Since 2000, the overall U.S. Gulf of Mexico jackup rig count has trended downward. Some improvement in pricing and demand has been seen recently in this market, but overall demand and utilization remains down considerably from a decade ago.
A number of factors have contributed to the decline in the number of jackups drilling in the Gulf. One factor is the decline in U.S. natural gas prices that occurred nearly a decade ago. This led to a decline in jackup drilling on the Gulf Outer Continental Shelf, where mostly gas is found. The growing U.S. onshore drilling market, where a significant amount of natural gas has been encountered, also has contributed to lower prices. The total supply of rigs available also has declined over the past decade in response to demand and to drilling contractors moving jackups to overseas markets with more lucrative, longer-term contracts.
Occasional peaks have peppered that trend. In June 2000, 132 rigs out of 147 available were under contract, with utilization on a rig-by-rig basis of 89.8 percent, according to RigLogix. The number of rigs under contract climbed, reaching 144 rigs out of 155 available and utilization of 92.9 percent in April 2001.
The jackup count declined from there, dropping to 93 rigs out of 152 available in October 2001. The number of jackups under contract would not break 100 again until June 2002; since that time, both the number of jackups under contract and utilization rate continued to plummet.
Understandably, the jackup rig count declined from September 2005 onwards after Hurricanes Katrina and Rita wreaked havoc on rigs and production infrastructure situated in the Gulf of Mexico. The focus shifted towards recovery and cleanup and away from drilling.
Industry and government also joined forces following the hurricane to improve stationkeeping abilities for mobile offshore drilling units, including jackups, to possibly prevent drifting in future storms. A number of jackups were lost or rendered unsalvageable by the storms as the magnitude of these storms surpassed the design criteria for the all the jackups damaged.
The jackup count started to pick up in mid-2008, but the global economic crisis knocked the jackup rig count back down. As a result, the contracted number of rigs and utilization reached new lows as operators to scale back drilling operations or made some drilling projects uneconomical. In September 2009, 21 rigs out of 27 available were under contract, and utilization fell to 29.17 percent.
The contracted jackup count, utilization rate and day rates have recovered somewhat in the Gulf, but jackup utilization has not climbed any higher since the 51.85 percent seen last month. Forty-two rigs out of the 81-rig jackup fleet were under contract in May of this year.
Still, the Gulf of Mexico market has been described as a "nice surprise" by some industry observers, with potential demand for premium jackups anticipated in this region. The Gulf market also continues to serve a historical role as the first region to typically recover from market setbacks, and a signal of recovery for other markets.
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