Plans announced May 4 by Diamond Offshore Drilling Inc. to decommission three semisubmersible drilling rigs brings to 36 the number of floating rigs steered toward retirement since crude oil prices collapsed in the second half of 2014, according to Cowen & Co. analysts.
The analysts, J.B. Lowe and Roland Morris, expect more rigs to be scrapped.
“Given our outlook for floater demand and visible supply additions through oncoming newbuild deliveries, we estimate that about 100 units should be removed from supply in order to balance the market,” they wrote in a May 8 report.
Semis in the Diamond Offshore announcement are the Ocean Saratoga, Ocean Worker, and Ocean Yorktown.
Contractors have retired 32 semis and 4 drillships so far. The average age of the units is 35 years.
Lowe and Morris said 123 out of 255 rigs now under contract will reach their contract terms by the end of 2016.
“We expect that competition for what little demand exists will grow increasingly fierce over the next 12-18 months,” they wrote, predicting the number of floaters under contract will fall to about 220 by yearend 2016 before recovering early in 2017.
With demand low, contractors able to do so are delaying delivery times for rigs under construction.
“Many of the 25 uncontracted newbuilds scheduled for delivery this year and next will be pushed out until at least the back half of 2016 if not 2017,” Lowe and Morris said.