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Rig Market Review

Heading for deepwater?

In? eld analyst newbuild rigs (60% jackups, 21% drill- investment decision, and secure appro- ships, and 19% semisubs) over the same priate yard space. Delivery could then

Edward Richardson examines 1 period . Current ? rm orders suggest that take anything between 18-36 months whether the newbuild rig market this growth will continue into 2015 but depending on the nature of the asset. momentum may then begin to slow from Consequently, newbuild cycles tend to is heading for deeper waters.

2016. lag oil price signals by a year or two. istory shows us that when oil The exact pace of this slowdown While the exact timing of the down- prices are high operators seek remains dif? cult to determine, not least turn is uncertain, it is clear that the new-

H to expedite the development of because ? rm contract visibility becomes build market may well be approaching existing reserves and prove up additional very patchy beyond 2016. A jackup its zenith. There are three main reasons resources. Demand for newbuild drilling ordered in 4Q 2014, for example, could for this. assets therefore tracks price cycles very be operational in 1Q 2017 but would not Firstly, demand and supply funda- closely. yet appear in the data. mentals suggest that oil prices may have

But what of the latest cycle? Since It also takes time for changing price passed their peak. Improving energy 2005, real oil prices have increased signals to feed through into the newbuild ef? ciency, particularly vehicle ef? ciency, 124%. This has driven billions of dollars market. If a rig manager was considering the reduced use of crude for direct power of investment into new offshore drilling offering a contract today, it would need to generation, slowing emerging market assets. In? eldRigs data shows nearly 300 raise the necessary capital, agree a ? nal economic growth, subsidy reform, and w

Oil Reserves (2P)

Fig. 1: Offshore Rig Construction Cycles Fig. 2: Undeveloped Offshore 2000 vs 2013 120

Ultra-deep

Drillship Jackup Semisub 3% 100

Deep 18% 80 60

Shallow 79% 40 116.0bn bbl 20

Firm newbuild orders (annually) 0 1974 1972 1976 1978 1970 1992 1982 2012 1998 1996 1988 1986 1994 1984 2010 1990 1980 2002 2008 2006 2004 2000 2014f 2016f

Source: In? eld Systems Limited

April 2014 | OE oedigital.com 28 000_OE0414_Rigmarket2_Infield.indd 28 3/23/14 1:14 AM