APRIL 2016 OFFSHORE RIG MARKET - marinemoney.com Kellock Rev2.pdf · © 2016 IHS. ALL RIGHTS...

© 2016 IHS. ALL RIGHTS RESERVED.

OFFSHORE RIG MARKET

APRIL 2016

Tom Kellock, Head of Offshore Rig Consulting

+1 832 463 3020

[email protected]

What’s happening on the supply side?

mailto:[email protected]




Offshore rigs –

the past eighteen

months

• Surprisingly little change in total supply

• In a market of steadily decreasing

demand, utilization and day rates

• With worse to come

• The number of stacked rigs has more

than doubled

• But scrapping so far fairly minimal and

mainly confined to floating rigs

Offshore Rig Market - Supply / April 2016


Utilization for the worldwide offshore fleet has dropped

from 80% to 60% over the last 18 months


55

60

65

70

75

80

85

90

95

100

450

500

550

600

650

700

750

800

850

900

Se

p 2

01

4

Oct 2

01

4

No

v 2

01

4

De

c 2

01

4

Ja

n 2

01

5

Fe

b 2

01

5

Ma

r 2

01

5

Ap

r 2

01

5

May 2

015

Ju

n 2

01

5

Ju

l 20

15

Au

g 2

01

5

Se

p 2

01

5

Oct 2

01

5

No

v 2

01

5

De

c 2

01

5

Ja

n 2

01

6

Fe

b 2

01

6

Ma

r 2

01

6

Ap

r 2

01

6

Un

de

r Co

ntra

ct U

tiliza

tion

(%)

Total Supply

Total Under Contract*

Utilization

Worldwide offshore rigs (jackups, semisubmersibles and drillships)

Nu

mb

er

of

rig

s

* Includes Owner-operated rigs

Source: IHS RigPoint © 2016 IHS


All major rig types

affected

• Jackup utilization: 61%

207 uncontracted delivered Units

• Floater Utilization: 56%

136 uncontracted delivered floaters

• 93 semis

• 43 drillships

• Situation likely to worsen

• New rigs in the pipeline

• Anaemic chartering



There are still nearly

200 offshore rigs on

order or under

construction

As of early April 2016:

• 67 Floaters (46 drillships, 21 semis)

• 120 jackups

• 8 tender-assists

All but 17 are reportedly already under

construction

But delivery dates are in a state of flux

And many rigs will not be owned and

operated by the companies that ordered them



Many analysts are

sceptical about how

many of these rigs

will be completed

We think most of the Chinese jackups will be

delivered – eventually

• •49 units delivered from China since 1/1/2005

• 75% under contract vs 61% for worldwide jackup

fleet

• We count 69 more whose construction has

started and another one on order

• 57 of these are designed by GustoMSC,

LeTourneau and Friede & Goldman

• Our analysis indicates around 87% of these will

be completed…

• …and we understand at least 8 are already

complete but undelivered



And at least some of the Sete Brasil floaters are likely to

be completed


0 0 0 0 0 0 0 0 0 0 0 0

5 14 14

17 23

27 31

38 40

52 52

60 69

71 74

85 89

0 20 40 60 80 100

Boipeba (DS)Botinas (SS)

Comandatuba (DS)Deepsea Siri (DS)

Interlagos (DS)Itapema (DS)Itaunas (DS)

Leme (DS)Marambaia (DS)

Sahy (DS)Salinas (DS)

Joatinga (DS)Mangaratiba (SS)

Curumim (DS)Leblon (DS)

Portogalo (SS)Ipanema (DS)

Pituba (DS)Deepsea Itaoca (DS)

Grumari (DS)Bracuhy (SS)Cassino (DS)

Copacabana (DS)Camburi (DS)

Frade (SS)Ondina (DS)

Deepsea Guarapari (DS)Arpoador (DS)

Urca (SS)

Sete Brasil Rigs - Construction Status January 2016

Source: Sete Brasil © 2016 IHS

% Complete


For some fleet segments rechartering dried up years ago


0

200

400

600

800

1,000

1,200

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

* On Order and Under Construction rigs are counted

3,001-7,500ft Floating Rig Backlog - Contracted Backlog Days Per Rig*

Source: IHS Floating Rig Market Report Monthly Slideshow March 2016

Nu

mb

er

of

Ba

ck

log

Co

ntr

ac

t D

ays

© 2016 IHS


Although jackup backlog is now holding up reasonably well


0

50

100

150

200

250

300

350

400

450

500

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

Global jackup backlog days - per rig*

Source: IHS Jackup Rig Market Report Monthly Slideshow - April 2016

* Out-of-service jackups are not counted, on-order and under-construction jackups are counted

