Worldwide offshore rig utilization continued to move up for the third straight week, with a net total of 2 idle rigs landing new contracts and pushing utilization up to 83.7%.
A Different View of Day Rates
In trying to get a better handle on oil prices and day rates, we decided to perform some calculations to determine the average day rates for rigs over the last 10 years in terms of barrels of oil. So, instead of looking at a day rate as a dollar amount, we will be looking at how many barrels of oil the rig earned. In order to do so, we simply divide the average day rate by the average price of a barrel of oil thus removing the dollars from the equation. This provides an inflation-adjusted comparison of how much offshore rigs have been earning in light of the commodity that they are used to procure.
Day Rates on the Decline?
The data above highlights the fact that 1998 was by far the best year for day rates in terms of barrels of oil. At that time, day rates were still holding on to higher levels attained due to higher oil prices in 1996-97, while at the same time the price of oil dropped to its lowest yearly average price since 1974. This divergence left rigs earning significantly more for a much less valuable resource than at any other time during the last 10 years.
Things turned around quickly in 1999 and 2000 with day rates dropping nearly in half from their 1998 levels, while at the same time the price of oil recovered significantly. This brought the average day rates in terms of barrels of oil back below the 10-year average.
Since that time, actual day rates have generally continued to rise, but they have not kept pace with the rapid increases in the price of oil. As such, even though average day rates (in dollars) are at their highest levels since 1997, rigs are earning less today (in terms of barrels of oil) than at any point in the last 10 years.
What's In Store?
For more information about the future of rig utilization and day rates, contact us about our new suite of RigOutlook reports. Just call +1-281-345-4040 ext. 11 or email firstname.lastname@example.org.
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