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© 2016 IHS. ALL RIGHTS RESERVED.
OFFSHORE RIG MARKET
APRIL 2016
Tom Kellock, Head of Offshore Rig Consulting
+1 832 463 3020
tom.kellock@ihs.com
What’s happening on the supply side?
© 2016 IHS. ALL RIGHTS RESERVED.
Offshore rigs –
the past eighteen
months
• Surprisingly little change in total supply
• In a market of steadily decreasing
demand, utilization and day rates
• With worse to come
• The number of stacked rigs has more
than doubled
• But scrapping so far fairly minimal and
mainly confined to floating rigs
Offshore Rig Market - Supply / April 2016
© 2016 IHS. ALL RIGHTS RESERVED.
Utilization for the worldwide offshore fleet has dropped
from 80% to 60% over the last 18 months
Offshore Rig Market - Supply / April 2016
55
60
65
70
75
80
85
90
95
100
450
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550
600
650
700
750
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850
900
Se
p 2
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Oct 2
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No
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De
c 2
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Ja
n 2
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Fe
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Ma
r 2
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May 2
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g 2
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Un
de
r Co
ntra
ct U
tiliza
tion
(%)
Total Supply
Total Under Contract*
Utilization
Worldwide offshore rigs (jackups, semisubmersibles and drillships)
Nu
mb
er
of
rig
s
* Includes Owner-operated rigs
Source: IHS RigPoint © 2016 IHS
© 2016 IHS. ALL RIGHTS RESERVED.
All major rig types
affected
• Jackup utilization: 61%
207 uncontracted delivered Units
• Floater Utilization: 56%
136 uncontracted delivered floaters
• 93 semis
• 43 drillships
• Situation likely to worsen
• New rigs in the pipeline
• Anaemic chartering
Offshore Rig Market - Supply / April 2016
© 2016 IHS. ALL RIGHTS RESERVED.
There are still nearly
200 offshore rigs on
order or under
construction
As of early April 2016:
• 67 Floaters (46 drillships, 21 semis)
• 120 jackups
• 8 tender-assists
All but 17 are reportedly already under
construction
But delivery dates are in a state of flux
And many rigs will not be owned and
operated by the companies that ordered them
Offshore Rig Market - Supply / April 2016
© 2016 IHS. ALL RIGHTS RESERVED.
Many analysts are
sceptical about how
many of these rigs
will be completed
We think most of the Chinese jackups will be
delivered – eventually
• •49 units delivered from China since 1/1/2005
• 75% under contract vs 61% for worldwide jackup
fleet
• We count 69 more whose construction has
started and another one on order
• 57 of these are designed by GustoMSC,
LeTourneau and Friede & Goldman
• Our analysis indicates around 87% of these will
be completed…
• …and we understand at least 8 are already
complete but undelivered
Offshore Rig Market - Supply / April 2016
© 2016 IHS. ALL RIGHTS RESERVED.
And at least some of the Sete Brasil floaters are likely to
be completed
Offshore Rig Market - Supply / April 2016
0 0 0 0 0 0 0 0 0 0 0 0
5 14 14
17 23
27 31
38 40
52 52
60 69
71 74
85 89
0 20 40 60 80 100
Boipeba (DS)Botinas (SS)
Comandatuba (DS)Deepsea Siri (DS)
Interlagos (DS)Itapema (DS)Itaunas (DS)
Leme (DS)Marambaia (DS)
Sahy (DS)Salinas (DS)
Joatinga (DS)Mangaratiba (SS)
Curumim (DS)Leblon (DS)
Portogalo (SS)Ipanema (DS)
Pituba (DS)Deepsea Itaoca (DS)
Grumari (DS)Bracuhy (SS)Cassino (DS)
Copacabana (DS)Camburi (DS)
Frade (SS)Ondina (DS)
Deepsea Guarapari (DS)Arpoador (DS)
Urca (SS)
Sete Brasil Rigs - Construction Status January 2016
Source: Sete Brasil © 2016 IHS
% Complete
© 2016 IHS. ALL RIGHTS RESERVED.
For some fleet segments rechartering dried up years ago
Offshore Rig Market - Supply / April 2016
0
200
400
600
800
1,000
1,200
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
* On Order and Under Construction rigs are counted
3,001-7,500ft Floating Rig Backlog - Contracted Backlog Days Per Rig*
Source: IHS Floating Rig Market Report Monthly Slideshow March 2016
Nu
mb
er
of
Ba
ck
log
Co
ntr
ac
t D
ays
© 2016 IHS
© 2016 IHS. ALL RIGHTS RESERVED.
Although jackup backlog is now holding up reasonably well
Offshore Rig Market - Supply / April 2016
0
50
100
150
200
250
300
350
400
450
500
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
Global jackup backlog days - per rig*
Source: IHS Jackup Rig Market Report Monthly Slideshow - April 2016
* Out-of-service jackups are not counted, on-order and under-construction jackups are counted
© 2016 IHS
Da
ys
of
Ba
ck
log
/ P
er
Rig
© 2016 IHS. ALL RIGHTS RESERVED.