© 2016 IHS

Da

ys

of

Ba

ck

log

/ P

er

Rig


How contractors

are reacting

• Postponing delivery – but usually at

some cost

• Cancelling construction contracts – even

when the rigs are basically complete

• More stacking but with limited impact

• Retiring rigs but not enough



Although the number of stacked rigs has more than

doubled cold-stacked rigs are up by only 60%


0

50

100

150

200

250

300

350

400

Sep 2014 Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016

Nu

mb

er

of

rigs

Hot Stacked

Warm Stacked

Cold Stacked

Source: IHS RigPoint

Stacked offshore rigs (all types except inland barges and platform rigs)

© 2016 IHS


Although at least 49 floaters have been retired since

2014 nearly three times as many are uncontracted today


0

5

10

15

20

25

30

35

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Voluntary

Accident

Floating rig attrition


Nu

mb

er

of

rig

s


Jackup attrition appears more consistent


0

2

4

6

8

10

12

14

16

18

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Jackup attrition

Nu

mb

er

of

rig

s



But this has involved multiple rig types


0

2

4

6

8

10

12

14

16

18

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Workover

Mat

ILS

ILC (accident)

ILC (voluntary)

Jackup attrition by type

Nu

mb

er

of

rig

s

Source: IHS RigPoint

Notes: IL = independent leg, S = slot, C = cantilever

© 2016 IHS


A paltry 30 independent leg cantilever units – the only ones

that really matter – have been retired in the past 8 years


0

2

4

6

8

10

12

14

16

18

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(YTD)

Voluntary ILC jackup attrition

Nu

mb

er

of

rig

s



Can the industry

respond

appropriately?

• Clearly it hasn’t done so yet

• It’s not as simple as just scrapping all

the old rigs

• The structure of the offshore drilling

market is a large part of the problem

• The strategies of some participants

make rig attrition almost impossible for

them

• Wholesale rig retirements appear very

unlikely



The theory that the new rigs would replace the old ones has

NOT been proven – and that is a major issue for the industry


Average

0

10

20

30

40

50

60

70

80

90

100

1980 1985 1990 1995 2000 2005 2010 2015

Un

de

r C

on

tra

ct

Uti

liza

tio

n (

%)

Average Year in Service (delivered rigs)

Fleet Age and Utilization - March 2016 - 16 Major Commercial Drilling Contractors

Source: IHS © 2016 IHS


Even under better circumstances, the degree of competition

in the floater market - with >60 players - is extreme



The Jackup market is even more fragmented – with more

than 120 players


Shelf Drilling

39 Ensco 35

COSL 34

Paragon 31

Hercules 29

Rowan 27

Seadrill 24

National Drilling 20

Aban 15

Transocean 15

Maersk 14 Noble 14

Japan Drilling 13 CPOE 10

Gulf Drilling International 10

Less than ten

rigs

Jackup rig market supply by manager (includes units under construction)


So what’s next? • Forced rationalization of the offshore drilling

industry through bankruptcies/liquidations

• ? New entrants to pick up the pieces

• As with E&P companies, assets more likely

to be purchased than companies

• Plummeting rig values may be the catalyst

for large-scale action

Of course this is not an unfamiliar scenario to

many of us



How many of these names are still here?


0 5 10 15 20 25 30 35 40 45 50

Key Drill

Maersk Contractors

Loffland Brothers

Diamond M

Dixilyn-Field

Atwood

Foramer

Forex Neptune

Marine Drilling

Western Oceanic

Transworld

Zapata Offshore

Rowan

Reading & Bates

Santa Fe

Sonat

Sedco/Sedco Forex

Global Marine

ODECO

Penrod

Contractors managing at least ten rigs in January 1985

Source: IHS RigPoint © 2016 IHS Number of rigs

IHS Customer Care:

Americas: +1 800 IHS CARE (+1 800 447 2273); [email protected]

Europe, Middle East, and Africa: +44 (0) 1344 328 300; [email protected]

Asia and the Pacific Rim: +604 291 3600; [email protected]

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permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage, or expense incurred by reliance on information or any statement contained herein. In particular, please note that no representation or warranty is given as to the

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APRIL 2016 OFFSHORE RIG MARKET - marinemoney.com Kellock Rev2.pdf · © 2016 IHS. ALL RIGHTS...

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