Worldwide offshore rig utilization continues to hold near 83%, as it has for the last several weeks. The only idle rig starting a new contract was the 8,000ft semisub ENSCO 7500, which just started working for Chevron in the US GOM.
Current utilization is an interesting fact, but most people are more interested in where utilization and day rates are headed. What's the future hold for the offshore rig fleet? How are utilization and day rates going to hold up in the coming year? These are the two of the key questions facing companies involved in the offshore oil and gas industry. This week, we'll take a look at some of the key indicators of future utilization and day rates: rig contract backlogs and the time between contract signing (fixture date) and the actual start of the contract, which we will refer to as the fixture-to-start differential for expediency's sake.
Part of the trend that has produced this large backlog for so many jackups is the fact that the length of time between the contract fixture date and start date has increased substantially. For contracts signed during 2004, the fixture-to-start differential for 250'+ ILCs was about 75 days, or about 2.5 months. While in 2005, contracts signed for these same rigs were being signed about 180 days, or 6 months, in advance of the start date. Along with the increase in the fixture-to-start differential comes a significant increase in day rates, with contracts for 250'+ ILCs signed in 2005 having day rates 60% higher than those signed in 2004.
Semisubs and Drillships
Taking a closer look at the contracts signed in 2005 for 4,000'+ semisubs, we see that most contracts were signed 3 to 12 months in advance, with the fixture-to-start differential affecting day rates noticably, up to a point. Specifically, contract with a 6 to 12 month fixture-to-start differential averaged just under $200,000 per day. While contracts signed 12 to 18 months in advance averaged $282,000 per day, about 40%. And contract with a fixture-to-start differential of 18 months to 2 years averaged day rates of $350,000, a further 24% increase. But, contracts signed 2 to 3 years in advance averaged only $185,000 per day.
This has lead to the current market situation where 25 of 26 (96%) of 4,000+ drillships are contracted into the future for an average of 3 years. 74 of 84 (88%) of 1,500' to 4,000' semis are contracted for an average of 2 years. And 53 of 54 (98%) of 4,000' semis are contracted out for the next 2.5 years.
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