Offshore Drilling Market Not Turning Around Yet

By MarEx 2017-06-06 21:21:42

Research consultancy Maritime Strategies International (MSI) has forecast a challenging earnings environment for the offshore rig market during the next two years.

In the first of its new quarterly sector reports, MSI compares the current market to the slump of the 1980s. Its data model shows the rig market to be in an even deeper hole than 30 years ago, with fleet utilization and the supply/demand balance a cause for caution on the earnings outlook.

This is despite a palpable shift of sentiment in the jackup rig market, with recent deals such as Borr Drilling’s takeout of the Transocean jackup fleet and two modern Hercules jackups establishing solid price expectations and for many marking a bottom to the market.

“The question we have considered is whether this recent activity heralds the beginnings of a broad-based industry turnaround and our conclusion is not just yet - at least for some market sectors,” says MSI Senior Analyst James Frew. “This is not least because rig earnings are not simply a function of the oil price but also the fleet utilization. Factoring in the supply/demand balance provides further evidence of why MSI are more cautious.”

In 1986, earnings for a third generation semi-submersible slipped below $50,000/day (and had been falling since their 1981 peak at around $90,000/day) while earnings remained below the $50,000/day mark for the remainder of the decade. Like today, there were shards of optimism amongst....

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