Report: Rig contracting activity begins to lag as available assets dwindle

Offshore staff

NEW YORK CITY – Offshore rig contracting activity slowed in recent weeks following a busy May that saw 30 rig-years awarded through 40 rig contracts, according to Evercore ISI’s latest Offshore Rig Market Snapshot.

The 40 rig contracts in May included six term contracts each for floaters and jackups.

Noble Corp. was “the big winner” in May, says Evercore, with five floaters and a jackup that were awarded new term contracts. These contracts included four Guyana drillships that were extended to mid-2027 with day rates resetting every six months under a unique commercial enabling agreement.

Overall, the firm says that there have been 22 floater and 45 jackup term contracts awarded year-to-date for 41 and 157 rig years, respectively. At the current pace, jackups are on track to be awarded 377 rig years, down 26% year-over-year, while floaters narrow the gap with 127 rig years, or down 5% year-over-year.

“We expect contracting activity to remain light in the near term as the industry is largely sold out of hot and warm assets,” Evercore said in the report. “However, we believe floaters could end the year higher on a rig-year basis. The marketed utilization for seventh-generation drillships at 95% is the highest it’s been since 2016, with only five cold-stacked and eight newbuilds available.”

The firm also noted that sixth-generation drillships have also increased to the low 90s percentage range, up significantly from a pandemic low of less than 60%, with only nine cold-stacked and three newbuilds available.

The report also said that contract terms “are likely to trend higher from the eight-month average currently, with a $500,000/day-plus dayrate expected in the coming months.”

06.15.2023