NEW YORK CITY – Evercore ISI has issued its “Offshore Rig Market Snapshot” for June 2020, and the report describes a market still reeling from the oil price collapse and the COVID-19 pandemic. The report notes that only one rig contract has been announced thus far in June, trailing well below the 11 contracts announced at this point a year ago.
Contracting activity is on pace to track lower for the sixth straight month, although the year-over-year shortfall could be growing smaller. A total of 12 contracts were announced in May, down 24 from a year ago, as operators signed up eight jackups and three floaters for a total of 10 rig years.
Two jackups were signed for term work offshore Saudi Arabia and Malaysia, while another jackup was signed for one year offshore Thailand in the lone June contract announced to date.
June has been a relatively quiet month for contract announcements in recent years, making up only 5% of 2018 and 2019 activity versus a busier July accounting for 12% of the full year total. However, Evercore says that it does not anticipate much improvement in contracting over the next several months with Brent drifting back below $40/bbl.
The report notes that “If the 1H pace of contracting activity is to persist, the industry will book less than 75 jackup and 60 floater contracts for the year, [which would be] down 50% and 40% respectively.”
Given the lack of contracting opportunities, offshore drillers have cold stacked another four floaters and two jackups over the past month. Contractors also retired one additional semisub and deferred newbuild deliveries for two drillships and four jackups from 2020 to 2021 and beyond. Many newbuild deliveries are now being pushed out to 2023.