Contract-Backed Newbuilds Poised to Benefit from Ultra-Deepwater Demand
While operators with uncontracted ultra-deepwater newbuilds are best positioned to benefit from the latest cycle of ultra-deepwater demand, substantial scope exists for "contract-backed newbuild opportunities" as the battle for ultra-deepwater availability unfolds, according to an Aug. 31 research note by Barclays Capital.
"We currently see up to 10 opportunities for contract-backed newbuilds," said analyst James C. West in the note.
Several majors and national oil companies are in the market with multi-unit, ultra-deepwater packages, according to Barclays. Higher oil prices and operators' aims of meeting higher production targets are driving ultra-deepwater rig demand higher worldwide compared with a few months ago.
High oil prices, continued exploration success, and the proliferation of emerging ultra-deepwater demand basins - including East Africa, the Mediterranean, Southeast Asia, and the Arctic - is driving operator interest in ultra-deepwater, a trend that Barclays expects to continue, West said.
Shell is expected to announce an ambitious ultra-deepwater tender program in the near term. The company already has eight ultra-deepwater rigs contracted.
Barclays expects the company to contract four to five additional units, with some awards potentially being awarded for contract-backed newbuilds.
"We think operators will increasingly opt to commission special-purpose rigs from the high-quality contractors with strong operational experience, as more drilling takes place in harsh and sensitive environments," West noted.
Drilling contractors Ensco, Transocean and Noble Corp. are best suited for contract-backed newbuilds due to their extensive ultra-deepwater experience and expertise, said West.
Statoil may be in the market for some contract-backed newbuilds for the North Sea, while others are looking at contract-backed newbuild opportunities for Greenland, eastern Canada and other emerging, environmentally challenging plays.
The emergence of made-to-order newbuilds could lead to resurgence in the rig construction cycle, with contract drillers and capital equipment companies such as Cameron and National Oilwell Varco poised to benefit, West said.
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