DRILLING RIG ECONOMICS: Drilling contractors direct cash flow into new units, upgrades, conversions

Forty rigs completed in 2000

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Transocean Sedco Forex's Cajun Express drilling in the Gulf of Mexico.
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Although it appeared that the building cycle was about to end at the close of 2000, several more units have moved to fabrication than there were last year at this time. Last year's 2000 Mobile Offshore Drilling Unit (MODU) Survey listed a total of 67 rigs, either in fabrication or being upgraded, of which 40 have been completed. This year's survey lists several more.

The increase in drilling activity around the globe has created an upswing in fabrication/ upgrade interest that should span several more years. Drilling companies that might have considered limiting investment in new and upgraded vessels have reconsidered, spending more money than anticipated to expand and upgrade their fleets.

Last year's showed 38 newbuilds and 29 upgrades and conversions. This year's shows 39 newbuilds - one more than last year - and 35 upgrades and conversions. What looked to be a leveling off of construction activity 12 months ago has turned into a sustained building cycle.

Construction and upgrade/conversion activity has left construction yards very busy meeting demand and a growing backlog. There is more activity today than was anticipated at the beginning of the industry upswing.

Newbuilds, upgrades, conversions

As drilling moves into deeper water, the number of drillships has increased dramatically. Of the 11 drillships listed in the survey, nine are newbuilds with increased water depth capability and greater storage capacity. New jackups are increasingly of the ultra-premium and harsh-environment type, with enhanced depth capability that allows them to drill in deeper water at the outer reaches of the continental shelf. Newbuilds are boasting additional mud pumps and increased drilling capability.

The large number of upgrades and conversions in the 2001 survey is evidence of an industry trend toward increasing depth capability and enhancing drilling speed. The "New/Upgrade Capabilities" column of the survey speaks volumes about the direction of the industry.

Industry's changing face

This year's MODU survey shows a number of companies expanding fleets that appeared at this time last year to have reached maximum size. Chiles Offshore, which listed only one planned vessel last year, indicates this year that two additional vessels are in the works.

Santa Fe International had no more units on its books as of July 2000. Today, a jackup and a semi are underway with another jackup and semi in the planning stages.

With so much cash flow being generated by contracting, some companies are sinking earnings into upgrades and construction. Both Diamond Offshore and Santa Fe have contracted work on speculation, confident that the continued upswing will make their investment pay off.

Other expansions occurred as a result of mergers. Since last year's survey, Transocean Sedco Forex has added the R&B Falcon rigs to its fleet. And Pride International, newly merged with Marine Drilling, has considerably expanded fleet size. For these companies, newbuilding has probably reached a static level. Their increased fleet size has placed them at the top of the heap. However, it is very likely that money will go into upgrades over the next few years.

2001 survey data

A total of 74 mobile offshore drilling units is listed in this year's annual survey. An abbreviation appears in the first column following the name of the rig to indicate the vessel type: ju (jackup), ss (semisubmersible), ds (drillship), sub (submersible).

Of the 74 vessels listed, there are 30 jackups, 31 semisubmersibles, 11 drillships, and two submersibles. The survey lists the construction status of each vessel in one of the following categories: recently completed, under construction, or planned during the last year.

Thirty-nine of the units surveyed are newbuilds: 16 semisubmersibles, 13 jackups, and 10 drillships. Thirty-five of the units surveyed are being converted or upgraded. Of those, 17 are jackups, 15 semisubmersibles, two submersibles, and one drillship.

Forty of the rigs listed were completed in the course of the last calendar year (15 semisubmersibles, 15 jackups, nine drillships, and one submersible). Of the remaining thirty-four, 14 reached completion in the first half of 2001, with another six scheduled for completion before year's end (nine semisubersibles, eight jackups, two drillships, and one submersible). No completion date was listed for two planned vessels. The other 12 vessels have completion dates that fall over the next three years.

Each listing includes the owner of the vessel, the vessel's name and type, whether it is a newbuild or under construction (planned, underway, or recently completed), new capabilities or upgraded features, the proposed date of completion, and the construction yard.

The information presented in this survey appears as it was submitted by the participating companies. Updated information is not listed for vessels that belong to companies that did not respond to the survey.

Click here to view 2001 Worldwide MODU Construction/Upgrade Survey

This survey is in PDF format and will open in a new window

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