Looking back on 2021, analyst sees positive offshore rig market trends

Dec. 28, 2021
Demand began to improve over the past year, particularly for floating rigs.

Offshore staff

NEW YORK CITY – Offshore drillers spent much of the past year working back to where they had been at the start of 2020, according to Evercore ISI’s latest Offshore Oracle report.

Several contractors emerged from restructuring and the industry retired an additional 20 floaters and 35 jackups, bringing the total amount retired since 2014 to 178 floaters and 160 jackups for a net 40% and 5% decline in global supply, respectively.

Meanwhile demand began to improve, particularly for floater rigs, with their marketed utilization increasing from 75% to nearly 83%. For jackups, the marketed utilization improved from 79% to 83%. The report notes that day rates are beginning to rise in select markets, most notably for dual-BOP drillships in the Gulf of Mexico and high-spec, harsh-environment assets.

While select markets continue to lag the recovery, momentum is building with the Brent oil price stabilizing north of $70/bbl. The painful and lengthy offshore downturn is inflecting, the report observes; and along with a dramatically smaller fleet, offshore rig contractors have led the OFS consolidation cycle. Noble Corp. acquired Pacific Drilling at the start of the year and has plans to merge with Maersk Drilling in 2Q 2022, which should drive $125MM in cost synergies, Evercore says.