Transocean, Diamond Offshore and Ensco are the drilling contractors deemed by stock analysts at Seeking Alpha to be most at risk this year.
They face the threat of significant contract rollovers but that “actual long-term contracts will not be terminated”.
According to Seeking Alpha, as of March 12 there were 11 new-build floaters scheduled to be delivered to US account this year and which do not have work.
“Some of these rigs have been already delayed until 2016 or will certainly be delayed if they do not have a firm contract,” it says.
“Vantage Drilling, for example, owns a drillship called the Cobalt Explorer, a 7th generation unit, scheduled to be delivered in Q3, not contracted. It is almost certain that the rig will not be delivered this year, if ever?
“One company particularly exposed to this new-build situation in 2015 is Seadrill with the Sevan Developer already delayed until 1/2017 maximum, West Rigel, West Draco, West Dorado, West Aquila and West Libra scheduled to be delivered in Q4 (this year), without a contract.
The West Rigel contract with Rosneft was terminated recently.”
Seeking Alpha reports “very few tenders available worldwide”, and it is “nowhere enough to absorb the actual floaters supply”.
Transocean and Diamond Offshore are said to be particularly exposed to this situation and could struggle to keep a decent rig utilisation rate going this year. Diamond Offshore has apparently fared better so far, in spite of its serious fleet exposure.
Seeking Alpha’s commentary notes that most of the 2th generation and 5th generation rigs will be scrapped and about half of the 3rd and 4th generation as well. Transocean has 18 rigs for disposal.
“The attrition process has been already initiated by most of the offshore drillers which have impaired, retired and sold numerous old rigs already. It is a difficult and painful process, however, a necessary step toward recovery later in 2016.”
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