DANA PETROLEUM: DRILLING FOR 1 BILLION BARRELS OF OIL

This is a very good reason for merger, you can't do much without rigs!

North Sea operators exercise options as rig market tightens and dayrates continue to rise, according to Platts North Sea Letter data

"London, Dec 7, 2005 - In October a number of operating companies exercised options on rigs to ensure their forward drilling plans remained on track, in view of market conditions showing very limited availability and increasing dayrates. Although a couple of the deals reported by Platts NSL indicated a modest day rate increase of below 10%, six exercised options increased in value by 47-93%, equating to day rate increases of $37,000-85,000.

A few rigs have either already started, or are about to start new contracts with different operators at dayrate increases by 10-50% from previous contracts. The day of the half-million dollar dayrate is looking ever more likely for semi-submersibles at the high-spec end of the market, given Ocean Rig’s three-year contract Shell for the Leiv Eiriksson which is understood to involve a dayrate of around $465,000.

Of the 74 rigs located in NW Europe, only one, the semi-submersible Petrolia, is readily available for hire, while four Transocean rigs are currently cold-stacked. The next rig to become available for hire will be the semi Bredford Dolphin in January 2006. The jack-up sector is even tighter, with the next units, the Ensco 92 and Noble’s Piet van Ede, not becoming available until November 2006.

Looking ahead to 2006 a number of rig contractors have already achieved 100% utilisation, assuming options will be taken up. Indeed, the overall utilisation rate for jack-ups next year is currently running at 99%. Some limited availability may emerge as drilling plans rarely run to exact allotted time schedules. However, even accepting some uncertainty, the jack-up market will remain tight throughout 2006. As a result, any operator still developing a drilling programme for next year in the UK gas basin or Dutch sector will face a tough time obtaining a jack-up; the only option may be a sublet. For 2007, the jack-up utilisation rate is currently 50%, but is likely to rise rapidly over the next few months.

The semi-submersible market is showing some spare capacity in 2006 with a utilisation rate of 82%, while for 2007 the rate is currently running parallel to that of the jack-up market at 50%."