Ocean Rig UDW Inc.’s recently announced acquisition of a deepwater drillship at less than 10% of its newbuild cost provides yet another signal of the dim market outlook for offshore drillers, Fitch Ratings said Apr. 27, saying the sale established a new offshore rig valuation low.
The drillship named Cerrado was sold at auction for $65 million, and it has no pending contract. Ocean Rig did not indicate its immediate plans for the drillship, which was built in 2011. The drillship will be renamed the Ocean Rig Paros upon delivery to Ocean Rig.
Fitch estimated Ocean Rig could generate positive cash flow and earn an attractive return on capital, subject to any additional upgrade costs, with an anticipated day rate in the low-$200,000s if awarded a multiyear tender.
“This would be substantially below the $500,000-plus day rates these types of rigs previously fetched,” Fitch added.
Fitch believes that creditors are likely to adopt a more conservative view of offshore rig values that will negatively influence prospective recovery in an offshore driller default scenario.
Fleet high-grading activity, even at these seemingly attractive levels, is likely to wait until a market recovery becomes more evident, Fitch said.