Offshore Drillers Warn of Growing Rig Scarcity

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More offshore drilling services providers are warning that the availability of high-specification rigs is rapidly dwindling due to heightened demand.

Noble Corp., which is in the process of finalizing a merger with Maersk Drilling, said new contract dayrates for high-specification units in the Gulf of Mexico were up to $400,000 and higher.

“Utilization for higher-spec drillships is well above 90%,” Noble CEO Robert Eifler told analysts during the company's second-quarter earnings presentation on Aug. 9. He added that Noble’s fleet of floating rigs was 100% contracted in the April-June period.

Jackup rigs are also in high demand, Borr Drilling CEO Patrick Schorn said during his company's second-quarter earnings presentation. He added that Borr's utilization rate for its modern jackup fleet “has now surpassed 92%" and that the firm was on track to have all 23 of its jackup rigs contracted by year-end.

Schorn also said that dayrates were increasing faster than expected and that market utilization of high-end rigs would hit 95%.

The commentary from Noble and Borr largely echoes the recent warnings by offshore drilling services peers Transocean and Valaris that offshore operators are racing to secure rigs now in anticipation of an even tighter market — and higher dayrates — in the future.

Broad Demand

Booming demand wasn’t limited to high-spec units or a particular region, Diamond Offshore CEO Bernie Wolford said during his company’s second-quarter earnings presentation on Wednesday.

“Rate spreads between regions are closing to zero,” said Wolford, who added that strong demand in Brazil and West Africa in particular was putting pressure on dayrates. “I think you’ll see rates for seventh [generation rigs] across the world go to $400,000 or in that vicinity, and for good, high-capacity sixth [generation rigs] to approach those kinds of numbers."

However, despite the rising demand, Noble’s Eifler said its customers weren’t yet worried enough about rig availability to make long-term contract commitments.

“Behavior is changing" but the market wasn’t “yet at that place” where availability trumps cost concerns, he said.

Offshore Oil and Gas, Earnings
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