Monthly report sees upturn in drilling rig contracts

Offshore staff

NEW YORKEvercore ISI has released its latest Offshore Rig Market Snapshot. The monthly report finds an increase in contracts so far in November over October. 

The firm’s Oilfield Services, Equipment & Drilling group found 10 new mutuals, one priced option, one priced contract, and five mutual renegotiations for a total of 17 announced so far in November, noting that it was “a nice pick-up from only seven at this point in October.”

Contracting activity accelerated in the back half of October with a total of 22 signed, but remained below pace of the prior three October totals of 34, 59, and 37. Of the 22 contracts signed last month, 12 were for jackups and 10 for floaters, with terms averaging 226 and 114 days, respectively.

Term contracts were signed for three jackups and a floater: the ENSCO 88 to Saudi Aramco, the ENSCO 104 to Wintershall in the UAE, the UMW Naga 8 to Hess in Malaysia, and the Transocean Barents to Suncor in Canada.

So far in November, all six term contracts are from PEMEX with domestic operators IPC and Grupo R. Day rates are down by an average of 18%.

The analyst firm found that utilization continues to trend lower for rigs rolling off contract and early contract terminations. Contracts for two floaters and a jackup were terminated early, including the Rowan Renaissance, which is being released early but will remain on a standby rate through the contract end in April.

Overall, the contracted global floater fleet fell by one to 148, while the contracted jackup fleet fell by six to 290. Average day rates edged down 30 basis points (bps) for floaters to around $413,000/d but increased 1.7% for jackups to $127,000/d.

Evercore found that within its coverage sphere, two Atwood jackups went off rate over the past month and are now warm-stacked, while two Diamond floaters, one Ensco floater, and one Noble jackup went on rate. The West Epsilon and GSF Development Driller I are newly cold-stacked while the Rowan Gorilla II, Transocean Driller, Transocean Winner, and Sedco 704 have exited the global fleet.

Overall, the industry retired six floaters over the past 30 days, bringing the year-to-date total to 23 and 68 since 2014.

Contract coverage for 2017 increased by 140 bps to 35% for the global floater fleet and 70 bps to 30% for the global jackup fleet. On the floater side, North Atlantic Drilling’s 2017 coverage increased to 14% from 0% last month for the 90-day Total contract for the West Phoenix, while new one-well projects boosted Ocean Rig’s and Pacific Drilling’s 2017 coverage increased by 260 bps and 230 bps to 36% and 22%, respectively.

Notably Rowan’s 2017 jackup coverage improved 660 bps to 45%, Ensco’s 2017 jackup coverage improved by 350 bps to 40%, and Noble’s 2017 jackup coverage improved 300 bps to an industry leading 71%.

On a rig month basis, Seadrill leads with a jackup fleet that is up a net 18.7 rig months from a year ago, followed by Diamond Offshore’s net 2.6 rig month increase.

11/16/2016

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