Weekly Offshore Rig Review: The Exodus Continues

During the course of 2006, the US Gulf of Mexico has undergone a major shift in the composition of its rig fleet, primarily the jackup fleet. This change is attributable to the ongoing exodus of rigs from the region that began at the start of the year.

Setting the Base Line
In this article, the GOM fleet of jackups, drillships, semisubs, and submersibles will be under consideration. As of November 15th, there are 6 drillships, 7 submersibles, 32 semisubs, and 94 jackups, for a total fleet size of 139 rigs.

During the previous two years (2004 and 2005), the size of the GOM rig fleet varied from a high of 165 rigs at the start of 2004 to a low of 156 rigs at the end of 2004, with an average of 161 rigs. The GOM rig fleet had seen declines in its size during 2004, but it bounced back to the 2-year average level for most of 2005. However, since that time, things have been changing quickly.

Fewer and Fewer Contracts
Last September, Hurricanes Katrina and Rita brought an unprecedented amount of damage to the offshore infrastructure including the rig fleet. GOM Utilization dropped six percent from September to October as 11 rigs came off contracts. This large drop marked the beginning of the decline in contracted rigs in the US Gulf.

Over the course of 2006, the number of offshore rigs contracted in the US GOM has set or tied new lows 6 out of 10 months. This decline in contracts has helped to fuel the overall decline in the GOM fleet size. At the same time, the declining number of contracts has also been a result of the overall decline in fleet size, since utilization has held in the mid to upper 70% range for most of the last three years.

Rigs Leaving the GOM
At the start of 2006, there were 161 jackups, semis, drillships, and submersibles in the US Gulf of Mexico. Since that time, a total of 29 rigs (including several previously retired rigs) have left the region leaving a total of 142 rigs in the GOM.

The jackup fleet has experienced the greatest degree of change in its fleet size and distribution. This year, 21 jackups have left the GOM for other areas of the world. Of those jackups, 19 of them were independent-leg cantilever jackups. As such, the ILC jackup subsegment has declined from accounting for a majority of the jackups in the GOM at the start of the year (60 of 115) to just over 40 percent of the jackup fleet today (41 of 93).

With the loss of so many ILC jackups, the face of the GOM jackup fleet is shifting towards older, lower-specification rigs. At this point, the majority of the rigs in the region are now Mat rigs, which is a major change from the Independent Leg domination that has held sway for so many years. The graphs below illustrate the change in the jackup fleet composition in just the last year.

The continuing changes in the US Gulf of Mexico rig fleet are leaving a much leaner and somewhat lower-specification offshore fleet working in the region. While the US Gulf still has the world's largest offshore rig fleet, the prominence of the region and its share of the overall market is much diminished.

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