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Westwood Global Energy: accelerating rig activity signals game-change as rig rates are on the up

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Oilfield Technology,

New insights into the offshore global rig market from research consultancy, Westwood Global Energy Group, reveal an acceleration in rig activity over the last 12 months, driving up rig rates in some areas and for certain types of rigs.

The data comes from Westwood’s RigLogix intelligence platform which is re-launching this week with additional data and improved functionality. The database is used by drilling contractors and operators (and service companies) for strategic planning, understanding opportunities and monitoring competition. It is also accessed by financial analysts for independent revenue modelling and projections.

RigLogix data shows that marketed utilisation for some rig types in some regions are nearing 85-90%. Historically this is the level at which day rates start to trend upwards at a more significant pace and could signal the start of a longer-term recovery. By 2021, Westwood expects to see day rates increase by at least 15% for rigs in operation.

Currently, the ultra-deep water (UWD) floating rig fleet is drawing a great deal of attention. Utilisation of the 139-rig marketed fleet stands at 76.9%, with 107 units currently working/committed, and one-third of those are contracted into 2021 or later. Looking ahead, the Riglogix Rig Requirements function shows that worldwide there are presently over 200 drilling programmes planned over the next 3-4 years that designate either a semi or drillship to be used, with the Norwegian North Sea, South America, and Africa among the regions expected to see high rig demand.

However, whilst some regions show positive signs of recovery, overall activity for the fleet as whole is taking time to recover. So far, 2019 utilisation growth has been encouraging but there is still room for improvement. Overall working, marketed jackup utilisation is now nudging 70% compared to 60% only one year ago.

A number of notable contract signings have been made in recent months for work in several regions. Operators in the so-called Golden Triangle (the US Gulf of Mexico, South America and off the west coast of Africa) have chartered rigs, including a few at new market-high day rates over US$200 000. Although some of these fixtures include contract add-ons such as managed pressure drilling (MPD) equipment or integrated services, the numbers have been a welcome relief for rig owners. And in Southeast Asia, several jackup contract signings have resulted in rates of US$80 000 or more, a level not seen there in many years.

Other significant trends emerging from the latest data include:

Rig stacking in Las Palmas

Las Palmas, off the Canary Islands, has become a major rig stacking area in recent years, not only due to its benign climate, which is said to have less of a detrimental impact on the rig, but also for its quick and easy access to several different regions.

Bidding not limited to rigs already in the region

Some rig owners will operate a rig at a lower day rate for a contract in a region with the hopes of securing additional work once it is there. In addition, with so many rigs idle, rig owners now routinely bid rigs for work in other regions, and in some cases far from where the rig is currently located. Recent contracts have been awarded for work off Senegal to rigs currently in the US Gulf of Mexico; in the Mexican Gulf to a newbuild rig in China; and in Brazil to two idle rigs in Greece. In 2018, one UDW drillship completed work in Aruba and mobilised to Malaysia for a contract there.

The New RigLogix platform is a subscription-based service that also offers interactive forecasting tools, allowing users to manipulate key assumptions such as rig retirement rate and macroeconomic outlooks to customisable dashboards. Forecasts are given for rig supply, demand, utilisation, and dayrates. The “Rig Tenders” section enables the user to keep track of upcoming global drilling opportunities.

Steve Robertson, Head of Rigs and Wells at Westwood Global Energy Group, commented: “After an extended downturn, the market is watching closely to see when improved utilisation will yield higher day rates. There are certainly significant reasons to be hopeful. In some areas, day rates are already hitting over US$200 000, and continued demand for specific types of rigs such as ultra-deep water jackups is good news for the industry. The fact that some operators are committing to rigs far in advance is a clear sign that they are anticipating further day rate rises.”

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