Rig Trends: Idle Times Ahead for Offshore Rig Fleet
As
the reality of low oil prices settles in, operators and rig owners are being
forced to take hard looks at where and when they will spend money. Oil
companies are reducing 2015 spending budgets significantly, which means in many
cases rig contracts will not be renewed and several others are being looked at
as possible early termination candidates. In turn, rig owners are having to
make tough decisions on whether to continue to market or cold stack currently
active rigs in addition to retiring older or long-idled rigs. In the past few
months, Hercules Offshore, Diamond Offshore, Noble Corporation and ENSCO have
cold-stacked a combined total of eight jackups and four semisubs. On the
retirement front, since the fourth quarter of last year, Transocean (11) and
Diamond Offshore (6) have scrapped 17 floating rigs. Most recently, Noble Corp.
(3) and Atwood Oceanics (1) announced the retirement of four floating rigs. All
were older, shallow and mid-water units that were either not likely to work for
some time or were going to require substantial capital expenditures to remain
competitive, and that money is simply not going to be spent on that equipment
given the current market. In general, most future rig attrition can be
identified from the existing fleet of cold-stacked rigs; however, in some
instances a rig owner may opt to retire a rig immediately after contract
completion. This article will examine long-idled rigs, the age of the rig fleet
and the existing cold-stacked fleet to see which segments of the fleet will
likely be affected in 2015.
Based
on data from RigLogix, as of Feb. 1, 2015 there were 196 idle jackups, semisubs and
drillships. Of those, 67 have been idle for one year or longer. A closer look
at the numbers show that 55 rigs have been idle for two years or more, and most
of those have not worked in three years or longer. In addition, there are 12
rigs that have been idle for at least one year, meaning 67 of the 196 (34.2
percent) stacked rigs have not worked in a minimum of 365 days. It must be
pointed out that 17 of the 67 rigs are owned by state oil companies or
shipyards, meaning that while not impossible, they might be less likely to be
removed from service. The data also shows that 58 of the 67 rigs are jackups.
Although larger contractors have been able to hang onto their long-idled units
for years, in some cases a rig may be the only asset a company owns. Some of
these companies may not be able to afford the substantial reactivation costs
necessary to bring the rig up to operational standards. The resale market
offers few, if any, opportunities to dispose of the rig for any kind of
meaningful revenue. As a result, how long they are able to keep these rigs is
questionable and makes scrapping a real possibility.
Source: Rig Zone
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