Hutton ODS

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Offshore Drilling Rig Market Outlook

Rod Hutton ODS-Petrodata

2011 ODS-Petrodata. All Rights Reserved.

Marine Money Conference, Oslo

May 26, 2011


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Today's agenda

The offshore rig market Newbuilds

Whats happening by market segment

Jackups

Midwater

Deepwater North Sea

2 2011 ODS-Petrodata. All Rights Reserved.


3/27

Offshore rig market

A new round of rig building is underway

Some consolidation already taking place

Demand shifting to higher spec jackups

Raising questions about older units

Midwater rig developments restricted to harsh environment

units

Deepwater is the growth area



4/27

The current picture

65.00

70.00

75.00

80.00

85.00

90.00

95.00

100.00

Jan-02

May-02

Sep-02

Jan-03

May-03

Sep-03

Jan-04

May-04

Sep-04

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

Utilisation(%)

World Rig Total Contracted Utili sationTotal offshore fleet January 2002 - Apri l 2011

Drillships Jackup s Semis


5/27

New rigs just keep on coming


14

11

17

8

7

21

21

2

27

1

1

4

2 2 2 1Drillship(51)

Semisubmersible(21)

Jackup(69)*

Newbui ld Rigs - Year in ServiceAs of May 16, 2011

2011 2012 2013 2014 2015 2016 2017 2018

* Excludes the "Iranian Ten"


6/27

With a surge of orders in the past 12 months


30

3

46

4

19

2

26

4

0

5

10

15

20

25

30

35

40

45

50

Drillships Semis* Jackups Other

New Offshore Rig ProjectsAnnounced Ju ly 1, 2010 to May 16, 2011

Ordered/Planned

Options

* Includes monoc olumn units


7/27

56% 60% 59% 56%

20%23% 24%

23%

7%4% 6% 12%

17% 14%12% 10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1985 1995 2005 2014

Offshore Fleet Make-up(if no attrition)

Others*

Drillship

Semisubmersible

Jackup

*Arctic rigs, drill barges, submersiblesand tender-assists

Overall fleet makeup has changed little over the

years



8/27

The jackup market

Global market seemingly insensitive to everything

Newbuilds are adding to the fleet not replacing it withobvious consequences

US market apparently in terminal decline Focus shifting to higher spec jackups



9/27

Situation has changed considerably since the oil price

crash


60

65

70

75

80

85

90

95

100

ContractedUtilsation(%)

Jackup UtilisationIndependent Leg Uni ts

301'+

300'

0-299'


10/27

300 ft and LessUnder Construction o r

On Order, 15

300 ft and LessDelivered, 18

301 ft and GreaterDelivered, 74

301 ft and GreaterUnder Construction or

On Order, 53

Newbui ld Jackup Orders Since 2005

Most but not all jackup owners going for long

legs



11/27

The bifurcation is forecast to continue


0

50

100

150

200

250

1Q01 1Q03 1Q05 1Q07 1Q09 1Q11 1Q13 1Q15 1Q17 1Q19

Rigs

Global Independent Leg JackupsRated Water Depth 300ft versus 301ft

Mid-case Demand Forecast Comparison

301ft Mid-case Forecast

300ft Mid-case Forecast

Whichwould mean even more new jackups!


12/27

The Midwater Fleet

Not a volatile market

Niche newbuilds only

Not much scope for more upgrades

Widely distributed

Old but serviceable



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0

10

20

30

40

50

60

70

80

90

100

110

120

130

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Midwater Rigs: Contracted vs Non-contracted(RWD


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And not a lot will change outside niche markets


0

1

2

3

4

5

1997 1998 2005 2006 2007

NumberofOrder

s

Midwater Rig Orders1997 to 2011


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Mostly fairly old

0

2

4

6

8

10

12

14

16

1970 1975 1980 1985 1990 1995 2000 2005 2010

Numberofrigs

Midwater Fleet*Year in Service

* Drillships and semisubmersiblesrated water depth 3,000 feet and less



16/27

Deepwater market remains strong

Is it price or demand prompting new orders?

There are a lot of uncontracted newbuilds in the pipeline

Not to mention the normal turnover

However, the ultra-deep market in particular is holding its own

and new areas are emerging



17/27

Recent demand growth has varied widely


0

10

20

30

40

50

60

Africa (West &South)

Asia-Pacific Mexico &Central America

Mediterranean& Middle East

North America NorthwestEurope

South America

Contracted

Rigs

Regional Change in Deepwater Fleet*Contracted Rigs 2005 vs 2011**

2005 2011**

* Drillship s and Semisubm ersibles with 3,001 ft Rated Water Depth and Deeper** January to May


18/27


18

Even before the Deepwater Horizon accident

there were potential problems with the deepwater

and even ultra-deepwater rig markets

Rigs coming off contract (as is normal)

Sublets available

Backlog falling

New uncontracted rigs arriving


19/27

26 Uncontracted ultra-deep newbuilds due before 2014


19


20/27

But outlook still good

Return of deepwater drilling to the US Gulf

High oil price boosting E&P budgets

Considerable pent-up demand in several regions e.g.interim demand off Brazil, development programmes

worldwide

Asia-Pacific the next hot spot ?



21/27

North Sea outlook floaters

UK

UK Standard semi day rates have remained around USD250,000 for 2 years

Bulk of UK semi work remains short-term UK tax change may discourage drilling

Norway

Statoil tendering to create new standard water workhorse

fleet, and to shift some work to well intervention units Long-term programmes still dominate in Norway, in contrastto UK sector

Barriers to entry constricting Norway supply



22/27

Smaller fields leading to falling demand


0

5

10

15

20

25

30

35

2000 Q1 2003 Q1 2006 Q1 2009 Q1

UK vs Norway semi demand

Norway UK


23/27

Norway offering longer term work

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2000 2002 2004 2006 2008 2010

Days

Average new charter lengths UK vs Norway

UK Norway



24/27

North Sea outlook jackups

Three distinct markets: Southern UK/NL/DK (21); UK

Central North Sea (12); and Norway (7)

Increasing high-spec supply up to 25 units capable ofCNS work

Southern North Sea jackups at full utilisation

Older units being sold

Growth in high-spec jackup market in UK and Norway

High-spec market being driven by good oil price, and bycompeting with semi market



25/27

Focus on North Sea high spec newbuilds

0

5

10

15

20

25

30

Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan Jul-14

Rigs

North Sea jackup supply (excluding Norway)

Potential NS High Spec Fleet NS Standard jackup fleet



26/27

Final thoughts on the offshore rig market

Without significant scrapping there is probably limited

upside for jackup rates

Midwater market will be pressured by deepwater rigs forsome years

Deepwater market has some short-term issues but futurestill looks very good



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