Weekly Offshore Rig Review: It Was a Very Good Year

With the final days of 2006 upon us, we will be taking a look back over the last twelve months to see what changes and trends have been occuring within the offshore rig fleet. This will be the final Weekly Offshore Rig Review of 2006, so we hope this year-end review is helpful and informative.

Utilization Holds Steady
In terms of overall utilization of jackups, semisubs, and drillships, the market has held very steady since the start of the year. January had the lowest level of overall utilization when 504 of 595 jackups, semis and drillships were contracted for an overall utilization rate of 85%. The month of December is shaping up to have the highest level of utilization with 526 of 602 rigs contracted for an 87% utilization rate. Between the low in January and the high in December, utilization held very consistently near 86%.

When looking at types of rigs, utilization as still consistently high throughout the year. However, more varaition does come to light. Looking at the floating rig fleet of semisubs and drillships, utilization was near 85% at the start of the year and then dipped to 83% in June and July before rising back up to 85% by the end of the year. Meanwhile, jackups followed a contrasting trend, with utilization near 87% during the first quarter, climbing to 89% in July and then dipping back down to 87% in November.

Day Rates Continue to Climb
While overall jackup, semisub, and drillship utilization has held quite steady throughout the year, day rates have continued to climb higher. For the month of January, the worldwide average was at $99,382. That average rose every month of the year, climbing just over $3,000 per month to reach an average of $137,509 per day for the month of December.

Besides rising average day rates, the day rates at the highest end of the spectrum also rose quite remarkably during 2006. In January, the highest day rate being earned was $325,000 by the Noble Paul Romano, a 6,000' 4th-generation semisubmersible. At the time, that was the highest day rate on record. Prior to that, only four rigs had earned day rates of $300,000 or more.

While $325,000 was remarkable a year ago, day rates have pushed so high during 2006 that rates above $400,000 are more common than rates over $300,000 were in 2005. A new peak day rate was set when Transocean's 5,400' 4th-generation semisubmersible Jack Bates earned $477,000 per day from Woodside for work offshore Australia during August through November. As of December, no rigs are currently earning that much, but five other rigs are now earning more than $400,000 per day.

Also during 2006, the number of rigs earning at least $300,000 per day has risen from four rigs in January to 29 rigs in December. In fact, there are more rigs earning at least $300,000 in December (29 rigs) than were earning at least $200,000 in January (25 rigs). Similarly, the number of rigs earning at least $200,000 per day has increased from 25 rigs in January to 71 rigs for December.

Rig Fleet Growing Strong
During 2006, a total of nine new jackups, three platform rigs, and two inland barges joined the fleet. At the same time, two jackups were converted to production units, one jackup was finally declared a total loss in the wake of Katrina, and two inland barges were retired. The net result was an increase of six jackups and three platform rigs over the course of the year.

In addition to the rigs that were delivered this year, another 27 jackups, 27 semisubmersibles, 10 drillships, 2 tenders, 1 inland barge, and 1 platform rig were ordered. Most of these rigs will be delivered in 2008 and 2009.

In Closing
2006 has been a very good year for the offshore rig fleet:

  • Strong, steady utilization has led to rapidly increasing day rates
  • No major losses like 2005's GOM hurricanes marred the fleet
  • More newbuilds joined the fleet than in any of the last six years

May the holiday season and the new year be as good to you as 2006 has been for the rig fleet.

For More Information on the Offshore Rig Fleet:
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