Rig operators look for silver lining

February 26, 2015

Offshore drilling rig operators have put a positive spin on the tough market conditions, suggesting that the downturn could improve the global fleet and offer opportunities to buy distressed assets. 

Seadrill CEO and President Per Wullf said while, together with the rest of the industry, Seadrill was facing challenging times, in a market that continues to be cyclical, there could be a beneficial "rebalancing" in the market. 

Rig contract signings have slowed as operators have cut their capital and exploration budgets following the oil price reduction from US$100 to $50/barrel. New rigs have also been entering the market, creating spare capacity and placing further pressure on drillers, who have been reducing costs and headcounts as a result. However, they are looking for a silver lining. 

Image: Seadrill's West Eclipse semisubmersible.

"We are optimistic that the drilling industry will benefit from the rebalancing that is occurring as older rigs are retired, and believe that this will ultimately result in a more healthy industry in the long run," said Wullf, in Seadrill's 2014 results statement. Seadrill operates 69 rigs, comprising drillships, jackups, semisubmersibles and tender rigs. 

Ocean Rig chairman and CEO George Economou this morning said the despite the challenging market environment, there could be opportunities for his company to pursue distressed assets.  

Ocean Rig, which owns and operates 13 ultra-deepwater drilling units, three of which are due to enter its fleet in 2016 and 2016, announcing its 2014 results today boasted 93% and 65% days under contract for 2015 and 2016, despite a broader slowdown in rig bookings. 

Maersk Drilling, which has 22 drilling units, including drillships and deepwater semisubmersibles, with an ultra deepwater drillship and a harsh environment jackup under construction, also set out its annual 2014 results today, saying it was confidence in the longer term market outlook. The firm said its equivalent figures for 2015 and 2015 are 80% and 52%. 

Maersk has longer term plans to increase its fleet further. However, CEO Claus Hemmingsen said this could only be carried out based on long-term contracts.

“We remain positive on the long term market outlook, and we maintain our long term financial aspiration, but the required additional units to reach the target will only be added against solid, long term contracts,” he said.

Meanwhile, Ensco has been busy cold-stacking rigs. CEO and President Carl Trowell said: "Given the severe downturn in the offshore drilling markets, we believe it is prudent to improve capital management flexibility and reduce expenses." Staff are being cut as rigs are cold stacked, he said. 

During Q4, three rigs were classified as held for sale - ENSCO DS-2, ENSCO 58 and ENSCO 90 - and being cold-stacked. A further four rigs in continuing operations have started cold stacking preparations since the start of 2015.

Ensco has 91 rigs, 11 of which are under construction, including drillships, semisubmersibles, and jackups. Five semisubmersibles are held for sale.



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