November’s declines in supply vessel day rates are likely to be repeated as the construction season ends and operators push back some jackup drilling programs.
Day rates for smaller supply vessels dropped an average of $550 during November, and the average day rate for the large supply vessels declined by $500 per day. Utilization of the larger units dropped 2 percent to 93 percent during November.
The number of jackups leaving the Gulf could challenge operators to find suitable rigs for future drilling programs, according to a recent report from Jefferies & Company. Absent a substantial decline in natural gas prices, oil-and-gas companies will have difficulties finding the required number of rigs to satisfy their drilling programs due to the low number of marketable jackups in the Gulf.
Jefferies also noted that, “With the prospect of an additional three-to-five jackups leaving the Gulf in 2007, some operators are privately acknowledging that availability for premium jackups could be limited.”
Analysts estimate that only 20 300′ independent-leg cantilever jackups will remain in the Gulf by the end of the first quarter 2007.
On the other hand, Jefferies said, despite the recent rebound in U.S. natural gas prices, spot demand for jackups is relatively weak as a number of smaller operators are deferring drilling programs to early 2007.
Despite that prognosis, ODS-Petrodata reported that Gulf utilization increased to 81.4 percent at the end of November as two more rigs were contracted, one jackup and one semisubmersible, bringing the total contracted to 114 rigs. That’s a net increase of one rig compared with the end of October. During November, one more jackup moved out of the Gulf while a semisubmersible mobilized to the region.
The deepwater market is expected to remain strong into the next decade. Some operators are willing to pay more than $500,000 per day for a deepwater rig.