Drilling Market Outlook - Marine Money Kell… · An opportunity for Petrobras and others to...
Transcript of Drilling Market Outlook - Marine Money Kell… · An opportunity for Petrobras and others to...
7th Annual Latin America Ship & Offshore Finance Forum
Rio de Janeiro - September 16, 2010
Drilling Market Outlook
Tom Kellock
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Today’s agenda
1. Impact on Brazil of Macondo Incident
2. Operating Costs
3. Petrobras Contract Renewals
4. Industry Consolidation
5. The Future of the Offshore Drilling Market
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The Impact of Macondo on the Brazil market:
A mass exodus of deepwater rigs from the US Gulf?No – only 4 so far
A dramatic decline in day rates?No – no obvious change
An opportunity for Petrobras and others to charter more rigs at bargain prices?
Possibly – but it hasn’t happened – yet Higher costs for operators and/or contractors?
Almost inevitably
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Even in the US Gulf the effects of the moratorium may be short-lived
0
10
20
30
40
50
60
1Q01 1Q03 1Q05 1Q07 1Q09 1Q11 1Q13 1Q15 1Q17
Rig
s
Base case
Scenario 1: Moratorium
Scenario 2: Moratorium with 25% longer time per well
Historical Activity
Supply and Demand ForecastUS Gulf of Mexico Floaters
Possible Consequences of Drilling Moratorium
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Operating costs (OPEX) are hard to pin down but are definitely on the rise
OPEX are important because they- set a floor for day rates- impact cash flowbut often appear to get too little attention
Recent figures show moderate increases But this could be misleading Upper limits may be surprising
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Latest figures not too scary
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But last quarter showed a very different picture
Daily Cash Operating Expenses(Large Fleet)
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
Deepwater Rigs Midwater Floaters Jackups
Dai
ly O
PEX
(USD
)
Q1 2007 Q1 2008 Q1 2009 Q1 2010
+10.5 % pa
+15% pa
+12% pa
Source: Transocean
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Some recent reported rates may surprise you –and these are for non-harsh environment areas
5th gen. ultra-deepwater semi: >$165,000 per day 5,000’ 4th gen semi: > $140,000 per day Midwater semis: > $100,000 per day Premium Jackups: > $65,000 per day
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Petrobras rig philosophy
Contracts tend to be renewed But several are coming to an end Will 28 additional rigs be needed ?
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Petrobras tends to keep its rigs
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Several contracts will expire in the next few years
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Will “the 28 rigs” represent incremental demand ?
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Will we see more consolidation among contractors?
Some already in the jackup market- Seadrill/Scorpion (7 rigs)- Seadrill/Petroprod (1 rig)- Rowan/Skeie (3 rigs)
And in the floater market- Noble/Frontier (6 rigs)- Diamond/Petrorig (2 rigs)- Grupo R/Petrorig (1 rig)- Songa/Larsen (1 rig)
But both markets remain extremely fragmented
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More than 70 companies manage jackupsWorldwide Jackup Managers
September 2010(includes rigs under construction)
Transocean, 65
Ensco, 41
Noble, 40
Hercules Offshore, 32
Rowan, 31
COSL, 26Seahawk Drilling, 20Seadrill, 17Nabors, 16
Aban Offshore, 15Diamond Offshore, 13
National Drilling, 13
Maersk Drilling, 12Kito Enterprises, 11
59 Others, 156
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Even Transocean will have less than 25% of the floater fleet
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There are many possibilities Seadrill has stated that it is looking at more consolidation
- “There are great opportunities in the rig market” John Fredriksen at Pareto Oil & Offshore Conference
- It already owns a piece of Pride- It is rumoured to be eyeing Transocean
Smaller companies without contracts may be targets- Ocean Rig (4 of 6 w/o contracts)- Pacific Drilling (3 of 6* w/o contracts)- Metrostar (2 of 2* w/o contracts)- SeaDragon (1 of 2 w/o contract)- Prospector Offshore (2 of 2 w/o contracts)
While Brazilian contractors have contracts for their rigs none has more than six owned and managed floaters…
* Pacific Drilling and Metrostar each have two joint venture rigs
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So what’s to come
1. The building boom is by no means over
2. Limited upside for jackups
3. Midwater fleet now stable
4. Deepwater fleet has short-term issues
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We’re only half way through the building boom
Offshore Fleet SizeDelivered units*
0
100
200
300
400
500
600
700
800
900
1000
1985 1995 2005 2010 (Aug) 2013**
+16%-14% +6%
+15% 919
755
652 688
797
*Jackups, semisubmersibles, drillships, arctic rigs, drill barges, tender-assists and submersibles
** Assumes no attrition
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Drilling is no longer a US dominated business
Ownership of Jackups, Semis and Drillships
405 350 423
194
169 136 148
519
68 72 83 114
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1985 1995 2005 2013*
Shar
e of
Fle
et
National Owned/Owner OperatorNon-US OwnedUS Owned
* Assumes all rigs are built as planned and no attrition
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Premium jackups finding a home internationally…..
