30/03/2021
Westwood Global Energy Group
It goes without saying that the past year has been unprecedented for not just the offshore rig market, but the oil and gas industry as a whole. The Covid-19 pandemic has interrupted rig contracting and drilling operations in every region and while activity in some geographies has shown signs of recovery, a new normal has been put in place for crew movements and other logistical protocols. In addition, a number of major rig owners have gone through or are currently in the midst of Chapter 11 bankruptcy proceedings, and consolidation rumors are once again running rampant further fueling uncertainty over the near-term future of the global fleet. The number of annual drillship retirements since 2016 has ranged from 5-7 units, and there is no reason to expect anything less in 2021.
According to RigLogix data, marketed (excluding cold stacked units) committed* drillship utilization in February and March was just under 82%, higher than any month since February 2020. As seen in the graph below, utilization in 2020 fell to just below 70% in July and despite some ups and downs, has sharply increased since December of last year. The recent upward swing was brought about by a combination of a three-rig supply decline, coupled with a near five-rig increase in demand. For the entire period, a supply decline has been responsible for utilization not falling off the deep end, falling from 94 in June 2019 to 74 by March 2021. At the same time, drillship demand has also come down – from a high of 73 contracted/committed rigs in May 2019 – to 60 in March 2021.
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