marc, Thanks for the post. Very positive for all drillers but particularly for jackup drillers. I particularly liked this part:
There are currently 59 rigs of all types under construction worldwide, according to Offshore Data Service in Houston. Other industry sources put the number at 45 for semisubmersibles, jackups and drillships. Either way, the total represents about 7% of the existing worldwide fleet. By contrast, in the early 1980s 239 rigs were being built, or about 50% of the fleet. Worldwide, newbuilding is doing little more than replacing units lost to attrition.
Of 45 rigs, 32 are under contract to the majors, being built for payout in four to five years. As they have been built for specific uses, they are not going to compete with the existing fleet. And 37 units are being built for 4,000 ft and deeper, a new market, and will not compete with equipment designed to work shallower waters.
The situation is even more pressing for the shallow-water market. Three-quarters of the world rig fleet are jackups, about 350 units, yet there are only eight jackups currently under construction-four with contracts, four on spec. Given the age of some units, plus damage and ultimate attrition, there will likely be fewer jackups in three to four years than exist today.
Operators recognize the need for more jackups, but will not start newbuilding until they've got a long-term contract in hand. There's an assumption by the majors that the equipment will be there when they need it to work non-deep assets because the jackup market is currently not as tight as the semi or drillship market. The wait for equipment today is typically 3 to 6 months. But contracts for jackups are getting longer. A year and a half ago, typical jackup contracts were for 90 days. Recent contracts have been double that.
Though I think the deep drillers are a safer bet in terms of their predictability in a low oil price scenario, eventually I think the shallow offshore drillers like ESV and perhaps some of the mixed offshore/land drillers like CDG and SDC will produce better returns. Particularly, when the deep drillers have been getting more market favor, I continue to feel the bigger opportunity lies with the shallow brethren. Unless oil prices really tank, I don't see much downside.
Baird |
