No time to die – How will offshore drilling rig values recover facing an energy crisis?
Summary
TLDRThe webinar discusses the offshore rig market and rig valuations, highlighting the oversupply from 2005 to 2014 and the impact of the COVID-19 pandemic on the industry. It explores the energy transition's effect on demand and the potential for value appreciation in the drilling rig market. The speakers also delve into the different types of buyers and sellers in the rig market and the factors influencing rig values, including technical aspects and market conditions. The presentation concludes with an outlook on the recovery of rig values and the challenges and opportunities within the industry.
Takeaways
- 📈 The offshore rig market experienced an oversupply between 2005 and 2014, growing from 600 to over 900 rigs.
- 📉 The COVID-19 pandemic in early 2020 further weakened the rig market, causing utilization rates to drop and rig values to plummet.
- 🔄 The energy transition is still in its growth phase and cannot yet replace fossil fuels, with oil demand expected to surpass pre-pandemic levels by 2022.
- 💰 Oil prices have been strong, around the $85 level, which is the highest since October 2018.
- 🚀 The competitive rig fleet has been reduced through scrapping and conversion, now standing at 587 rigs, similar to the size in 2005.
- 🛠️ Rig values are determined by market factors such as oil prices, rig supply and demand, utilization rates, and recent sales.
- 🔄 The buyer landscape consists of strategic buyers, opportunistic buyers, and those interested in conversion or scrap, each with different motivations and resources.
- 🔄 The seller landscape includes strategic sellers, distressed sellers, and stranded sellers, with deals varying based on the seller's situation.
- 🌐 SGN provides a digital platform for rig values and analytics, covering the status of all rigs and offering forecasts, as well as a product for individual CO2 emissions from the rig fleet.
- 📈 Looking ahead, the forecast for rig values suggests a potential for substantial appreciation, especially for modern drill ships and premium jack-ups, as utilization rates increase.
Q & A
What was the impact of the COVID-19 pandemic on the offshore rig market in early 2020?
-The COVID-19 pandemic led to a significant downturn in the offshore rig market in early 2020. Rig utilization rates dropped from 78% to 64% between February and June, and the number of big contract rigs fell from 460 to 378. This resulted in a substantial devaluation of rig assets, with many becoming worth only their scrap value, leading to offshore drillers filing for bankruptcy under Chapter 11.
How has the offshore rig fleet changed in size between 2005 and 2014?
-Between 2005 and 2014, the offshore rig fleet grew from approximately 600 rigs to just over 900 rigs. This expansion led to an oversupply in the market.
What is the role of the energy transition in the current state of the offshore rig market?
-The energy transition is still in a growth phase and is not yet ready to replace fossil fuels to meet additional demand as economies grow. Despite the transition, the demand for oil is expected to surpass pre-pandemic levels by 2022 and grow beyond 100 million barrels per day by 2023.
How does the SGN Rig Values platform function?
-SGN Rig Values is a digital platform that provides rig values 24/7. The values are updated twice weekly or as market events demand. The platform's basis is SGN Rig Analytics, which covers the status of all rigs in the world fleet and provides rig demand and rig supply forecasts.
What factors are considered when establishing rig values?
-Rig values are established by considering macro-level factors such as oil prices and oil company spending, the rig market itself including rig supply size and the competitive fleet, utilization fixtures, day rates, and recent sales. Technical aspects like rig design and operating areas are also considered.
What has been the trend in rig values since the market peak in 2014?
-Since the market peak in 2014, there has been a catastrophic reduction in rig values. Modern rigs such as seventh-generation drillships and premium jack-ups have lost about 75% of their value. The harsh environment sector has fared the best, with values dropping about 50% due to limited supply.
Who are the typical buyers in the current offshore rig market?
-Typical buyers in the current market are drillers with less inventory of idle rigs and higher fleet utilization. These drillers are likely to acquire more modern rigs to take advantage of the increase in day rates and bid on new tenders.
What are the three types of sellers in the offshore rig market?
-The three types of sellers are strategic sellers, which include drillers looking to right-size their fleet or exit non-core segments; distressed sellers, which occur when creditors take over companies and need to exit quickly; and stranded sellers, which are new builds controlled by yards that have become unwilling owners due to cancelled orders.
How does the retirement of older rigs affect the market dynamics?
