Drillships are driving the recovery in the deepwater market, according to a leading rig analyst, with contractors moving to procure new or stranded units as day rates continue to rise.
In a recent blog Hans Jacob Bassoe, product manager at rig market analyst Esgian, noted that several years of low rates have prompted a wave of scrapping and conversion of assets, reducing the drillship fleet by around 15% since 2018.
Now reduced supply and increasing demand for deepwater drilling has pushed contract utilization rates to over 90%, he observed.
Meanwhile, Esgian says the race to secure units has driven up day rates from around $300,000 in early 2022 to over $400,000 in the key markets of the US Gulf of Mexico, South America and West Africa.
“This trend is expected to continue into 2023 as offshore E&P is forecasted to increase and we could soon see dayrates in the $500,000s,” Mr Bassoe added.
As a result, he said contractors were already moving to acquire units to take advantage of current rates.
Mr Bassoe drew attention to Transocean (NYSE:RIG) subsidiary Liquila Ventures, which recently agreed to purchase Hull 3623 – an ultra-deepwater newbuild drillship formerly known as West Aquila – for approximately $200 million.
The drilling major maintains exclusive right to market and manage the operations of the rig, which is expected to be delivered from DSME in the third quarter of 2023.
“However, Transocean was not the only party interested in the rig, which indicates that more transactions are on the horizon,” Mr Bassoe observed.
“Many deepwater drilling contractors have a drillship utilisation at or close to 100%, which means that newbuild acquisition is a necessary step to securing new contracts with high dayrates. Seadrill and Diamond Offshore, to name a few, have most of its fleet contracted until 2024, so purchasing newbuilds with potential delivery dates in 2023 would open these companies up for bidding on new contracts,” he wrote.
In Brazil, he said drillships belonging to Constellation and Ocyan are all already under long-term contracts Petrobras, and with more demand expected, could be likely contenders to add further drillships to their fleet.
There are “only a few” stranded hulls left in Asian shipyards, he added, so interested contractors will have to move quickly to secure these assets – and pointed to one DSME unit, three at Samsung HI, and one with Keppel Fels.
“Now that the market fundamentals have caused rig utilization and dayrates to improve rapidly, it appears that these once abandoned newbuilds are once again hot commodities.”
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