Active floater utilisation has rebounded from a low of 65% in 2018 to over 85% in 2023 which could lead to the construction of new offshore rigs, Wood Mackenzie said in a recent report.
In a new report named “Are we at the tipping point of the deepwater rig market?” Woodmac said that the number of contracted ultra-deepwater benign rigs has returned to pre-covid levels and day rates for best-in-class floaters have doubled in the past two years. Also, demand is forecast to increase another 20% from 2024-2025.
“Higher oil prices, the focus on energy security, and deepwater’s emissions advantages have supported deepwater development and, to some extent, boosted exploration. Active supply is now more in line with demand and rig cash flows are positive. We expect demand to continue to rise,” said Leslie Cook, principal analyst for Wood Mackenzie.
The energy consultancy firm added that much of this expected growth would come from the “Golden Triangle” of Latin America, North America, and Africa, as well as parts of the Mediterranean. It projects that these areas will account for 75% of global floating rig demand through 2027.
Recent activity has pushed rates up 40% in the past year and WoodMac anticipates a further 18% escalation for floater day rates. Before the end of the year, rates of $500,000 per day or above may return for highly prized, advantaged ultra-deepwater rigs. Benign ultra-deepwater rigs have averaged $420,000 per day in the first half of 2023, with utilisation at 90%.
“With increasing demand and rates, we are approaching the tipping point for new builds and reactivations. We haven’t reached it yet, but for newbuilds, it’s not a question of if, but when. The need for decarbonisation, technological advancement, more efficiency, and, ultimately, a fleet replacement will drive a new cycle. If rig economics remain robust and rig companies see contractual risks abate, this could be sooner rather than later,” Cook concluded.
