Drilling rig market sees slight improvement, says Evercore ISI

July 17, 2020
Market improved since June, but still significantly down year-over-year.

Offshore staff

NEW YORK CITY – A total of eight rig contracts have been announced thus far this month, according to the latest “Offshore Rig Market Snapshot” offered by Evercore ISI.

According to the report, dated July 15, there has been an improvement in the market – from the five contracts issued for all of June; but it is still “a far cry” from the total of 61 contracts issued last July. 

Offshore rig contracting activity has declined for six straight months and is on pace to track 60% lower year-over-year for jackups and 50% lower for floaters compared to 2019 totals.

On a rig year basis however, jackups are poised to hold up better with 220 total rig years secured. Jackups are down 45% versus a 58% decline for floaters, which have only 46 rig years contracted for all of 2020.

Only six of the almost 60 floater contracts announced in the first half of 2020 were for terms of a year or more, with the average contract length falling to just 63 days, as compared to 206 days on average in 2019.

In contrast, 38 of 78 jackup contracts signed in the first half were for term, with the average contract term expanding to 616 days or about 20.5 months from less than 15 months.

Floaters are kicking off the second half with two new term contracts from LLOG in the deepwater Gulf of Mexico and Equinor for offshore Norway, with disclosed dayrates of $455 kpd for Transocean’s second 20k psi drillship and $278 kpd for Odfjell’s Deepsea Atlantic.

Jackup dayrates remain undisclosed but a couple of rigs were contracted to the UK sector in July, which marks the first jackup contracts for the region since March.

No new floaters or jackups were cold stacked over the past month; however, two jackups (Valaris 70 and 71) were recently retired. The industry has retired 11 jackups and 16 floaters year to date and more are likely as 2Q earnings get underway.