Page 28: of Offshore Engineer Magazine (Apr/May 2013)

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Rig Market

EPIC

Market Review

Review

By Nina Rach

Howard Weil 41st Energy Conference

The global rig market is strong, with in March that despite a “massive high utilization, high day rates, infux” of new rigs since 2005, he

T and nearly 200 offshore drilling sees a limited supply of ultra-deep- rigs under construction. Drilling water rigs. Since 2005, 107 addi- contractors are changing their feet tional UDW rigs and 138 jackup rigs makeup, modernizing, streamlin- have been delivered and absorbed ing, and concentrating on market by the market, and yet offshore sectors. National oil companies are oil production has decreased by assembling their own feets of non- 4%, according to Seadrill. Magnus competitive rigs. believes signifcant new capacity is

The global recession, followed needed to maintain offshore oil pro- by the drilling moratorium after duction, as aging felds have a higher

Macondo, created extreme condi- decline rate.

tions in the US offshore market in In late February, Macquarie Capital 2009-2011, and many drillers took analyst Nigel Browne noted that a hit, refected in stock prices that drilling stocks underperformed last have not yet fully recovered. year, and that “valuations right now

As oil prices diverged from natural are still relatively low on a histori- gas prices, E&P companies have cal basis, especially names levered shifted drilling programs to target to North America.” But he says that oil, driving demand for drilling rigs, “investors have really embraced increasing feet utilization, day rates, the whole deepwater drilling story, and building a backlog for the world- which in turn refects confdence wide drilling feet. in sustained crude oil demand. The

Rig utilization rates have improved most prolifc, new sources of oil are over the past 12 months. According in the deepwater frontier regions and to Rigzone, as of 28 March 2013, we are starting to see the huge uptick there were 600 rigs working out of in demand for services that target a total offshore feet of 708 (575 of those reserves… 677 competitive rigs), representing Browne noted that stock prices a utilization of 84.7%. This is an in the deepwater/subsea segments increase from 81.4% six months ago increased over the past two years. and 78.1% 1 year ago. But, “the large-cap diversifed names

National oil companies have been have lagged and current stock prices aggressively building their offshore do not fully refect their exposure rig feets since early 2011, particu- to the infection in growth - espe- larly Petrobras. In addition to dozens cially deepwater rig count, which is of rigs currently under construction, forecast to grow ~12% /year over the the NOCs already run signifcant next two years.” rig feets: ONGC (10), PDVSA (26), In the “Deep & Ultra-deepwater

Pemex (19), Petrobras (16), and Market Report to 2016, analysts

Azerbaijan’s Socar (17). at Infeld Systems Ltd. see four development trends: deep water,

Deepwater harsh environment, remote areas,

Seadrill CFO Rune Magnus and smaller developments. The key

Lundetrae told investors at the basins are the Lower Tertiary in the

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