Although recent contracts indicate rates of $500,000-550,000/d,Seadrill believes some of its main competitors will accept levels for sixth-generation vessels in the $425,000-475,000/d range.
This is due to a combination of limited exploration drilling and delays in field developments on the part of the majors, many of which are striving to improve their cash generation. The outlook appears to be further impacted by sub-lets and some contractors trying to price lower-spec rigs into a higher-end market.
Oil companies are waiting to see when day rates will trough, Seadrill suggests, adding that once a leading edge is defined others tend to be compelled to award contracts. Once the majors resume contracting activity, rates will likely remain lower than those attained last year.
The current uncertainty has led to reduced newbuild activity with only seven rigs ordered for delivery in 2016 and five for 2017, compared with 30 and 19 deliveries in 2014-2015. These numbers exclude Brazilian-built rigs where there is additional uncertainty over actual delivery dates.
Main challenges lie with fourth- and fifth-generation assets, Seadrill says, with new requirements post-Macondo and the focus on increased water depth areas limiting contractibility of these rigs. Owners may have to decide whether to commit to substantial upgrades of their 20- or 30-year-old assets or simply lay them up. According to analysts Fearnley’s, 51 units older than 25 years must undergo their special survey in the next 24 months.
The outlook appears healthier for ultra-deepwater floating rigs designed for operations in up to 7,500 ft (2,286 m) of water. Most of the activity remains focused on the Atlantic triangle ofWest Africa, Brazil, and the US Gulf of Mexico; however, more opportunities are arising in the newly-opened Mexican sector which could impact demand in 2015 for ultra-deepwater rigs.
Over the last two and a half years Seadrill has operated theWest Pegasus offshore Mexico for Pemex with strong exploration drilling results. The first Mexican deal with an international oil major will likely be concluded later this year, the contractor claims, and as capital from the majors starts to flow into the country, demand for rigs is likely to follow.
Clients’ main priorities are rigs that can provide dual BOPs, increased deck space, and high variable deck load capacity.
The premium jackup fleet (350 ft/107 m water depth and built post-2005) continues to operate at greater than 95% utilization rates for the sixth successive quarter. There is upward pressure on day rates and increased contract durations worldwide.
At the same time, the pace of retirements continues to accelerate with more than 30 jackups leaving the market over the past two years. Around 60% of the globally contracted jackup fleet remains more than 30 years old, which bodes well for employment of the newbuilds under construction for established contractors.
InArctic regions, Seadrill expects annual E&P spend to increase by 8% through 2018. This could emerge as one of the world’s highest growth regions for newcomers, due to a combination of an aging fleet and few assets suitable for operations in the harsh environment.
Seadrill’s joint venture company North Atlantic Drilling has upgraded the semisubmersible rigWest Alpha to drill a potentially significant offshore prospect this August in the Kara Sea offshore northern Russia for the Rosneft/ExxonMobil joint venture.
According to Rosneft it is likely to be one of the highest impact wells drilled worldwide this year and if successful could trigger significant additionaldrilling.