LONDON – Maritime Strategies International (MSI) predicts continued challenges for the offshore rig market over the next two years.
The consultant has compared the current market to the slump of the 1980s. Its data model suggests the rig market at present is in a worse state, due to under-use of the global fleet and the supply/demand balance.
According to MSI’s research, in 1986, earnings for a third-generation semisub had fallen below $50,000/d from a peak of around $90,000/d in 1981, and earnings remained below $50,000/d for the remainder of the ’80s.
Today, employment of floating rigs globally is below 50%, the consultant added, whereas in the 1980s it only dipped below 70% for two years.
Even excluding cold-stacked rigs from the analysis, utilization rates for floaters in 2017/18 look set to stay below the levels of 1987/88.
With jackups, the situation is more favorable mainly because there has been little reduction in activity offshore the Middle East. Jackup utilization has held up better at around 60%, while cold-stacked jackups represent only 12% of the fleet.
MSI senior analyst James Frew said: “We expect day rates for a sixth-generation semisubmersible to average around $170,000/d in 2017 – down about 5% relative to 2016 levels – rising to a shade under $190,000/d on average in 2018. More positively, by 2020 our projection shows day rates rising to over $300,000/d.”
Modern jackups will continue to outperform floaters over the next three years, the consultant added, due to continued demand from NOCs in the Middle East and Southeast Asia, but earnings look set to remain at disappointing levels.