SUBSEA RESOURCES: A possible Treasure Trove

Without prejudging SUB's methodology & consequent vessel requirements for the FV & "Sally":

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%.