Half-year data points for the offshore market released by Clarksons Research, profiling improving activity, utilization and day rates across the offshore oil and gas market, show the overall index is up 17%.
Reviewing the data, Steve Gordon, Managing Director of Clarksons Research, commented:
Overall Index up 17% in 1H to highest level for seven years …
- Offshore markets continued to make encouraging progress with the cross segment Clarksons Offshore Index (covering Rigs, OSV and Subsea construction vessel dayrates) rising 17% across 1H 2022 to a seven year high, building further on the 28% improvement across 2021. For context, the current index (74) remains 27% below the ten year peak (101 in 2014) and compares to a ten year average of 66 and a ten year low of 44 (in 2017).
- The oil price environment (despite recent softening, Brent averaged $110/bbl in 1H 22, the highest half-yearly av. since 2013), increasing offshore activity and the multi-year impacts on fleet supply of consolidation, restructuring, limited newbuilding and ongoing removals have all been supportive of the improving utilisation and day rate environment. In addition, the increasing focus on energy security has been supportive of some elements of project sanctioning. Inflationary pressures and global macro-economic conditions may become headwinds.
Active rig count up 6% in 1H, day rates and utilization (+5 points) improving, our projections suggest further utilization improvements …
- Global rig demand increased by an encouraging 6% across 1H (jack-ups: +3% to 367, floaters: +14% to 132), reaching 499 active units by mid-year, 11% above start-21. Tight UDW floater markets (>=7,500ft utilization up 10pp y-o-y) and heightened fixing activity in the Middle East/ISC (35 contracts agreed in 1H, up >200% y-o-y) saw our Rig Rate Index rise 24% across 1H 22 to 104 points at end-June, though still 38% below start-14.
- Combined MODU utilization (basis jack-ups and floaters) rose 5 points across 1H 22, reaching 84% (84% for JU / 82% Floater) at start-July, up 11pp and 6pp on start-21 and start-20 respectively, and at the highest level since Jun-15 (albeit still 10pp below start-14). We project that Rig utilization (see Offshore Drilling Rig Monthly) will reach 87% / 88% by end-22 and 90% / 93% by end-23 for JU / Floater.
- Today the overall rig fleet is 13% smaller than it was in 2018,
- The number of ready stacked rigs fell 30% y-o-y to 98, the number of rigs in cold stack fell 14% y-o-y driven by a limited number of reactivations of well preserved cold stacked assets (7) and removals from the fleet (9 via scrapping, 1 conversion).
Overall OSV Rate Index up 18% across 1H and is now up >50% since the start of 2021…
- The Clarksons OSV Rate Index increased by 18% across 1H 22 to 126 points, up 53% since the start of 2021, with large PSV rates closing in on pre-2014 downturn levels in some regions. AHTS term rate improvements were slightly more gradual (+12% across 1H) although very large North AHTS spot rates surged to a spectacular £173,750/day in late June, a record high.
- Global OSV utilization rose 4 points across 1H 22 to reach 68% at start-July, up 11pp on start-21, though still 18pp below start-14. We are projecting 80% utilization by end 2023 (see Offshore Support Vessel Monthly).
- The overall OSV fleet has contracted by 4% since the start of 2018 to ~3,500 “boats” (AHTS >4,000 BHP, PSV > 1,000 dwt).
- The number of laid-up assets continues to decline, with OSV lay-up falling below 800 units for the first time since 2015 (though it still equates to a significant 23% of the fleet). It seems likely that OSV lay-up will decline further as the market continues to tighten, although many long-term lay-ups are expected to have already been re-purposed for alternative markets or be scrapped ‘in situ’.
- Subsea support vessel markets have tightened moving into the peak season, with global MSV utilization rising to 82% at start-July, the highest level since 2014, while rates in the US (+c.90% since start-22) and the North Sea (+c.20%) have picked up further.
Strong S&P activity, limited newbuild ordering, FPSO award activity ramping up with 16 projected for 2022 …
- Offshore oil & gas fleet newbuild activity remained very limited in 1H 22 though sentiment in the MOPU (including FPSO) sector remains bullish (5 orders in 1H; our projection for full year awards (16 newbuilds / conversions plus 9 redeployments) would be the highest since 2014). Offshore wind continues to account for c.50% of offshore newbuilding activity, with contracting in the WTIV (14 in 1H) & C/SOV (12) sectors on track to surpass totals seen last year.
- 150 offshore sales reported in 1H 22, the strongest start to a year on record, as buyers sought to position for the market upturn. S&P activity picked up notably in the rig sector in 1H, as Middle Eastern owners expanded their fleets, with 27 jack-up sales reported, already 59% above the full year 2021 total. Asset pricing has also begun to pick up (our OSV Secondhand Price Index is up 39% in the ytd, though still 53% below start-14).