-The retirement of older rigs, particularly those that have been stacked for a long period or are pre-2005 models, reduces the supply of available rigs. This can lead to higher utilization rates and potentially higher day rates and rig values as the market adjusts to a smaller fleet size.
What are the climate risks associated with offshore drilling activities?
-Climate risks in offshore drilling activities include the costs associated with reducing emissions from drilling rigs. As the world moves towards a low-carbon future, there will be increasing pressure to limit greenhouse gas emissions, which could affect the economics of offshore drilling operations.
What are the expectations for rig values and utilization rates in the coming years?
-The expectations are for rig values and utilization rates to increase significantly. With a forecasted increase in demand for oil and gas, and a reduction in the competitive fleet size to levels not seen since 2005, utilization rates for all rig classes are expected to move above 80%, which historically has led to higher day rates and rig values.
Outlines
📉 Market Review and Rig Valuation
This paragraph discusses the historical context and current state of the offshore rig market, highlighting the growth of the rig fleet from 2005 to 2014 and the subsequent oversupply. It mentions the impact of the COVID-19 pandemic on the rig market, with utilization rates dropping significantly and contract counts falling. The paragraph also touches on the future outlook for rig values, considering the energy transition and the expected growth in oil demand. It introduces the speakers and their roles, setting the stage for a deeper dive into the market dynamics and valuations of offshore rigs.
🔍 Methodology and Rig Value Determination
This section delves into the methodology used to establish rig values, starting with macro-level factors such as oil prices and company spending, and moving on to specific rig market elements like fleet size, utilization rates, and day rates. It emphasizes the importance of recent sales as a value reference and discusses the principle of willing buyer and willing seller in determining values. Technical aspects like rig design and operating areas are also considered as value drivers. The paragraph introduces digital platforms that provide rig values and analytics, highlighting the role of market events in influencing these values.
💡 Buyer and Seller Dynamics
This paragraph examines the current market dynamics from the perspective of buyers and sellers. It identifies traditional large drillers as less likely to be asset buyers, focusing instead on improving fleet utilization. On the other hand, drillers with fewer idle rigs and higher fleet utilization may seek to acquire additional rigs to capitalize on increasing day rates. The buyers are categorized into three groups: strategic, opportunistic, and those interested in conversion or scrap. The paragraph also discusses the motivations and characteristics of different types of sellers, including strategic distressed, opportunistic, and stranded sellers, and how these dynamics affect rig transactions and values.
🛠 Rig Retirement and Market Fundamentals
This section discusses the rig retirement landscape, considering factors like age and stacking periods of rigs, as well as the costs associated with reactivating older rigs. It highlights the challenges of bringing older, stacked rigs back into operation due to high reactivation costs. The paragraph also presents detailed databases and systems used to analyze every rig in the world, evaluating them based on various criteria. It forecasts rig retirements and anticipates improved market conditions, suggesting a continued shrinkage in supply and potential for value appreciation in the future.
🚀 Value Appreciation and Market Outlook
The paragraph provides an outlook on the potential for value appreciation in the drilling rig market. It discusses the expected increase in day rates and rig values, particularly for modern drill ships and premium jack-ups, based on high utilization rates and demand forecasts. The potential impact of climate risk on rig values is also considered, as emissions reduction costs could affect the value of fossil fuel activities. The section concludes with a positive outlook on the market, suggesting higher utilization and day rates leading to increasing values for drilling units, while acknowledging the risks associated with oil prices and the transition to renewable energy sources.
🤝 Audience Q&A and Final Thoughts
This final paragraph is dedicated to answering audience questions and providing concluding remarks. It compares rig values to the implicit values of publicly listed drillers, discusses the potential for increases in rig values, and addresses the differences in values between various market segments. The speakers provide insights on the recovery of the rig market, noting that the competitive fleet has decreased to 2005 levels and that demand is expected to return to pre-pandemic levels. They also address the potential for recovery similar to the 2005 market boom, concluding that a new building boom is unlikely due to the energy transition and shipyard shifts. The presentation ends with a thank you to the attendees and a note that a recording will be made available for those who missed it.
