trending Market Intelligence /marketintelligence/en/news-insights/trending/9yjxyedsfiysllfv0zpbiq2 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Amid oversupply, analysts expect offshore drillers to write down more rigs

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August

Amid oversupply, analysts expect offshore drillers to write down more rigs

Following Transocean Ltd.'s decision to retire four offshore drilling rigs and take a $520 million charge, analysts expect that other offshore drillers will follow suit due to a glut of older rigs.

"With the large oversupply of deepwater drillships, customers can leverage the many higher specification rigs built more recently on which they can still secure extremely low rates," Sanford C. Bernstein & Co. LLC analyst Colin Davies wrote in a June 15 report. "Older rigs built before this decades' massive new build cycle are squeezed out and eventual scrappage is inevitable."

Davies noted Transocean's retiring rigs had been "cold stacked" — effectively mothballed with reduced maintenance performed to prevent them from deteriorating and becoming hazards — and would have required substantial expense to be brought back into service.

Though cold stacking is not as expensive as warm stacking, or maintaining a rig in a state where it can quickly enter service, the cost is still significant, with some drillers pegging the expense at $15,000 per day for a single rig.

Despite the expense, offshore drillers can save millions of dollars by maintaining inactive rigs in cold-stack status during downcycles.

"We applaud [Transocean] for continuing to prune its rig fleet," Tudor Pickering Holt & Co. analysts wrote in a June 15 note. "While this action doesn't change the industry floater supply/demand picture much ... it does illustrate [the drilling company] is methodically shaping its rig fleet to be ideally positioned for the eventual upcycle."

Tudor Pickering Holt & Co. analysts noted Transocean has 13 additional cold-stacked rigs that "are of elderly vintage."

"Transocean is leading the way with scrapping but the industry still has a long way to go," Davies wrote. "Floaters built between 1999 and 2005 are old but still have much book value remaining. These rigs are uncompetitive and are high risk scrap and write down candidates. ... Even rigs built during the early phases (2006 – 2012) of the current new build cycle will struggle to find work, with 22 of these rigs still in cold stack status."

Davies noted that Ensco PLC and Seadrill Partners LLC together account for more than half of the newer cold-stacked rigs, while Transocean, Ensco and Dolphin Drilling Ltd. together account for just over half of the 23 rigs built between 1999 and 2005.