Monday, August 20, 2012

Offshore drilling activities outlook still thriving ahead 2012

Barring the outcome of the severity of recession emanating from Europe, supply and inventories are low enough to keep oil prices firm. Oil prices also will likely to hold up if governments opt to print more money in response to over-leveraged situations in the Europe and US.
From a supply/demand standpoint and from a global money situation, oil will continue to be the main driver of activity, particularly in North America, where drilling is expected to see double-digit growth, mostly in the liquids-rich and oil plays.
Due to typically slower growth rates, the international market will see growth of 6% to 9% or less. Higher natural gas prices in most international markets will support continued production in shale and other unconventional gas plays, particularly in Australia and South America.

Courtesy of Rowan N-class
The global jackup market is probably poised for a rebound, as utilization has increased from 82% to 90%, signaling a possible increase in rig pricingand most jackup activity is driven by Brent oil prices, which have remained above $100/bbl to-date.
Asia and the Middle East are the lead currently in jackup market. About 100 jackups in Asia, including India, China and Southeast Asia, which is at the high end of the historic demand market.

The nuclear disaster in Japan and moves by Germany to shut down reactors also will bolster the outlook for LNG and oil prices are the driver for international activity simply because LNG internationally tends to be priced off oil prices or some function of oil prices.

Oil will continue to be the focus of activity in the GOM, but ongoing and heightened regulations and the still-slow pace by the US government to issue permits cloud the post-Macondo picture.

A positive development has been the recent large ultra-deepwater discoveries by ExxonMobil, Chevron and BHP Billiton in the highly pressurized Lower Tertiary geological formation.

There is a return to more activities in the Gulf, with operators allocating more time and resources in the geoscience departments for future developments as a result an increase in rig rates and support for more drilling going into 2012.
The active deepwater rig count in the Gulf had moved up to more than 20 by early October, higher than it was last year but still well below pre-Macondo levels. 
ENSCO 8500 Semi Rig
There are 23 (active deepwater) rigs in the Gulf now, but there are questions about what will happen when that work is completed. There is not a pipeline of other projects with permits in place. That increases the risk that rigs could once again be realizing reduced dayrates while waiting for work. Both operators and rig owners suffer under those circumstances.
Meanwhile, new regulations mandating such activities as unannounced spill drills and stronger disclosure requirements have been implemented. On 1 October, the US Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) split into two agencies. The Bureau of Safety and Environmental Enforcement (BSEE) will be responsible for inspections, enforcement and safety of offshore oil and gas operations. The Bureau of Ocean Energy Management (BOEM) will oversee energy leasing and planning on the Outer Continental Shelf (OCS), along with offshore leasing, resource evaluation, review and administration of oil and gas exploration and development plans.

The U.S. Gulf continues to thrive and grow. Witness the latest big contract going to Seadrill Offshore that's worth a whopping $4 billion for a total of 19 rig years for three ultradeepwater drillships for work in the Gulf of Mexico. Two of the drillships, the West Auriga and West Vela, won’t be delivered until February and May 2013 with startup set for later that year. The third drillship already is operating and will be named at a later date (kind of like a baseball trade). The potential contract also includes mobilization fees for the newbuild units.

Another driller, Noble Corp., signed a three-year contract for one of its ultradeepwater drillships under construction and set for delivery during the fourth quarter 2013. Anadarko Petroleum contracted the Noble Bob Douglas. Startup is set for the first quarter 2014. The day rate reported by Noble is $618,000 including mobilization revenue. Noble also has two newbuild drillships under construction that are still available.

Also, the newbuild deepwater semisubmersible Ensco 8506, the last of the seven rigs  that is set for delivery this year from KeppelFELS in Singapore, is contracted to Anadarko in the Gulf from December 2012 through June 2015.

Transocean’s drillship Discoverer Deep Seas received a three-year contract from March 2013 through March 2016 from Murphy at a day rate of $595,000. The rig is presently contracted to Chevron until March 2013 for $450,000 a day.

Other potential contracts could go to Rowan Companies, which has three newbuld drillships under construction with deliveries scheduled for 2013 and 2014.

With high (but fluctuating) oil prices and plenty of new potential acreage to drill due to two recent successful lease sales, operators and drilling contractors are expected to announce several additional long-term, high day-rate drilling contracts for rigs destined for the Gulf. If operators don’t hurry and charter rigs for delivery during 2013, they might have to wait to begin their drilling programs in 2014 as rig deliveries are snapped up.

Below courtesy of International Strategy and Investment Group :

Rig Outlook 2012 06-27ofs

Global Offshore outlook - courtesy of Douglas Westwood :-
Global Offshore Prospects

Semi Offshore 000 2008 Drillrig Poster - Courtesy Offshore Magazine

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