Weekly Offshore Rig Review: A Look Back at 2005

This will be the last Weekly Offshore Rig Review of 2005, and as such, we've decided to take a moment to reflect on what 2005 has meant to the mobile offshore drilling fleet.

Moving on Up - Day Rates Reach New Highs
Probably the most notable, and arguably the most important, trend for 2005 was the steady increase in day rates being earned by offshore rigs. For the entire competitive worldwide fleet, day rates increased a hefty 36% over the course of 2005. Increases in day rates were most dramatic in the Gulf of Mexico where day rates for jackups rose 81% while semisub rates climbed almost 65% in the last year. On the other side of the globe, the 6 semisubs working offshore Australia saw day rates climb nearly 60%. All in all, there were only a handful of regional subgroups that saw declining day rates, including drillships offshore India, jackups in the Mediterranean, and semisubs offshore Mexico.

The overall increases in day rates led to some specific examples that are definitely worth noting. In the past year, 2 semisubs and 1 drillship have broken the $300,000 day rate mark. And a total of 24 different rigs have pulled down day rates of $200,000 or higher. Among jackups, the Rowan Gorilla VII locked in a 1-year contract with Maersk Oil at $180,000 per day, the highest rate on record for a jackup.

Great Expectations - Rig Construction Explosion
With the strong demand and rising day rates experienced throughout 2005, drilling contractors have been on a bit of a building spree in 2005. All in all, 33 jackups, 14 semisubs, 2 drillships, 2 inland barges, 3 new Super Sundowner platform rigs, and 1 tender rig were ordered in 2005. Thats a total of 55 rig orders placed this past year. That's on top of 12 more jackups and 1 more semisub that were ordered before the start of this year and are still under construction. Excluding barges, platforms, and tenders, 2005 has seen orders for enough rigs to swell the size of the rig fleet more than 8% from 602 rigs right now to 651 rigs within the next 3 to 4 years.

New Arrivals - A Few New Builds Join the Fleet
During 2005, only 5 new rigs entered the fleet. The three jackup rigs ENSCO 106, Bob Keller, and the Al Hail were all completed and began drilling operations this year. Smedvig's tender rig, the West Setia, also came out of the shipyard and began working in SE Asia. And Nabors' Super Sundowner XIX platform rig began working in the Gulf of Mexico this year.

Farewell, Old Friends - Retiring Rigs Shrink the Fleet
At the same time, 2005 was a tough year for the heavy metal of the rig fleet. 11 platform rigs and 4 inland barges were scrapped, 4 semisubs and 1 jackup were converted to support or production units, and 5 jackups retired from the fleet after being severely damaged during Hurricanes Katrina and Rita. That's a combined total of 25 rigs that retired from the offshore drilling fleet in 2005, which is as many rigs as retired in the previous 2 years combined.

Many Happy Returns - Rigs Rejoining the Active Fleet
But not all that is lost stays lost, and 2005 has seen several rigs coming out of retirement and preparing to return to service. Two jackups that had been retired in 2003 are now in the possession of Blake Offshore and are undergoing modifications in Sabine Pass for reactivation. A third jackup, the AD19, that had also retired in 2003 was bought by Thule Drilling and is now under modifcation in the UAE. Finally, a fourth jackup, the newly renamed Songa Neptune, is now undergoing modifications in Sabine Pass after having been retired in 2004 due to damage caused by Hurricane Ivan.

In addition to these jackups, Noble has landed a contract with Shell for one of its Bingo semisub hulls, which have been stacked in Dalian, China since the company bought them from Ocean Rig in 2002. The rig has been renamed the Noble Danny Adkins, and when it is complete in 3 years, it will join the ranks of the most advanced semisubs in the world, including its sister rigs the Leiv Eiriksson and Eirik Raude.

Happy New Year
2005 has been a tremendous year for the worldwide offshore rig fleet, but 2006 is already poised to surpass it. In some areas of the world, there are more rigs already under contract for the first quarter of 2006 than at any time in the last 12 months, and rigs throughout the world are being locked into longer and longer term contracts with higher day rates.

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