Report: Rig attrition continues while demand ramps up

Nov. 17, 2021
Industry retired five additional offshore drilling rigs over the past month, says Evercore ISI.

Offshore staff

NEW YORK CITY – In its November Offshore Oracle report, oilfield services analyst firm Evercore ISI notes that “both M&A and rig attrition accelerated over the past month,” with Noble and Maersk Drilling announcing plans to merge while the industry retired five additional offshore drilling rigs (three semisubsmersibles and two jackups).

The firm said that over the past year, the industry has retired, scrapped, or converted to non-drilling purposes 34 jackups and 19 floaters, bringing the total to 159 jackups and 177 floaters since the offshore downturn commenced in 2014. This brings a net reduction in global supply of nearly 40% for floaters and 5% for jackups. Another 13 floaters and 52 jackups have been cold stacked for more than two years and are candidates for retirement, the report commented.

Meanwhile, the firm noted that demand “appears to be strengthening” with 28 contracts announced in October (flat year-over-year) and 23 thus far in November (up from nine as of mid-November 2020).

“We expect the industry to beat relatively easy November and December comparables to end the year with more than 400 contracts announced for about 380 rig years, up 33% and 20% respectively,” the report said. “While jackups continue to dominate, accounting for nearly 55% of all rig contracts (+18% year-over-year) and two-thirds of all rig years (+3% year-over-year), floaters have rebounded with contracting activity up 57% (9% short of 2019 levels) for an 80% jump in rig years (14% higher than the recent 2019 peak and 13% short of 2014 levels).

“With Brent comfortably north of $70/bbl, we expect floater terms to continue lengthening in the coming year as operators take advantage of relatively low dayrates,” the firm said.