Mindmap
Keywords
💡Offshore Rig Market
💡Rig Valuations
💡Rig Utilization
💡Energy Transition
💡Fleet Utilization
💡Day Rates
💡Climate Risk
💡Stranded Assets
💡Reactivation Costs
💡Greenpack Rigs
Highlights
The offshore rig market experienced an oversupply between 2005 and 2014, with the rig fleet growing from 600 to over 900 rigs.
The COVID-19 pandemic in early 2020 exacerbated the weak rig market, causing utilization rates to drop from 78% to 64% between February and June.
Rig values plummeted to all-time lows, with many rigs being worth only their scrap value, leading to offshore drillers filing for bankruptcy under Chapter 11.
The energy transition is still in its growth phase and cannot yet replace fossil fuels to meet increased demand as economies recover.
Oil demand is expected to surpass pre-pandemic levels by 2022 and grow beyond 100 million barrels per day by 2023.
Oil prices have been around $85 per barrel, the strongest levels since October 2018.
The competitive rig fleet has been reduced by scrapping and conversion, now standing at 587 rigs, similar to the size in 2005.
There is no new rig construction, which provides more clarity in the supply overhang.
SGN's rig values platform, based on SGN rig analytics, provides rig values updated twice weekly, reflecting the status of all rigs in the world fleet and offering rig demand and forecast data.
Rig values are determined by a willing buyer and willing seller principle and do not include contract values.
Since the market peak in 2014, modern rigs have lost about 75% of their value.
The harsh environment sector has fared the best, with values dropping about 50% due to limited supply and operational limits.
Buyers in the rig market can be categorized into three groups: strategic, opportunistic, and those focused on conversion or scrap.
Sellers in the rig market can be strategic, distressed, or stranded, with each category having varying motivations and value expectations.
There is a price expectation gap between willing sellers and buyers, which can affect transaction types and values.
Improving market fundamentals are expected to draw opportunistic buyers chasing premium jack-up deals at distress prices.
The forecast for 2022 and 2023 indicates that rig utilization for all classes will move above 80%, potentially leading to higher day rates and rig values.
Climate risk is a significant factor in the fossil fuel industry, with costs to reduce emissions from drilling rigs affecting future value potentials.
The retirement of older and less competitive rigs, combined with increased demand, is expected to lead to higher utilization and value appreciation for modern drilling units.
Transcripts
good morning and good afternoon
welcome to this estrogen webinar today
we will be covering the offshore rig
market and the development in rig
valuations
with me i have erlen basser chairman of
asgen
hans huggleburgh bp rigs and green pack
rigs
and hans jacob basser one of our
offshore rig analysts
we will be starting off looking at the
past few years and fundamentals
impacting the market
then we will look closer at buyers and
sellers in the rig asset market and
finally we will discuss the current
situation and the outlook for rig values
for the next few years
over to hans hagelberg
in the period between 2005 and 2014
the offshore rig fleet has grown from
some 600 rigs to
slightly over 900 rigs by 2014
and that created
an oversupply
then to make things worse in
early 2020 the kovid pandemic
hit an already weak
rig market
with the rig utilizations going from 78
down to 64
in the short period between february and
june
uh and with big song contract dropping
from
460 down to 378
and as a result big values took a tumble
to an all-time low
with many rigs
only worth scrap
and that resulting in offshore drillers
filing for chapter 11.
as can we have the next slide
so could the fossil fuel renewable gap
mean that we're moving towards a
brighter future for the offshoring
market
the
energy transition
is still in a growth phase
and it's not ready to replace fossil
fuels to take up the additional demand
when the economies now start to grow
again
energy demand is expected to surpass
pre-pandemic
levels already by
2022 and
grow beyond 100 million barrels per day
by 2023
oil price has been around 85
level which is the strongest since
october
2018.
shale is
restructure restructured
and there is now more production
discipline
creditors has become drilling contracted
shareholders and that will also provide
more discipline in their offering
since
the peak of 2014
the
competitive fleet
has been reduced through
scrapping and conversion and it now
stands at 587
rigs
which is roughly the size of the fleet
in 2005.
there is no additional
new building
and that
creates
more clarity
in the supply overhang
so next slide please
um sgn is following offshoring values
and uh presenting them through the to
the market
through uh esgn rig values which is a
digital platform providing rig values
24 7.
