Page 11: of Offshore Engineer Magazine (Jul/Aug 2023)

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MARKETS OFFSHORE DRILLING RIGS lot has happened since the last newbuilding table reasons not to build. There are still 15 drillships and cycle took place, and there are several reasons seven semis, many from the last newbuild cycle, waiting why Westwood believes new rig construction in various yards to be delivered (although three of the 22

A will not occur anytime soon. units have contracts in place). Westwood believes as many

Assuming a rig owner can obtain fnancing, there are as eight units may never be delivered, which leaves 11 new- far fewer shipyards that would entertain building a new builds – seven drillships and four semis – available for rig rig. Many have exited the business or undergone yard con- owners to absorb into their feets.

solidation. As one drilling contractor put it, the yards are The investment required to get these units will vary, but busy “building vessels they can actually get paid for,” refer- the base cost is thought to be a minimum of $100-110 ring to foating production storage and offoading (FPSO) million (plus $250-300 million to buy the rig if necessary).

and other non-drilling units. In addition, down payment With most of these units in Southeast Asia, a mobiliza- terms, which had been as little as 2% in the last cycle, tion fee would be as much as $35-50 million plus other would be signifcantly higher now. upgrades necessary for a specifc operator and/or region,

Secondly, there are still undelivered rigs in yards that adding another $30 million to the cost. So, excluding pur- were ordered in the last newbuilding period. While mostly chase price, an all-in cost of around $200 million would be completed, these “new” rigs require a substantial amount expected. It is estimated to take 12-14 months of yard time of capital and shipyard time. Nevertheless, there is still in- to get one of these rigs out.

ventory available, another reason not to build now. Also There are also 30 cold-stacked foating rigs – 13 drill- related to excess inventory, several cold-stacked units could ships and 17 semis. We believe as many as ten are being undergo reactivation, providing rig owners with a cheaper marketed for drilling programs while a few will likely and faster source for additional rigs. be scrapped. Between the stranded newbuilds and cold

Finally, there are more M&A deals that can be done. As stacked units, rig owners have access to 30-35 units.

seen in recent transactions, deals can be structured that do The cost to reactivate one of these rigs will vary depend- not require a lot of cash, making it far cheaper and faster to ing on the scope of work done. For example, to reactivate acquire a company and its assets versus building a new rig. a cold stacked drillship in Las Palmas, the base cost is be- lieved to be $85-90 million alone, plus mobilization fees

New Floating Rigs Less Likely and additional upgrades. Shipyard time is believed to be

The prospect of building a new drillship or semi-sub- around one year for reactivation.

mersible (semi) is less likely than jack-ups. Even with drill- A rig owner would need a minimum fve-year initial ship dayrates inching closer to the magical $500,000 mark, term to even consider building a new unit and currently, the numbers simply do not add up at the present time. there are just a handful of regions where operators have

According to rig owner estimates, the all-in cost to build programs that could offer that.

a new drillship would be over $1 billion. Among the potential landing spots would be Brazil and

Assuming 90-95% utilization, the dayrate needed for a Africa. TotalEnergies recently issued a tender for two drill- standard 12-15% return on investment (ROI) would be ships to work under 10-year contracts with rumors of two $650-700,000 for the useful life of the rig (~25 years). existing newbuilds competing for that work. The US Gulf of

Build time would be around three years. Mexico has taken on two newbuild drillships this year and

In addition to the economic factors, there are other no- last, but it seems unlikely the region could take on another.

july/august 2023 OFFSHORE ENGINEER 11