How contractors
are reacting
• Postponing delivery – but usually at
some cost
• Cancelling construction contracts – even
when the rigs are basically complete
• More stacking but with limited impact
• Retiring rigs but not enough
Offshore Rig Market - Supply / April 2016
© 2016 IHS. ALL RIGHTS RESERVED.
Although the number of stacked rigs has more than
doubled cold-stacked rigs are up by only 60%
Offshore Rig Market - Supply / April 2016
0
50
100
150
200
250
300
350
400
Sep 2014 Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016
Nu
mb
er
of
rigs
Hot Stacked
Warm Stacked
Cold Stacked
Source: IHS RigPoint
Stacked offshore rigs (all types except inland barges and platform rigs)
© 2016 IHS
© 2016 IHS. ALL RIGHTS RESERVED.
Although at least 49 floaters have been retired since
2014 nearly three times as many are uncontracted today
Offshore Rig Market - Supply / April 2016
0
5
10
15
20
25
30
35
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(YTD)
Voluntary
Accident
Floating rig attrition
Source: IHS RigPoint © 2016 IHS
Nu
mb
er
of
rig
s
© 2016 IHS. ALL RIGHTS RESERVED.
Jackup attrition appears more consistent
Offshore Rig Market - Supply / April 2016
0
2
4
6
8
10
12
14
16
18
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(YTD)
Jackup attrition
Nu
mb
er
of
rig
s
Source: IHS RigPoint © 2016 IHS
© 2016 IHS. ALL RIGHTS RESERVED.
But this has involved multiple rig types
Offshore Rig Market - Supply / April 2016
0
2
4
6
8
10
12
14
16
18
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(YTD)
Workover
Mat
ILS
ILC (accident)
ILC (voluntary)
Jackup attrition by type
Nu
mb
er
of
rig
s
Source: IHS RigPoint
Notes: IL = independent leg, S = slot, C = cantilever
© 2016 IHS
© 2016 IHS. ALL RIGHTS RESERVED.
A paltry 30 independent leg cantilever units – the only ones
that really matter – have been retired in the past 8 years
Offshore Rig Market - Supply / April 2016
0
2
4
6
8
10
12
14
16
18
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(YTD)
Voluntary ILC jackup attrition
Nu
mb
er
of
rig
s
Source: IHS RigPoint © 2016 IHS
© 2016 IHS. ALL RIGHTS RESERVED.
Can the industry
respond
appropriately?
• Clearly it hasn’t done so yet
• It’s not as simple as just scrapping all
the old rigs
• The structure of the offshore drilling
market is a large part of the problem
• The strategies of some participants
make rig attrition almost impossible for
them
• Wholesale rig retirements appear very
unlikely
Offshore Rig Market - Supply / April 2016
© 2016 IHS. ALL RIGHTS RESERVED.
The theory that the new rigs would replace the old ones has
NOT been proven – and that is a major issue for the industry
Offshore Rig Market - Supply / April 2016
Average
0
10
20
30
40
50
60
70
80
90
100
1980 1985 1990 1995 2000 2005 2010 2015
Un
de
r C
on
tra
ct
Uti
liza
tio
n (
%)
Average Year in Service (delivered rigs)
Fleet Age and Utilization - March 2016 - 16 Major Commercial Drilling Contractors
Source: IHS © 2016 IHS
© 2016 IHS. ALL RIGHTS RESERVED.
Even under better circumstances, the degree of competition
in the floater market - with >60 players - is extreme
Offshore Rig Market - Supply / April 2016
© 2016 IHS. ALL RIGHTS RESERVED.
The Jackup market is even more fragmented – with more
than 120 players
Offshore Rig Market - Supply / April 2016
Shelf Drilling
39 Ensco 35
COSL 34
Paragon 31
Hercules 29
Rowan 27
Seadrill 24
National Drilling 20
Aban 15
Transocean 15
Maersk 14 Noble 14
Japan Drilling 13 CPOE 10
Gulf Drilling International 10
Less than ten
rigs
Jackup rig market supply by manager (includes units under construction)
© 2016 IHS. ALL RIGHTS RESERVED.
So what’s next? • Forced rationalization of the offshore drilling
industry through bankruptcies/liquidations
• ? New entrants to pick up the pieces
• As with E&P companies, assets more likely
to be purchased than companies
• Plummeting rig values may be the catalyst
for large-scale action
Of course this is not an unfamiliar scenario to
many of us
Offshore Rig Market - Supply / April 2016
© 2016 IHS. ALL RIGHTS RESERVED.
How many of these names are still here?
Offshore Rig Market - Supply / April 2016
0 5 10 15 20 25 30 35 40 45 50
Key Drill
Maersk Contractors
Loffland Brothers
Diamond M
Dixilyn-Field
Atwood
Foramer
Forex Neptune
Marine Drilling
Western Oceanic
Transworld
Zapata Offshore
Rowan
Reading & Bates
Santa Fe
Sonat
Sedco/Sedco Forex
Global Marine
ODECO
Penrod
Contractors managing at least ten rigs in January 1985
Source: IHS RigPoint © 2016 IHS Number of rigs
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