Weekly Offshore Rig Review: Jackup Ops
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
The table below provides the jackup day rate expenditures for the top 10 operators worldwide over the course of 2001 to 2005. Day rates for the current year are not included because the year is ongoing and data is not complete. In the jackup market, variance among the top ten operators was somewhat smaller than among the top semisub operators, with the top jackup operator (chevron) spending about 4 times as much as the 10th operator whereas the top semisub operator (Petrobras) spent almost 5 times as much as the 10th semisub operator.
|Operator||Total Jackup Contracts ('01-'05)|
|Total for Top 10||$8,728.04|
|Total for Others||$10,660.89|
|Total for All||$19,388.93|
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
During the five years from 2001 to 2005, worldwide all operators combined to spend an average of about $3.9 billion on jackup day rates per year. From 2001 to 2003, that amount averaged about $3.4 billion per year, and began to rise in 2004 to just under $4 billion. Total jackup day rates expenditures grew to $5.2 billion in 2005, rising more than 30% from the previous year.
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
As mentioned earlier, the trend among jackup operators has been towards total day rate expenditures being spread out across more operators, unlike in the semisub market where the majority of spending is done by the top 10 operators. Over the last five years, however, the top 10 operators have grown their share of expenditures each year, from only about 35% in 2001 up to 45% in 2005. The general trend is illustrated in the graph below.
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.
For More Information on the Offshore Rig Fleet:
RigLogix can provide the information that you need about the offshore rig fleet, whether you need utilization and industry trends or detailed reports on future rig contracts. Subscribing to RigLogix will allow you to access dozens of prebuilt reports and build your own custom reports using hundreds of available data columns. For more information about a RigLogix subscription, visit www.riglogix.com.