Analyst sees first increase in global jackup count in more than two years

March 30, 2017
Evercore ISI’s Oilfield Services, Equipment & Drilling group released its latest offshore market snapshot.

Offshore staff

NEW YORKEvercore ISI’s Oilfield Services, Equipment & Drilling group released its latest offshore market snapshot.

In it, the group forecasts regional rig demand based on existing contracts and various vessel characteristics. It also makes assumptions regarding potential rig reactivations and newbuild additions over the next three years.

Including all future contracts, the global jackup rig count increased for the first time this month in almost 2.5 years to 257.5 units or 8.6% above the firm’s base case estimate from a year ago. Industry demand held up “much better” than anticipated, Evercore said, and appears to have bottomed in February, down 36.8% from the April 2014 peak, led by gains in Southeast Asia, the North Sea, and Middle East while activity is a bit lower in the Indian Ocean.

There are 21 jackups that will start work on new contracts in the next few months, down from 24 a month ago, but still a positive indicator that activity may trend higher in the near term, Evercore said.

The firm’s base case estimate assumes the rig count increases gradually over the next couple of months and end the year up 6% from current levels, driven by improvements in SE Asia, the North Sea, and the Middle East. The jackup rig count is expected to increase another 12% in 2018 due to higher activity in the North Sea, SE Asia, and Mexico, while activity flattens in 2019.

Meanwhile on the floater side, the global rig count increased by 2.3 units or 180 basis point (bps) over the past month to average 127 units, which is in line with the firm’s bull case estimate. The floater count increased in the North Sea, South America, and the Indian Ocean, but slipped in the US Gulf of Mexico. There are 15 floaters with future contracts that should start in the near-to-medium-term, down slightly from 16 last month.

Global floater utilization increased by 110 bps to 53%, but if 75 cold stacked units are excluded, floater utilization increased by 190 bps to 72%. The marketed ultra-deepwater utilization is at 74.5%, while deepwater is at 72.8%, and midwater is at 67.8%.

The global jackup utilization increased by 120 bps to 58%, but is 70% if excluding 93 cold stacked units. The working jackup count reversed February’s dip and is currently 4.3% above the September 2016 trough.

There was no change in the global floater order book over the past month. However, shipyards and contractors deferred delivery of three units from 2017 to 2018 and 2019: Sete Brasil’sIpanema, and Seadrill’s West Dorado and West Draco.

“We expect contractors to defer the majority of the 19 floaters currently scheduled for 2017 delivery where possible. Only two of these 19 units were originally scheduled for 2017, North Sea Rigs’Beacon Pacific and Sete’s Grumari, while 12 were for 2016, three for 2015, and two for 2014,” the report said.

Likewise, there was no change in the global jackup order book over the past month. However, two units were advanced from 2020 to 2018:Transocean Cassiopeia and Transocean Centaurus. Only four or 4% of all jackups under construction are currently contracted, unchanged from last month. The industry continues to expect 39 jackups to be delivered in 2017, of which only five were originally scheduled for 2017. The majority 12 are deferred from 2016, 18 from 2015, three from 2014, and one from 2010.

In terms of regional trends, both the floater and jackup count increased in Southeast Asia and West Africa, while the floater count increased in South America but the jackup count increased in the Middle East.