the values are updated twice weekly or
otherwise as market events might demand
the basis for
rig values the rig values platform is
sgn rig analytics
which is covering the status of all rigs
in the world fleet
and is providing rig demand and rigged
forecasts
sgn also have a third product called
green packed rigs which is covering
individual
co2 emissions from
the world's
offshore rig fleet
so next slide
the methodology for establishing rig
values
[Music]
then we're looking at
things
starting with the macro level
the oil price oil company spending etc
then
we're looking at
the rig market itself and
the rig supply
size of the competitive fleet
utilization fixtures and of course day
rates
we have value references and
the most important is of course recent
sales
however that can be difficult in the
market as today's
where very few asset sales have taken
place
it's important to point out that the
values are always determined by the
willing buyer and willing seller
principal
and the values does not include
any values from any contracts it's
contract shorter three
values
then finally there are technical aspects
such as
the rig design operating areas we're
looking at the rig specification
to identify value driving factors etc
next slide please
since since the peak of the market in
2014
the value reduction has been
catastrophic
looking at modern rigs such as seven
generation drink ships and premium jack
ups they've lost about 75 percent of
their value
the class of rigs that has fared the
best is the harsh environment sector due
to
its operational
limit limits
the supply
uh
[Music]
the
the limited supply
has helped to keep
rates
at a higher level
but still
values have dropped
about fifty percent
uh next slide please
and uh with that we will move on and
talk about uh the buyers uh and the
sellers so hence jacob
hey girls
so
firstly in the current market we believe
that the traditional large drillers are
not the asset buyers as revenue growth
can be achieved within its current fleet
these companies such as velaris
transocean and board really already have
a large fleet and after years with low
demand and equalization
these companies look to bring stack rigs
back into work and improve its fleet
utilization rather than crying or
acquiring an additional rig
on the other hand we have drillers that
have less inventory of idle rigs and
higher fleet utilization
these drillers are likely to take on a
rigor 2 in order to bid on new tenders
and take advantage of the current
increase in day rates
so the buyers can be categorized into
three groups we have
optionistic and conversion or scrap
so the strategic buyers can pay more to
acquire more modern rigs and typically
finance the purchase against a long-term
contract
typical buyers as mentioned earlier are
drillers with less idler rates
but for instance saipim type airport
charger the samsung santorini which have
a purchase option and shelf drilling
which acquired the mers completer and
rented its shelf drilling enterprise
both rigs have been contracted the
samsung century will commence work with
eni in the u.s gulf of mexico
while the sheltering enterprise went
contracted to chevron for work offshore
thailand
other buyers can be companies that have
some some sort of government support
such as 80s which acquired four noble
jack ups and contract with some saudi
aramco earlier this year
the second buyer the opportunistic
buyers are industry players who look to
take advantage of the stress assets in
the market
these buyers have either their own cash
or look to raise cash quickly and buy a
rig with little to no leverage and the
transaction are generally completed
fairly quickly
the buyer looked to look to take
advantage of the low steel values which
must be favored to public equity and
acquire rigs on a discount and later
this can lead to growth opportunities
through consolidations
lastly we got the conversion scrap virus
require acquire rigs at low values to
scrap values for recycling of steel or
cost efficient conversion for other
purposes
uh typically rigs can be converted into
mobile ultra production units but also
long traditional conversion happens such
as offshore wind installation
and also landing platform platforms for
rockets like the two of the largest
embassadors acquired last year
for the scrap buyer the steel prices
drive the market rather than the oil
price and the buyers are not valid
drivers rather set the floor for greek
values
and the risks acquired are of course
permanently removed from the market
so moving on we also looked at the three
types of sellers
and we've got the strategic distressed
and the stranded sellers
for the strategic sales these are cells
done by drillers and values can vary
from high values to low or scrap values
these types typically take place when
drillers look to right size its fleet
such after an m a transaction
or when the company wants to exit a
non-core segment such as when transocean
sold its checkups report drilling
also in times such as now builders could
sell off rigs to generate cash to fund
future activities
lastly drillers sell for strategic scrap
or conversions and this typically
happened as mentioned earlier during the
riot sizing
or when it does not make economic sense
to reactivate a full stack route
when we say modern units sold for a
scrap of conversion such as for instance
a semi-general ship it tends to be
because drillers look to reduce the
supply of bricks rather than allow it to
continue with a competitor
we also have distress sales which happen
when creditors take over the company and
the prices are
