Rig rates steady or rising with few newbuilds on the horizon

Offshore staff

LONDON — Westwood Global Energy Group subsidiary RigLogix has issued an update on opportunities for the global offshore rig fleet.

In the jackup segment, most of the rigs with upcoming availability are based in Mexico, the Middle East and Southeast Asia. Some will likely secure extension awards from the operator clients in 2024.

Teresa Wilkie, Director – RigLogix, said this is expected to be a short-term fluctuation until operators firm up their 2024 budgets and drilling plans. Since many are now making bigger commitments for longer duration contracts, it can take more time to choose the most suitable rig and execute a deal.

RigLogix has identified 22 tenders, pre-tenders or direct negotiations with a start date in 2024 and running for two to five years’ firm, many of which carry extension options.

There will likely be a further uptick in demand and rig take-up next year in regions such as India, Southeast Asia, South America and West Africa, with ONGC potentially needing six more jackups.

This year the overall number of rig reactivations and newbuild deliveries fell by 64% compared with 2022, mainly due to NOCs in the Middle East satisfying their near-term quotas. Floating rig reactivations and deliveries were also down, largely because of Petrobras cutting its awards by 50% after tying up long-term deals in 2022.

Now the company is in the market with several long-term floater tenders that should lead to terms for three to four more rigs.

Valaris and Borr Drilling have announced plans to take delivery of newbuild rigs, some delayed in yards for up to a decade, and these could be highly sought after due to their modern capabilities.

RigLogix counts 86 cold-stacked rigs at present, 39 of which have been idle for over five years. Only eight have a five-year special periodic survey in place while 40 are more than four decades old.

Nevertheless, about 14 of the jackups, 12 drillships and 12 semis could be candidates for reactivation.

This year there has been lower attrition, with just two rigs removed from the global fleet, and the trend is set to continue as rig owners hold onto older rigs in hopes of a contract. With few new ones under construction, some of these may eventually be put back to work.

This year day rates have continued to climb, with some semis and drillships commanding above $500,000/d.

That may not be the case for long-term contracts starting in 2024. Most of the $480,000-500,000/d fixtures agreed this year were for short-term deals involving one or two wells and do not take effect until 2025 onward.

Next year Westwood believes some floater day rates could attract fixed long-term deals in the mid-to-high $300,000s, along with short-term deals above the leading rates secured this year.

As for jackups, one contract has been fixed at $180,000/d for a program offshore Australia, and two more at over $165,000/d in Southeast Asia. There should be further upward movement next year in line with the forecast tight market, but again with a range of rates based on the duration, location and technical specifications.

12.21.2023