International* Jackup Utilization
50
60
70
80
90
100
Jan 2000 Jan 2001 Jan 2002 Jan 2003 Jan 2004 Jan 2005 Jan 2006 Jan 2007 Jan 2008 Jan 2009 Jan 2010
Con
trac
ted
Util
izat
ion
(%)
Premium Jackups (301'+)
Non-Premium Jackups(<301')
* Worldwide except the US Gulf of Mexico
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…but no sign yet of a real uptick in day rates…
Jackup Day Rates
$0
$50,000
$100,000
$150,000
$200,000
Jan 2005 Jan 2006 Jan 2007 Jan 2008 Jan 2009 Jan 2010
New
Fix
ture
day
Rat
es (U
SD/d
ay)
Premium Jackups (301'+)
Standard Jackups(300')
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…and almost 120 jackups are idle today
Worldwide Jackup FleetAugust 2010
Under construction, 39
Drilling, 303
Hot stacked, 26Warm stacked, 24
Cold stacked, 68
Yard, 23
Other, 20
On order, 13
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The midwater market seems to have stabilised
Midwater Rigs*
0
10
20
30
40
50
60
70
80
90
100
Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
Rig
s un
der c
ontr
act
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
Day R
ates (USD
)
Rigs Under Contract
New Fixture Day Rates
*Rigs with rated water depths up to 3,000ft
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Even before the Deepwater Horizon accident there were potential problems with the deepwater and even ultra-deepwater rig markets Backlog falling New uncontracted rigs arriving Rigs coming off contract Sublets available
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Backlog was falling – but slowlyDeepwater Rig* Backlog
Days of contracted backlog per competitive rig
0
200
400
600
800
1,000
1,200
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
Con
trac
ted
Day
s Pe
r Rig
* Rigs with rated water depths 3,001 feet and greater Under Construction, On Order and Planned rigs are counted
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20 Uncontracted ultra-deepwater newbuilds are duefor delivery in the next 2 years
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…and 19 more ultra-deepwater rigs may be availableover these two years
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There are a number of unfilled sublet slots
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But there’s plenty of uncontracted deepwater and ultra-deepwater work out there
69 identified projects with water depths wholly or partially in excess of 5,000 feet planned to start before the end of 2011 for which no rig has yet been contracted
West Africa the leader but widely distributed around the world- West Africa - 29- Asia/Pacific – 18- Mediterranean and Middle East - 8- US Gulf – 7- South America - 6- Others – 1
These represent between 35 and 51 rig years of work
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In summary:•Without significant scrapping there’s limited upside for jackup rates
•Midwater market will be pressured by deepwater rigs for some years
•Deepwater market has short-term issues but future still looks good
•One last observation:
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The key is that the world needs more offshore oil
Worldwide Discoveries and ConsumptionOil and Gas - 2005 to 2009
0
10,000
20,000
30,000
40,000
50,000
2005 2006 2007 2008 2009
Mill
ion
BO
E
OnshoreShelf (0-600 ft)Deepwater (>600 ft)Consumption
Sources: Discoveries IHS, Consumption BP