lower than the strategic sales but of
course higher than scrap sets
creditors become the unwilling owner
when debt requirements are not met and
therefore they look to exit quickly and
cut the losses the new owner will look
to run processes to downsize and
restructure companies and sell of assets
however sometimes the creditors could be
willing to give some sort of an
optionality for higher asset pricing
for instance a payable charter with a
purchase option
could be an option for the accreditor
finally we got this stranded sales which
are new builds that are controlled by
the yards
in the current market
many new bills have been cancelled
which then leaves the ownership to the
arm
like the creditors the odds become the
unwilling owner
but these searches do not want to cut
the losses and self-achieve values
typically the yards have some sort of
governmental backing and cash available
and therefore can hold into the asset
for a longer period of time to wait for
a fair price
and often
while waiting for this fair price yards
often combine the strategy assets into
hold up posts
so then looking at the buyers or sellers
deal territory we can see that there is
a price expectation gap between the
willing seller and the willing buyer
on certain transactions such as scrap
and conversion the buyers and sellers
are more or less aligned
and this is also the transaction type we
see in the most of in the past few years
some transaction this year could be
is for instance the recent sale of the
semi-cell leo to bw energy for fpu
conversion and also pacific mistrial and
bora to gms for scrap
looking at other transaction types we of
course have the distressed opportunistic
strategic and stranded and the price
expectation gap between willing seller
and willing buyer is much wider here
this is also transaction we haven't we
have seen less of in the market
by looking at certain asset classes we
see that the gap
is narrowing for instance with improving
market fundamentals we believe
there could be opportunistic buyers who
would chase premium jack up deals at
distress prices
furthermore the 7th general ship price
gap is narrowing as we see in both
opportunistic and strategic
transactions for instance with deep
valley jewelry which was acquired from
dolphin earlier this year
also to narrow the gap companies acquire
ships with purchase options as mentioned
earlier sipim has the purchase option on
the samsung santorini while on the harsh
environment semi-sub we saw yesterday
that dolphin will market the two sim
sub-starting spring in nordic winter
and also secure the right to purchase
them at the latest stage
i will now move the presentation
to ireland who will talk more about
offshore week values in the current
energy crisis
thank you hans
yeah move to the next slide yeah i
suppose most of you have seen the james
bond movie
by now and we know the outcome of that
i cannot guarantee what the outcome will
be of the drilling industry other than
saying
this is not the time to die for most
rigs
though regrettably
it's time for some and that's what we
look at here
so it's been a tough market for many
years it's been a long downturn
and still about
30 of the rig supply is stacked
18
of the stacked rigs are fairly modern
between 2005 2009
why although 42 are built before 2005.
and of these 195 rigs
84 of them have been stacked for a very
long period
more than three years
and
such a long stacking period and old age
in combination
often makes the reactivation cost
prohibitive
for making or for bringing the rigs back
here with some economic sense to it
so many strategic sellers choose to
scrap
rather than invest a large amount of
money in all these rigs
and bring them back and really create
more competition
so with that backdrop we claim it's time
to consider
those
which have no time to die versus those
which do
and if you look further down on the page
and look at uh at the distribution of
stacked rigs
you'll see that jack ops
have a large percentage of old rigs
almost 50 percent of the fleet is
pre-2005
semi-submersibles are very similar
one-third of the fleet is old
well when it comes to drill ships most
of the fleet is quite new
one of the major factors for bringing
rigs back into operations is what you
need to do to satisfy the class and the
special periodic survey which all rigs
have to go through
and as you can see from the graph a very
large number of rigs i will have their
sps position expired and hence it will
be costly to bring them back
next slide please
so
in sgn we have
detailed databases and
and system to analyze
every rig in the world
and we can go in on all levels to
evaluate these rigs
according to various criteria
excuse me
and when we look at the sort of the
retirement picture uh if we apply some
criteria which are on the right side of
the page for jack obviously would be
pre-2005 it would be typically
all designs one of the signs long
stacking periods no sps
or semi submersibles typically before
2000
outside of the north cie not capable to
go back to the north sea
on favorite designs long stacking period
expired sps and for drill ships
more or less the same but
hp 2013 long stacking
and there we also look more carefully at
the reactivation cost because as drill
ships have been stacked for very long
time
the reactivation cost can be substantial
often 100 million dollars or more
next please
so looking at that analysis that you
just saw
and taking into regards that we already
seen a huge number of drilling rigs
being retired
and will continue to be retired based on
that analysis into 22 and 23 with more
than 36 weeks in 22 and 47 in 23
