Navigating 2024: A Global Q1 Review and Year Ahead Forecast.

Summary

The Estan Rig Webinar Series for March 2024 reviews Q1 activity and forecasts the rest of the year. Matthew Donovan and Sophia Forester discuss trends in jackup and floating rig markets, highlighting increased demand in the Middle East and other regions. They note potential market shifts due to Saudi Aramco's adjustments in jackup demand and the impact on global rig markets. The webinar also covers the floating rig market, with a focus on South America and the North Sea, and provides insights into future rig requirements and day rate expectations.

Takeaways

• 📈 The global jackup fleet stands at 499 units, with 75% actively drilling, indicating a higher demand than current supply when considering units with future contracts.
• 🌍 Jackup activity is primarily clustered in the Middle East, with strong demand also from the Far East, Indian Ocean, Southeast Asia, Mexico, and the North Sea.
• 📉 There are around 62 cold stacked units, many of which are not available for future work, impacting the potential supply of jackups.
• 🔄 Jackup demand and utilization have increased over the past two years, especially in the Middle East, absorbing much of the spare capacity globally.
• 📊 Despite high utilization rates, competitive contractor utilization has remained at 90% or above since early 2023, reflecting a tight market.
• 🔄 Saudi Aramco's potential release of jackups may lead to changes in market dynamics and contracting strategies, with 23 contracts set to expire by 2025.
• 🌐 The North Sea market has tightened, with increased contract activity and limited remaining availability, impacting day rates and supply.
• 🚢 The floating rig market, including drillships and semisubmersibles, has a total supply of 208 units, with South America, US Gulf of Mexico, and West Africa being key regions.
• 📈 Floater demand has improved since the COVID-19 pandemic, with utilization around 70%, up from 33% since the pandemic.
• 💰 High day rates for premium rigs have been observed, and long-term contracts are expected to tighten floating rig availability in the coming years, leading to potential increases in day rates.

Q & A

What was the total number of jackup units in the global fleet at the beginning of 2024?

The total number of jackup units in the global fleet at the beginning of 2024 was 499.

What percentage of the global jackup fleet was actively drilling at the start of 2024?

At the start of 2024, 75% of the global jackup fleet was actively drilling.

Which regions showed strong demand for jackups in Q1 2024?

The regions that showed strong demand for jackups in Q1 2024 were primarily the Middle East, Far East, Indian Ocean, Southeast Asia, Mexico, and the North Sea.

How has jackup demand and utilization changed over the past two years and into Q1 2024?

Over the past two years and into Q1 2024, there was increased demand in the Middle East, which drew a large number of jackups to the region and boosted global utilization. Total utilization trended up towards 75%, while competitive contractor utilization, which includes rigs with future contracts, remained at 90% or above since early 2023.

What is the current status of cold stacked jackup units, and are they expected to return to the market?

There are still around 62 cold stacked jackup units. While some of these have been reactivated over the past several years, many of the remaining units are not available for future work and some may not return to the markets going forward.

What is the current situation with Saudi Aramco's jackup demand and how might it change in the future?

Saudi Aramco has received a directive to maintain its maximum sustained capacity for crude oil production at 12 million barrels per day, leading to speculation that the company will modify the number of jackups under contract. There are around 23 contracts set to expire between now and the end of 2025, which could highlight a potential shift in market dynamics and contracting strategies for this state oil company.

What is the current utilization rate for floating rigs, and how has it changed since the COVID-19 pandemic?

The current utilization rate for floating rigs is around 70%, which has been the trend for the last three quarters. This is up from 33% since the COVID-19 pandemic.

Which regions are driving the demand for floating rigs?

The top four regions driving the demand for floating rigs are South America, US Gulf of Mexico, West Africa, and the North Sea.

What is the expected trend for day rates of jackups and floating rigs in the near future?

In the near future, jackup day rates are expected to remain flat due to some availability in the floating rig market and uncertainty in the jackup market. However, as uncertainty decreases and rigs are signed to long-term contracts, some upward movement in day rates is expected.

How has the average duration of contracts for floating rigs changed recently?

The average duration of contracts for floating rigs has increased, with a spike in mid-2022, surpassing the 2020 levels. This is due to operators wanting to secure rigs for their future projects and to hedge against potential upticks in day rates.

What is the expected demand for rigs in South America for the year 2025?

South America is expected to have a very high number of rig requirements in 2025, with the region being responsible for around 26% of the global demand in rig years and 32% of the global number in terms of backlog added in the first quarter.

What is the current supply and demand situation for semisubmersibles in the North Sea?

The supply of semisubmersibles in the North Sea has shrunk over the last couple of years due to high demand elsewhere driving the harsh environment semis out of the region. However, there has been a recent arrival of a rig from China for a two-year contract in Norway, indicating a potential for increased activity in the coming years.