Weekly Offshore Rig Review: Stay in the Yard
This week, worldwide offshore rig utilization moved down slightly to 83.1% as one idle rig started working and two rigs came off contract. Both of these rigs are jackups that are going to be leaving the Gulf of Mexico and heading for the Persian Gulf where they will start working long-term contracts. The one idle rig that began work this week had been cold stacked and just came out of the shipyard after a 7 month reactivation stay.
An important component of the overall utilization picture is the ongoing maintenance and modifications that are performed on the world's offshore rigs on a regular basis. Whether rigs are undergoing major upgrades or in the shipyard for routine maintenance, a significant amount of rig time is spent in the maintenance yard.
Currently Under Modification
There are currently a total of 30 jackups, 18 semisubs, and 9 drillships that are in shipyards around the world for maintenance and modification. And another 8 rigs are scheduled to pass through shipyards this month. So, in total, for the month of August, it's expected that 65 rigs will be undergoing maintenance and modification work. That represents about 11% of the worldwide jackup, semisub, and drillship fleet.
The United States currently has the most rigs that are undergoing modifications. Fully half of the world's jackups that are in the shipyard for maintenance are in the Gulf of Mexico. There are 15 jackups in GOM shipyards, and another 5 semisubs, for a total of 20 offshore rigs undergoing work in the Gulf of Mexico. Those 20 total rigs account for about 14% of the GOM jackup, semisub, and drillship fleet, and the 15 jackups account for just under 15% of the total GOM jackup fleet of 101 rigs.
Besides the Gulf of Mexico, a significant number of rigs are undergoing maintenance in the shipyards of Singapore. Currently, there are only 3 jackups in Singapore that are having modification work done on them (although there are 37 jackups under construction there), but there are an additional 4 semisubs and 4 drillships, for a total of 11 rigs under modification in the country. A particular focus in the area is upgrading floaters, as 3 semis and 1 drillship are expressly in the yards undergoing modifications to increase their water depths and place them amongst the deepwater floaters.
The United Arab Emirates is currently home to the largest group of jackups undergoing maintenance outside of the GOM. There are 5 jackups in the country's shipyards that are being worked on, including one Gulf Drilling mobile production unit that is being converted to a jackup drilling unit.
How's That Compare?
Over the course of 2006, the world's shipyards, and the Gulf of Mexico's in particular, have been unusually busy handling the many rigs' maintenance, modification, and repair needs. On a month-by-month basis, more than 10% of the fleet of MODUs has been in the shipyard each month of 2006. That trend peaked in June when a total of 80 rigs, representing more than 13% of the fleet, passed through the shipyards for maintenance.
That percentage of rigs undergoing maintenance and repair work has historically been between 5 and 8 percent on a month-by-month basis for most of the last six years. So that during any given month from 2000 thru the first half of 2005, somewhere between 30 and 50 rigs were in the yards. The average number of rigs undergoing maintenance over the five-year period from August 2000 to 2005 was 39 rigs, or about 6.5% of the fleet.
Since the fourth quarter of 2005, the number of rigs in the shipyard for maintenance, modification and repair work has increased significantly. The reasons for this increase are two-fold:
Reactivations - There are currently 6 jackups, 3 drillships and 1 semisub that are in the shipyard preparing to rejoin the rig active fleet. All of these rigs were cold stacked prior to the fourth quarter of 2005, and all of them have entered the yards since September 2005.
In addition to the 10 rigs currently being reactivated, another 4 semisubs, 3 jackups, and 2 drillships have passed through the shipyard for reactivation in the last 10 months and are already back in the active fleet. All but one of those 9 rigs started its reactivation since the second half of 2005.
So, within the last year, a total of 19 rigs have undergone modifications to return from cold storage. Compared with the previous 12 months when only 2 rigs were reactivated, that is an 850% increase in reactivation activity in the last year.
Hurricane Damage - The fact that the number of rigs around the world undergoing maintenance, modifications, and repairs rocketed upwards by 23 rigs (a more than 50% increase) between the months of August and September 2005 is hardly coincidental. Hurricanes Katrina and Rita dealt a heavy blow to the Gulf of Mexico rig fleet, sending more than 20 rigs to shipyards for repairs, not to mention the rigs that were lost completely.
Looking specifically at the Gulf of Mexico, the number of rigs in the shipyard averaged 10 rigs (about 6%) from August 2000 to August 2005. That number jumped from 15 in August to 38 in September of 2005, more than doubling. That number moved even higher in October when it peaked at 43 GOM rigs, which is more than 27% of the GOM fleet, in the shipyard that month.
Since September of last year, the percentage of the GOM fleet in the shipyard has been near or above 20% until just this month when it finally moved down to 17%. That is still exceptionally high for a region that has averaged about 5% of the fleet undergoing maintenance during any given month over the previous 5 years.
An added factor that will continue to drive increased shipyard time for GOM rigs is the MMS' recent release of new mooring guidelines for offshore rigs. Drilling contractors have been and are going to be sending more Gulf of Mexico rigs to the shipyards for upgrades in order to keep them compliant with these new requirements. This is particularly pressing for many of the fleet's semisub rigs and represents a significant investment of time and money.
More ominously, with the Gulf of Mexico hurricane season moving into its peak months, the potential for more rig damage and packed shipyards is high. If this August and September produce even half as many hurricane-damaged rigs as last year, the Gulf of Mexico's shipyards will be repairing more rigs than at any point in recent history.
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