Worldwide offshore rig utilization has held basically constant between 82% and 83% for most of the last month. However, for the first time in several weeks, utilization has ticked up slightly as two GOM jackups went on contract and one Venezuelan drill barge came off contract, for a net increase of one rig under contract.
Gulf of Mexico Utilization
Looking at the jackup market in particular, which makes up the largest subsection of the GOM fleet, there are currently 112 jackups in the GOM. Compared to other regions, the GOM has nearly twice as many jackups as the Persian Gulf, with 66 jackups. Of those 112 jackups, only 78 are currently under contract, which translates to a 70% utilization rate.
Going, going, gone
In addition to rigs leaving, it is likely that at least two more jackup rigs will be officially retired in the wake of Hurricanes Katrina and Rita: the GSF High Island III (250' ILC) and the GSF Adriatic VII (328' ILC) are both now listed by the US Coast Guard as underwater obstructions. That's in addition to 5 jackups already retired because of the storms.
Effect on the Rig Fleet
When taken as a whole, the GOM jackup fleet will not be greatly affected by the lose of these rigs. Of all the world regions with at least 10 jackups, the US Gulf of Mexico has the lowest utilization rate of 70%, whereas the other 8 regions with 10+ jackups are averaging well over 90% utilization. Counterintuitively, though, the average day rate for GOM jackups is the second highest among these 9 regions, trailing only the North Sea with its more stringent standards.
But when looking specifically at the 300' ILCs, this subsegment is currently experiencing more than 90% utilization and one of the highest average day rates for any region, less than 1% below the average for similar jackups in the North Sea. So, to see 15% of the fleet leaving the region is rather shocking. This decrease in fleet size is likely to drive costs for high-end jackups in the GOM significantly higher, and we would not be surprised to see the average day rates for Gulf of Mexico 300'+ ILCs increase 30% to 50% this year to the mid-100s.
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