It looks as if the global offshore rig market is starting to come off the boil after five years or so of burgeoning rates, especially for high-spec new deepwater tonnage.
There are a total of 38 ultra-deep-water rigs around the world looking for work, up from 22 a year earlier, it has been reported.
Signals regarding the softening have come through the latest spate of drilling contractors reporting 2013 final quarter and full-year results with many companies taking a hefty hit on their share price as stock markets reacted.
Notable are observations by David Williams, chairman, president, and CEO of Noble Energy, when discussing the company’s latest figures and market conditions.
“After the very robust pace of offshore activity over the past four years, our industry may be entering a short and arguably useful pause in the cycle,” Williams said.
“As was the case in 2013, we entered this year with considerable backlog.
“That said, although we believe activity in the jack-up sector is best defined as a steady state, the reality is that we find ourselves evaluating fewer floating rig contract opportunities today than we did a year ago.
“The first half of 2014 is likely to be characterised by lower rig utilisation. This is likely to be more pronounced for the floating rigs with limited technical features.”
“Noble’s exposure to a weaker floating rig sector is limited in 2014, with only 22% of our operating days available.”
However, Williams said he remained comfortable about the long-term outlook for offshore drilling.
“In the ultra-deepwater segment, which represents a growing portion of our revenue, we continue to observe a fundamentally sound business.
“In the face of generally steady crude oil prices, successful exploration programmes with over 240 announced deepwater discoveries since 2008, continued geographic expansion and a building backlog of field development projects, the segment is poised to provide exceptional future growth opportunities.”
Williams said that the company’s transformation to one with a predominately premium asset fleet positioned Noble well to address and capture opportunities for ultra-deepwater rigs and high-spec jack-ups in shallower waters.
Roger Hunt, Noble’s senior VP of contracts and marketing, told analysts and investors today on a conference call: “There really is an execution phase that is going on right now where the customers are trying to swallow the proverbial pig. Our customers really have had an extraordinary increase in activity over the past three years.”
The pace of customer spending growth is expected to be lower this year compared with last year, according to Hunt.
Another US company, Hercules Offshore, which recently took delivery of a new high-spec jack-up, saw its share price slump last month when it said in a fleet status report that it had suspended plans to reactivate a shallow-water rig in the Gulf of Mexico. Hercules dropped 14% to $4.92 after earlier plummeting as much as 17% on the news.
It has been claimed that Hercules investors are nervous about the demand outlook for shallow-water rigs in the Gulf of Mexico, where the Houston firm garners most of its work.
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