Jackups continue to dominate drilling contracting activity, says Evercore ISI

Jackup drilling rigs continue to dominate the rig contracting market, particularly in the Middle East, according to Evercore ISI’s latest Offshore Rig Market Snapshot report.

Offshore drilling contractor and services company ADES has benefited the most from this regional Middle Eastern demand, signing 14 contracts in May for a total of 66 rig years, Evercore says. All but one contract was for Saudi Aramco, with the country executing on its plans to double its offshore fleet to 90 by 2024 as part of its drive to boost production capacity by 1 MMb/d to 13 MMb/d by 2027.

On the floater side, contracting activity has been dominated by operators exercising existing short-term priced options, which dragged down the average contract term to four to five months for May, down from seven months for the three months prior.

Only one new term contract was announced last month, with Transocean securing a new 10 well contract for the Deepwater Skyros from TotalEnergies for work offshore Angola. The 18-month contract has an average dayrate of $310,000/day, up from the prior $195,000/day for the seventh-generation drillship. Transocean also announced the lone term floater contract for June thus far, with the harsh environment Transocean Spitsbergen securing a new nine well contract offshore Norway for Equinor, also estimated to take 18 months. The new $335,000/day rate is nearly 20% above its current operating day rate.

The Evercore report also noted the “re-emergence” of several markets. “Despite their relatively small size, accounting for nearly 10 jackups at its peak, we are encouraged by re-emerging jackup demand from Angola, Germany, Guyana; and New Zealand, where four jackups are newly contracted after hiatuses of 20 months or more. On the floater side, five units are similar contracted for the Cote d’Ivoire, Israel, Japan, Mauritania, and Senegal.

“We expect contracting activity to continue to be dominated by jackups in the near term as 15 units are scheduled to roll off contract by the end of June, including five with Pemex and three with Saudi Aramco,” the report noted. In contrast, only two floaters are rolling off contract in the near term, Evercore said. “A modest 12 floaters are scheduled to roll off contract in 3Q 2022, down from 15 for the same comparable period a year ago, as operators have been quick to renew higher spec units.”

Meanwhile, the report noted that 36 jackups are scheduled to roll off contract in 3Q 2022, up from 23 a year ago, with more lower spec units becoming available.

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