A seasonal slowdown in rig contracting activity is taking place in the North Sea as the year begins to wind down, according to Evercore ISI’s latest Offshore Oracle Report.
According to the report, the marketed utilization for North Sea floaters declined by 210 basis points over the past month to 81% but increased by 113 basis points to 95% for jackups.
Year-over-year, the report noted that the marketed utilization for floaters is down a modest 245 basis points but up 498 basis points for jackups due to a decline in supply as three floaters and three jackups have exited the region.
With Seadrill’s sixth-generation Hercules rig departing for a new contract with ExxonMobil in Canada, the North Sea’s supply of rigs will fall to new multi-decades low of 31 floaters and 34 jackups. The marketed utilization could test last winter’s low of 79% for floaters and 83% for jackups, but dayrates will likely stabilize at current levels with demand firming up for 2024E and beyond.
Dayrates for new contracts are averaging ~$100,000/day for jackups, up from recent troughs of $70,000/day, while the Transocean Norge recently established a leading-edge floater rate of ~$410,000/day.
Ten different operators have tenders out for 11 jackups for a total of 7-15 rig-years beginning in 2023-2025, while four operators have tenders for six floaters for a total of 4-7 rig years. Floater demand appears light for 2023 with average contract durations at 2-4 months but is lengthening to 9-16 months for contracts beginning in 2024.
On the jackup side, most tenders are for 2-9 months but Eni is reportedly seeking a unit for a three-plus year P&A and re-completion of wells contract in the UK North Sea for the HyNet CCS project. Three other potential CCS projects (Acorn, Aramis, Northern Endurance) could also seek jackups for 2024 and beyond.
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