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    1. Rigs

    Report: Slower than expected contracting activity puts a toll on ultra-deepwater rigs

    Oct. 2, 2024
    Demand for UDW floaters is not going away and is instead being pushed out, says Evercore ISI.
    Related To: Evercore ISI
    Courtesy Constellation Oil Services
    Petrobras recently awarded Constellation a contract for the drillship Laguna Star at an implied day rate of $450,000/day.
    Petrobras recently awarded Constellation a contract for the drillship Laguna Star at an implied day rate of $450,000/day.

    Slower than expected contracting activity in 2024 continues to put a toll on ultra-deepwater UDW marketed rig utilization, according to Evercore ISI’s latest Offshore Oracle report.

    That rate, according to Evercore, fell from 89.0% in August 2023 to 83.6% one year later. Marketed utilization for sixth-generation/seventh-generation rigs declined from 94.5% to 87.0% during the same period, the firm noted.

    This is incrementally making it harder for newbuild floaters to find work, the report said, especially when existing rigs are not assigned follow-on work. According to Petrodata, 12 6G/7G floaters (five 7G floaters/seven 6G floaters) are expected to be delivered by May 2026. “Despite some whitespace in 2025 in tandem with newbuilds entering the market,” Evercore wrote, “we continue to believe demand for UDW floaters is not going away and is rather being pushed out.”

    Offshore drillers are tracking some 30 long-term floater opportunities with contract durations of at least one year, and incremental demand, particularly in Brazil and Africa, will absorb UDW supply, Evercore wrote. “Keep in mind that Africa is often subject to delays due to tender process hold-ups, political instability or partner problems,” the report commented. 

    While there were numerous reactivations over the past few years, “we think offshore drillers are becoming increasingly disciplined on reactivation given softer UDW demand,” Evercore said. 

    “Based on our conversations with drillers, slower activity in 2024 and some whitespace in 2025 is likely from 1) delays in FPSO and equipment deliveries and 2) lengthening contract durations (and significantly higher day rates) and increased complexity of projects,” the report said. However, day rates have been steadily increasing, with 20,000 BOP/MPD-capable rigs breaking $600,000/day in the US Gulf of Mexico. 

    Evercore noted that there are still 14 legacy floater newbuilds remaining in the orderbook, waiting patiently for new contracts. 

    The report also noted that Petrobras recently awarded Constellation two new contracts for drillships, including Tidal Action (expected delivery date of April 2025) and Laguna Star, totaling $1.0 billion, for 30 months each, implying day rates of $450,000/day.