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Offshore drill contractors set to cash-in big
…charging oil companies more than US$400,000 per day to lease rig – Wall Street Journal
Kaieteur News – Offshore drill contractors are positioned to cash-in big with their rates to lease a drilling rig to oil and gas companies currently standing at more than US$400,000 a day, the Wall Street Journal (WSJ) recently reported in an article headlined ‘The Offshore Oil Business Is Gushing Again … Rigs that haven’t been used in years are setting out to sea as demand for energy surges. ‘Everyone started drilling again.’
The WSJ is an American business-focused, international daily newspaper based in New York City and is one of the world’s leading daily financial newspapers.
The WSJ said that the hunt for offshore petroleum has resurfaced, fuelled by a surge in global demand for energy, supply disruptions triggered by the war in Ukraine and crude prices that remain above prepandemic levels.
A drill rig (Transocean photo)
Notably, while the oil giants saw record-shattering profits last year amid the Ukraine war, there are other beneficiaries in the oil and gas industry who will also to see big profits.
In December last year, Oilprice reported that the stocks of offshore drilling contractors such as Transocean, Valaris, and Noble Corp were skyrocketing amid robust demand for their services, with day rates for drilling rigs surging as well. Now, the Wall Street Journal is reporting that rates could top US$500,000 per day, up from about US$400,000 at the moment, with offshore drilling picking up everywhere as demand shows no signs it is about to start declining.
Notably, in 2022, the contractors were charging the oil companies around US$300,000 a day and less than US$200,000 two years ago to lease a drill rig daily.
The last offshore oil boom had come to an end in 2014, when oil prices crashed due to a surge of supply from U.S. shale oil producers and a refusal by the Organization of the Petroleum Exporting Countries (OPEC) cartel to cut its petroleum output. Many drillers either went bankrupt or had to restructure their debt. However, with oil prices soaring and the demand for petroleum the drillers are now making their comeback.
“Over the past year and a half, everyone started drilling again offshore, and they want to use the most efficient rigs and all of a sudden, bam!” Noble Corp chief executive Robert Eifler told the Wall Street Journal. “After eight years we basically have full utilization of the high-end drillship fleet.”
According to oilprice, a roundup of the biggest deals signed in the offshore drilling industry last year reinforces the perception of a strong revival. The biggest deal was QatarEnergy’s contract with McDermott for expanding the production capacity at the North Field, which McDermott said is one of the largest single deals in its history.
The Wall Street Journal highlighted too that offshore drilling is booming in Brazil, Guyana, and Suriname as well. It was stated that Guyana is enjoying the results of a string of offshore discoveries that have boosted the nation’s oil exports by 164 percent in 2022.
Analyst expectations about the offshore drilling market appear to be upbeat. Oil prices are higher than they were in 2019, oil demand is strong, and offshore drilling contractors are turning a nice profit. Deepwater drilling is particularly attractive since that’s where most of the world’s untapped oil resources are.
According to data from Westwood Global Energy Group, some 90 percent of the world’s offshore rigs were contracted to work or were already working as of last December. That’s up from about 60 percent five years earlier, the WSJ noted in its report.
Moreover, this surge in demand for offshore drilling, especially in deep waters, has also revived demand for drillships that were put offline during the pandemic and the industry downturn it caused. Drillships cost about US$100 million to put back online, and owners are demanding most of the money upfront. It was reported that their clients are paying it: the WSJ notes a deal between Valaris and Equinor for a drillship that was sent to drill in the deep waters offshore Brazil.
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