NEW YORK - Evercore ISI’s Oilfield Services, Equipment & Drilling group released the most recent edition of its monthly Global Offshore Rig Market Snapshot, which covers early contracts terminations, rig addition and attrition and year-over-year contract coverage.
A total of eight contracts - seven new mutuals and one mutual sublet - have been announced so far in September, slightly below pace of 10 at this point in August, the analyst group found. Contracting decelerated in the back half of last month with a total of 18 contracts signed, well below the August totals of the prior three years, which Evercore placed at 36, 32, and 48.
Three August jackup contracts were for terms of a year or more. Vantage Drilling International's Emerald Driller heading to Qatar for Total while Seadrill's West Castor and China Oilfield Services Ltd.’s COSLHunter will operate in Mexico for independent E&Ps. September brought additional activity into the Middle East and Mexico. Diamond Offshore’s Ocean Scepter is headed to Mexico for Fieldwood Energy. Abu Qir Petroleum and Petrobel contracted El Qaher I and El Qaher II from Egyptian Drilling to work in Egypt. Saudi Aramco contracted Senusret from Egyptian Drilling and ENSCO 84 from Ensco to work in Saudi Arabia. Both of the Saudi Aramco contracts were for periods lasting more than 1,000 days.
Since the last report, on the floater side, two contracts were for terms of a year or more, with both Transocean's Sedco 712 and Diamond Offshore's Ocean Valiant secured for UK P&A work. The UK accounts for two of the eight September contracts thus far, Evercore continued, with both harsh high-spec jackups working for independent E&Ps, including the Maersk Gallant (also for P&A work).
Utilization continues to trend lower for rigs rolling off contract, while early contract terminations reaccelerated. Evercore said that the contracted global floater fleet fell by five units, or 3.2%, while the contracted jackup fleet fell by 10 units or 3.3%. Average dayrates were flat for both floaters and jackups at around $410,000/d and $130,000/d, respectively.
Contractors continued to cold-stack additional floaters, the analyst group found, citing a recent IHS report that ENSCO 8506 and Ocean Rig Mylos will be next to be cold-stacked. The cold-stacked floater count has increased by 30 thus far to 65 since the start of the year.
Evercore found that contract coverage for 2018 has slipped by 30 basis points (bps) to 26% for the global floater fleet but improved by 40 bps to 18% for the global jackup fleet. This compares unfavorably with the forward two-year coverage of 32% for floaters and 20% for jackups from this time last year. Within the analyst group’s coverage universe, Ensco plc is the only company to increase its 2018 coverage over the past 30 days. While the company's forward two-year coverage is similarly lower than the level of one year ago,
Ensco's 21% floater coverage for 2018 is only 280 bps lower than its 2017 coverage
of 24% at this time last year. In contrast, the industry's forward two-year floater coverage is down 690 bps.
Atwood, Transocean, and Vantage are the only companies to have a higher year-over-year forward two-year floater coverage, with Atwood's and Transocean's coverage incorporating one and six floaters scrapped over the past 12 months, respectively. On the jackup side, Seadrill and Vantage are the only companies to have a higher year-over-year forward two-year coverage versus the industry's average of -270 bps.