacked ready. Three of its remaining five area semisubs reach the end of existing commitments this year.
Both of GlobalSantaFe's US Gulf-based semisubs are working in the well-to-well market, and are due to be joined by both of the company's drillships. The CR Luigs and Glomar Explorer roll off their current jobs in 2003.
GlobalSantaFe management, much like its competition, is not looking at the US Gulf floating rig market through rose-tinted glasses.
"With no immediate signs of the Gulf of Mexico deep-water market improving, we expect lower dayrates and possible idle time on these units as they roll off contract commitments," says chief operating officer Jon Marshall.
Contract turnover will continue to be an issue throughout the year for semisub contractors in the region. Of the 22 semisubs currently drilling, only six have firm commitments extending past the year-end.
The mix of current spot market contracts and remaining long-term fixed price contracts in the region has made for an interesting dichotomy of dayrate schemes.
The current range of dayrates for all floating rigs in the US Gulf runs from a low in the mid $30,000s to a high topping $200,000. |
