Weekly Offshore Rig Review: Stacking Up

This week, worldwide offshore rig utilization held steady at 83%, as 543 of 654 MODUs were under contract.

Looking at utilization presents a very good indicator of the level of demand for offshore drilling services over time. But to take a slightly different look at the same trends, we will take a look at what has been happening with cold stacked rigs.

Cold Stacked Jackups
Of the mobile offshore drilling units, jackup rigs account for the greatest number of rigs currently cold stacked, with a count of 15 cold stacked jackups worldwide. As would be expected, the majority of those jackups are located in the US Gulf of Mexico, where there are currently 9 cold stacked jackups.

As for managers, TODCO is currently the rig manager with the most cold stacked jackups, with a total of 6 rigs currently cold stacked. Five of those rigs are in the US GOM, while one is in Trinidad and Tobago. Of the 5 rigs in the GOM, TODCO has already stated that it plans to reactivate all five of those rigs during 2006, at an expected cost of about $65 million, which is higher than the $45 million that TODCO estimated it would cost to reactivate 10 jackups 1 year ago. Nabors follows closely behind Todco in terms of cold stacked jackups with 4 rigs stacked in the GOM, although all 4 Nabors rigs are only 90' MC jackups, making them much lower specification rigs than TODCO's.

Besides Nabor's four 90' MC jackups, the other cold stacked jackups around the world are mostly Mat Slot or Mat Cantilever rigs capable of 150' to 250' water depths.

Over the course of the last five years, the number of cold stacked jackups has risen and fallen inversely with the level of rig utilization. So, when jackup utilization dropped precipitously from a high of nearly 90% in May 2001 to a low of about 73% in November 2001, the number of rigs cold stacked climbed rapidly at the end of 2001 and start of 2002, peaking at 31 rigs in March 2002. Throughout 2002 and into 2003, the number of cold stacked jackups remained near 30 rigs until June 2003 saw the start of a trend in rigs coming out of cold stacked status. During the nearly 3 years since, the number of cold stacked rigs has declined slightly, with a major drop of 5 rigs in the last 4 months. And that trend is likely to continue as TODCO seeks to reactivate its jackups.

Cold Stacked Semisubs and Drillships
Semisubmerisbles and drillships account for a smaller portion of the total number of rigs currently cold stacked. Currently, there are 8 cold stacked semis and 2 cold stacked drillships. However, these rigs actually account for a larger percentage of their fleets than the 15 cold stacked jackups. 8 cold stacked semis represents 4.8% of the total worldwide semisub fleet. 2 cold stacked drillships represents 5.3% of the worldwide drillship fleet. While 15 jackups represents only 3.8% of the jackup fleet.

Both cold stacked drillships belong to Frontier Drilling: their 2,000' and 3,000' Frontier Deepwater and Frontier Discoverer, which are both in Singapore at this time. The leading manager in terms of cold stacked semisubs is Transocean, with 3 semis currently stacked, 2 of which are in the North Sea and 1 in the GOM. Transocean has indicated that 2 of these rigs, the 3,300' C. Kirk Rhein Jr. and the 1,300' Transocean Wildcat, may be reactivated later in the year, since customers have already expressed some interest in these rigs. That is in addition to the 2 semis that the company is already reactivating in the North Sea for a combined cost of $100 million.

The number of cold stacked jackups, semis, and drillships have reached lower levels than have been seen in many years. And with more reactivations likely for TODCO's jackups and Transocean's semis, the number of cold stacked rigs is likely to fall even lower, as drilling contractors take advantage of the high level of demand for drilling rigs.

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