Offshore rig market shakeup will be like nothing we’ve seen before

Within a reasonable timeframe, rig dayrates, especially for deepwater drilling rigs, won’t increase from current cash break-even levels.

Rig asset values are at less than 50% of build cost for most rigs (midwater harsh environment semisubs are the only real exception). Owners such as Seadrill and Pacific Drilling have outstanding debt which exceeds asset values on many of their rigs. Nearly 150 rigs are under construction or under deferred delivery agreements which could extend for years.

Nevertheless, some rig owners have a future to look forward to. And some will find ways to exploit the current market to ensure they make money over time. As they position themselves, the face of the rig market will change dramatically.

The first half of 2017 has shown us that this change is well underway.

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