Weekly Offshore Rig Review: Drilling Down on Drillships

Worldwide offshore rig utilization moved up significantly this week, rising more than 1/2 of a percentage point from 82.9% to 83.5%. This rise was driven by a total of eight idle rigs starting new contracts this week. That rise was offset slightly by three rigs coming off contract for a net total of five rigs going on contract.

Drillships constitute a fairly small, but important, portion of the overall offshore drilling fleet. There are currently 38 active drillships in the worldwide rig fleet, which constitutes less than 6% of the 656 rigs in the fleet. For comparison, the drillship fleet is less than 1/10 the size of the worldwide jackup fleet of 395 rigs.

Commanding Top Dollar
However, drillships command the highest day rates in the industry. At this time, there are 30 drillships under contract for an average day rate of $183,156. Historically, drillships have not only earned the highest day rates, but they have had the least variation in the rates that they earn. Over the 4 years from mid-2000 to mid-2004, drillship dayrates averaged between $120,000 and $140,000 for 40 out of 48 months. During that time, the average day rate earned during any given month only varied from the 4-year average about 6%, and the variance from the 4-year average only exceeded 10% in 6 months out of 48. That is a remarkable level of consistency.

During that same four year period, jackup and semisub day rates varied more widely. Jackups had twice as many months (12) in which the overall average day rate earned varied more than 10% from the 4-year average. Meanwhile, semis had 50% more months (9) in which the monthly day rate average varied more than 10% from the 4-year average.

Since June 2004, when drillship day rates averaged about $135,000, drillship day rates have risen along with the market and are now nearly $50,000 higher. That amounts to an increase of 37%. This continues the trend of drillships having more stable day rates than other rig types. Over the same 2-year period, semisub day rates increased 81% and jackup day rates increased 100%.

Longer Contracts Make for a Smoother Ride
A large part of the reason for the stability in drillship day rates is the fact that drillships generally have the longest contracts among the three main mobile offshore rig types. Of the 30 drillships currently under contract, the average length of the contract for each rig is 2.3 years. And each of those contracts has an average of 1.3 years left.

In contrast, for current jackup contracts, the average length is 1.9 years with 0.9 years remaining. And current semisub contracts average 1.7 years in length with about 0.9 years remaining. So, on average, jackups and semis are currently contracted for about 6 to 7 months less per contract than drillships. This leaves them more open to variations in the market as day rates move up and down over time.

Top Ops
Among operators who currently have drillships under contract, Petrobras is by far the leading company with a total of 7 drillships under contract, 6 of which are capable of drilling in 4,000ft+ water depths. Those Petrobras contracts averaged just under 3 years in length and $122k per day, which is the lowest day rate being paid for high-specification drillships.

After Petrobras, ONGC has the second largest number of drillships currently under contract with 4 lower specification rigs in its fleet. Shell, Total, and BP each have 3 drillships under contract. Of those companies, Shell and BP are paying average day rates about $220k for contracts between one and two years in length, while Total is paying about $170k per day for its three to four year contracts.

Looking Forward
For more information about future drillship utilization, the new RigOutlook for Semisubmersible and Drillship Demand gives an in-depth look at future utilization trends for drillships and semisubs. Based on a newly developed and very accurate analytical model, the market-by-market and worldwide rig utilization forecasts in this 36-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 or email dkent@rigzone.com.

For More Information on the Offshore Rig Fleet:
RigLogix can provide the information that you need about the offshore rig fleet, whether you need utilization and industry trends or detailed reports on future rig contracts. Subscribing to RigLogix will allow you to access dozens of prebuilt reports and build your own custom reports using hundreds of available data columns. For more information about a RigLogix subscription, visit www.riglogix.com.


Our Privacy Pledge

Most Popular Articles
Related Articles

Brent Crude Oil : $51.78/BBL 0.77%
Light Crude Oil : $50.85/BBL 0.83%
Natural Gas : $2.99/MMBtu 4.77%
Updated in last 24 hours