although some rigs will come back we
forecast improved conditions so stranded
rigs will come back into the market
but nevertheless supply will continue to
shrink and
remind you we already think that the
supply level is at almost
2005 levels i.e 15 years ago
so if you blend this with our supply
excuse me our demand forecast we have a
10 year demand forecast
but applying that demand forecast
through 23
and mixing it with retirements
we see that the fleet utilization for
all of the
three classes we look at move above
the magical 80 level
the experience from the rig market is
that as soon as you move into the 80
percent territory
you see their rates move and as you move
up through towards 100 they can move
quite dramatically
so we think that
the forecast based on utilization is a
good qualifier for estimating where
values will move
and if you look bottom left
we estimate a modern drill ship
today uh in uh asian rig values to be
about 200 million
uh looking at utilization
in
uh 23 of say 90 plus with opex of 150
000 per day we think day rates will move
from the current
280 300
marginally about 300 to 400
uh if you just pick a multiplication of
five
we see that with
the rig values of these rings could
double more than double towards 450
million
which is still under the original
replacement
level which often was
600 650
for the harsh environment semis
the more popular unit in this
uh market at least prior to the recovery
of deep water wheel ships
estimating values think
such unit today is worth around 300
they already have pretty good
utilization but when that moves into the
90 territory they have high operative
cost particularly in the north sea
darius would move from the current 300
325 even a bit more to 400 000 400 000
plus and such units would easily be
worth in the 400 million range
if you go back to well if you go down to
semi-six-gen
kind of a little bit of these sort of
the forgotten type of rig
between the shallow water jacobs and the
deep water
drill ships
we think such rig
even if
despite it being quite modern it's only
worth 100 million based on being warm or
in drilling condition
but as the utilization also is
forecasted to increase for this segment
of the market
with opex of 150k
we think their rates could move to say
250 000 maybe an inch higher than that
and quickly we see values develop into
the sort of the 180 million dollar range
so um
all of this
point towards at least the platform
towards fairly substantial
value appreciation over the years to
come
but obviously there are risks to these
values
as we know
it depends heavily on the oil price and
hence the oil company's earnings because
they need good earnings to pay for
drilling
being dependent on world economic growth
we are we are dependent on shale
oil production and discipline within
that field
and obviously
if opaque plus open the float gates yeah
something would happen to
the oil prices
and we have other factors like iran iraq
and so on but not in the near term
and then we have another factor which is
today in today's market
very important to take into
consideration
and that is the climate risk
there is definitely climate risk in
fossil activities
and it will cost money
to reduce emissions from drilling rigs
and these are factors that has to be
looked at
going forward to
say fine-tune
value potentials
other risks could of course also be as
demand of oil and gas as we move into
renewables
but also we see that
there are some funding challenges and
for for oil companies in fossils
it is not the most popular item to
finance these days
if you want to look at the
climate risk of rigs
we mentioned earlier that we have a
product called greenpack the greenpack
rigs
which
calculate emissions from all drilling
rigs in the world
so now you have heard
that the supply supplier rigs
is close to 2005 levels which is quite
remarkable i think
um and
still many rigs will be retired as we
have gone through
we do not we know that demand for oil
obviously is higher today than in 2005
and since 2014
there has been a large very large under
investment drilling for oil and gas
less than half and what it used to be in
2014 last year
and the renewables
are immature and
extended
so there is this fossil renewable gap
where
drilling comes into play we think
and we think this these conditions will
lead to higher utilization
and higher day rates
and ultimately increasing values
for those drilling units with no time to
die thank you very much
thank you erland a lot of strong
information and assessment of
opportunities there for the drilling rig
market
we do have a few few minutes left and a
few questions that have come through
from the audience so i'd just like to
pose a couple of those questions to the
three of you if we can go through and
try and answer those
um so first one was um
how do rig values compare to implicit
values of publicly listed drillers
yes i mean
big values
well you need to kind of be
in the market constantly hearing about
the bid asks
uh talking to people so that's sort of a
market function
uh implicit values are
just what you get from analyzing
a company it's stock price dividing uh
the
balance sheet uh net effects of the
balance sheet over the fleet
and and develop and and sort of divide
between the various assets
uh within what
the positive values are to find
a value for each class rig so for
example
if you look at
the various
companies
seven gen if you look at for example
diamond
rig velaris noble drill co
consider seven gen implicit values
you come to you know a very large figure
because of the depth in trans ocean so
that's like 300.
