Worldwide offshore rig utilization continued to climb this week, rising to 84.5% as a net total of two idle rigs started new contracts.
Last week, we looked at the level of operator demand for semisubmersible rigs. And this week, we will take a look at another major pillar of the offshore rig market, operator demand for jackup rigs. Jackups constitute a much larger portion of the MODU fleet than semisubs, but earn significantly lower day rates. Thus, even though nearly two times as many jackup rig days were contracted during the 2001 to 2005 period, the total amount spent on jackup and semisub day rates only varied by about 3% in favor of jackups.
Top Jackup Operators
These top ten operators accounted for about 45% of the total expenditures on jackups during the 2001 to 2005 period. This is the reverse of the trend among semisub operators, where the top 10 operators accounted for nearly 65% of the total expenditures. The obvious explanation is that since semis work in deepwater, the rig day rates and higher and the overall projects cost more, so larger companies are more likely to make the investments required.
Still, the top 10 jackup operators account for a significant portion of the jackup expenditures. Among those top 10 operators, the top 5 accounted for about 60% of the top 10 and nearly 30% of total expenditures. The total jackup day rate expenditures for these top 5 operators is provided below.
2001 to 2005
Expenditures and Day Rates Move Up in 2005
The chart below illustrates the total number of days that jackups were contracted over the previous 5 years. During that time, the total number of days contracted remained fairly steady from year to year, varying no more than 4% from the 5-year average number of days contracted. In 2005, the number of day under contract only grew a little over 4%, but jackup day rate expenditures grew 30%, similar to semisub expenditures, meaning that on average each jackup was earning about $10,000 more per day than in 2004, a 26% increase.
2001 to 2005
Larger Operators Hiring More Jackups
2001 to 2005
While the rate of growth has slowed, worldwide jackup demand is continuing to expand in 2006, and day rates have continued to rise dramatically, rising more than 60% above last year's average day rate. At this point, the market is quite tight, and so there is not much room for growth in rig days contracted, except as rigs are reactivated and new rigs enter the market. So, look for overall increases in days contracted to be fairly modest, with larger increases in total expenditures this year as day rates rise.
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