Day rate pressures looming for all types of offshore rigs, contractor claims

June 2, 2020
Seadrill has issued an update on the status of its offshore rig fleet and market prospects.

Offshore staff

HAMILTON, BermudaSeadrill has issued an update on the status of its offshore rig fleet and market prospects.

The company has six floating rigs operating currently. In the Gulf of Mexico, Sevan Louisiana’s contract with the Walter Oil & Gas in the Gulf of Mexico has been extended to include one additional well, while the drillship West Neptune is working for LLOG.

Elsewhere, the drillship West Tellus is under contract with Petrobras off Brazil, and in the Norwegian sector, the semisubmersibles West Hercules and West Phoenix are working respectively for Equinor and Neptune Energy. However, Neptune has served notice of intent to terminate its contract ahead of schedule in July.

The drillship West Carina has a four-well contract with PTTEP offshore Malaysia.

As for Seadrill’s jackups, five were on duty in the Middle East during 1Q, with two more working in Asia and two harsh-environment jackups engaged offshore Norway.

The West Castor and West Telesto are both on bareboat charter to the company’s GulfDrill joint venture in Qatar.

More recently, Seadrill secured a $48-million, two-well contract from ExxonMobil for the drillship West Saturn to operate offshore Brazil, including 2.5 years of continuous optionality.

Current market conditions have led offshore operators generally to pare back 2020 capex, and the likely impact on drillers, Seadrill said, will be a reduction in exploration programs and delays in the sanctioning of development programs, resulting in cancelled or deferred tenders, contract terminations, and renegotiation of existing contracts.

This will in turn affect supply and demand dynamics, putting pressure on day rates and driving down utilization for all types of rigs in the coming months.

Harsh environment rig day rates too could fall back due to a lack of demand for long-term work. While the same scenario applies to benign jackup market, the company added, the impact may not be as severe due to lower customer project break-even levels.