Worldwide offshore rig utilization moved down again this week, moving back below 84%, as a net total of 3 rigs ended contracts and one new rig joined the fleet. The majority of rigs coming off contract this past week were mid-water semisubs, which accounted for the majority of the drop in overall utilization.
Looking back over the last several months and looking out into the near future, it looks as if the jackup fleet is potentially at the beginning of a decline in its overall utilization rate.
In early fall 2005, the worldwide jackup fleet experienced its largest drop in utilization since the fall of 2001. Between September and October 2005, the number of jackups under contract worldwide fell by a net total of 8 rigs, which equates to a 2% drop in one month's time.
That drop in utilization was felt mostly in the United States GOM, where utilization actually dropped by 9 rigs, more than the worldwide decline. Considering that the GOM rig fleet consisted on 115 rigs in September 2005, a decrease of 9 rigs equates to a nearly 8% decline in rig demand in just one month.
The decline in the GOM was due in large part to the effects of Huricanes Rita and Katrina, which combined to destroy or severely damage 6 GOM jackups that are now retired from the active rig fleet.
During the northern winter months of December and January, jackup utilization around the world and in the GOM dipped further, dropping another 10 rigs worldwide and 6 rigs in the GOM by January of this year to reach a low of 332 rig contracted worldwide. Since that time, worldwide utilization has recovered almost to its pre-Rita levels, with 348 of 394 jackups contracted for a utilization rate of more than 88%. That is just 2 rigs below the September high.
The US Gulf of Mexico has not fared nearly as well, only pulling back up to 78 out of 103 rigs contracted for a utilization rate of about 75%. That is a far cry from the 91 to 92 rigs that were contracted during Q2 and Q3 2005. With the decline in GOM jackup utilization has also come a decline in fleet size: during the 7 months since September, the GOM rig fleet has also lost a net total of 14 rigs, 6 retired and 8 moved to other areas.
The good news for rig contractors in the US GOM is that day rates have finally caught up with and surpassed the worldwide average. Up until May 2005, US GOM day rates averaged about 10 to 40% lower than the worldwide average over the 2002-2004 time range. But since May 2005, when worldwide and GOM day rates averaged about $55,000 per day, US GOM rates have risen steadily to an average of $114,000, which is nearly $25,000 (27%) above the worldwide average jackup day rate of about $90,000 per day.
However, it is rather doubtful that those high day rates will persist much longer. With the jackup market entering what looks to be a downturn that began in the aftermath of Hurricanes Rita and Katrina, we are expecting to see declines in both utilization and day rates as rig demand eases.
For more detailed predictions of future jackups utilization, the new RigOutlook for Worldwide Jackup Demand provides in-depth analysis and mid-term forecasts for the jackup fleet around the world, with specific focus on the Gulf of Mexico, Persian Gulf, Southeast Asia, and other key regions. Based on a newly developed and very accurate analytical model, the market-by-market and worldwide rig utilization forecasts in this 38-page report present a heretofore unavailable look at future offshore rig activity. For more information about this report and other rig demand forecasts, please call +1-281-345-4040 ext. 11 or email firstname.lastname@example.org.
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