NEW YORK -- Global Marine Inc., Transocean Offshore Inc. and Rowan Cos. are rebuffing major oil companies who are complaining that rental rates for oil rigs are too high when crude oil prices are at a four-year low.
Shares of the companies that rent out oil rigs and provide drilling services have slid recently as investors foresaw a glut of oil, lower oil prices and less demand for drilling.
Last week Amoco Corp., Texaco Inc. and Chevron Corp. asked oil service companies to cut prices on rental rates that had shot up as much 500 percent since 1994.
"We don't want to make anybody madder than we have to. But to give away rig time -- no thank you," said David Herasimchuk, vice president of market development for Global Marine. "They're suffering from sticker shock."
The three oil service companies don't expect to make price cuts this year, spokesmen said.
Rather than cut prices if demand weakens in the Gulf of Mexico, Houston-based Global Marine will seek to rent its rigs in the North Sea where drilling continues at a rapid pace, Herasimchuk said.
"The world doesn't center around Louisiana and Texas," he said.
Oil services companies endured years of low rates and now say the prices they charge oil companies are justified by tight supply and soaring demand.
"We've got people waiting in line to take our rigs," said Edward Thiele, treasurer of Houston-based Rowan. "When we were crying, they didn't feel anything for us."
Though the oil service companies are holding the line on price cuts, investors are taking the view that lower oil prices ultimately mean trouble for companies that drill for oil on contract.
The Philadelphia oil service sector index of 15 companies has fallen 4.7 to 96.75, while the Standard & Poor Index of six oil well equipment and service companies fell 143.05 to 4016.45. Both indexes have followed crude lower since October.
Crude oil for March delivery is trading at more than 30 percent lower than a year ago.
"The longer oil prices go down, the more likely you're going to have a reduction in spending" for oil services, said Joseph Agular, an analyst with Johnson Rice & Co.
With oil companies considering oil exploration budget cuts, oil service companies might do well to get long-term contracts for as many rigs as possible, said Richard Shepherd, managing director of Petrodata in Aberdeen, Scotland.
"They have to watch out," Shepherd said. "The fact is that the market is extremely sensitive to oil prices."
Transocean, which has many deepwater rigs with an average contract length of 33 months, said it doesn't expect to lower its rates, though it will talk with its customers as a normal course of negotiations. |