uh but for velarius noble and so on it's
about
165 170 very close to the values that we
have and it can vary a lot but you know
you have to run your own calculations
but usually when you see implicit values
increase because the stock price
increase because it's liquid
uh people look to buying steel rather
than stock if you can if you're disposed
to do that as an investor
there's a couple of questions sort of
around i'm trying to put these into into
one it's sort of um
rig values you know what when do sgn
expect to see increases
the most and the soonest which areas
i don't mind uh covering that yeah or
yeah
so
uh we think that the
modern drill ship or the 7th gen pro
ship
will probably have the most and soonest
uh appreciate appreciation
potential
because there's been a lot of the math
and utilization has been quite high
there recently particularly in
certain regions such as the u.s gulf of
mexico and south america
um
we also believe that freemium jacobs
could
expect to see a significant
increase
of these rigs are you know operating in
shallow water
and
there are cheaper drilling costs uh
we're using the jack ups so as the oil
price continues to move
uh the recovery there of the value can
happen quite uh rapidly
um
lastly i think the semi subs uh like we
mentioned it's
kind of the forgotten asset
with the exception of the horse
environment of course
and
we don't see a rapid increase in values
at least not in the near term
but as the utilization
increases for the drill ships and that
will should become less available
uh certainly the deepwater semi subs
will
be in higher demand and are more
attractive assets
and if i can add to that we
talked about the different type of
sellers
and you know there are
different numbers of rigs available in
each level so if you look at the
distressed segments
it's not an endless number of rigs for
sale there though those can be a bit
cheaper than
than the more sort of strategic side or
the stranded side
and as
those segments of the market empty out
and those rigs get sold you kind of move
up in the value chain
from the cheapest units to the most
expensive units being the
probably the stranded units with the
chinese korean
and singapore shipyards where you see
uh for example a jackpot having an
asking price of call it 80 million
versus
if you look at the stress levels
probably talking in the 30 to 40 million
so as you move through the value chain
and the supply of
bikini rigs empty out you quickly move
up to the next level
okay
um i just time for one more that we've
got several but what this has been asked
on a few different scenarios um we
mentioned that the competitive fleet is
decreased to about 2005 levels
and the demand is expected to return to
pre-pandemic levels
do essentially expect to see recovery
similar to what happened in 2005
i would say no
lots of different reasons
we don't foresee
any
really new new building taking place
um
with the
energy transition uh
the
lead time
will be such that uh it's gonna be
difficult to
have uh
paid down
on a new building taking place so
what what we could see that will take up
the slack from
the level we have today is
when
utilization
or demand starts to increase
there is room to
move stranded
assets into the working fleet
um
as you could see earlier in the
presentation
and a lot of the
uncompetitive
uh parts of the fleet uh
we have about 80 rigs today which we
consider uncompetitive they will
disappear and also some of the
more long-term stacked
units
on on the new building side it's also
worth to note that
many of the
shipyards that
has
previously been building offshore rigs
has moved away and
now
engaged in
shipbuilding
and it's unlikely that they will come
back
and start building rigs anytime soon
so
while the the
competitive fleet will increase with
stranded units and some stacked units
we don't see anywhere near as much
added supply as you can see in
the years leading up to 2014.
okay
thank you for that um we're at the end
of our uh a lot of time i know we have
um a few questions that haven't been
answered but uh we will reach out to
those people individually and answer
those questions for you over the next
couple of days
um i just like to say you know a huge
thank you to everyone for attending
today's presentation
um to confirm again this the recording
will be posted onto the sg and youtube
website in the next couple of days and
we'll send a copy of the uh the slide
deck to all those people attended today
um and thank you very much uh to the
three presenters for insightful
information and hopefully we all got
some some valuable takeaways from this
so thank you again and this uh concludes
today's presentation thank you everyone
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