A report by Rystad Energy says that the ongoing Covid-19 pandemic and oil price war have ravaged global energy markets, and estimates that offshore drillers could see up to 10% of their contract volumes cancelled in 2020 and 2021, representing a total loss of revenue of about $3bn.
At present, around six rig years worth around $400m have been cancelled, and this figure is estimated to grow to around $20bn in 2020 and a further $10bn in 2021 according to Rystad.
“More than $22 billion in contract value was wiped off the books as a result of contracts being cancelled between 2014 and 2017. Now, in the infancy of a new downturn, a market that was only beginning to return to a healthy level of contracting activity, contract volumes and dayrates has seen its hopes crushed,“ said Oddmund Føre, Rystad Energy’s head of offshore rig market services.
The report also predicts that many drillers, including top names in the sector, will be at risk of failing to meet their debt repayments and may need restructuring.
“Of the 100 listed energy service companies analyzed by Rystad Energy across the various service segments for this research, more than two-thirds are unlikely to be able to meet their interest payment obligations on time this year. Many offshore drillers will be living on the edge in the coming months,” the report said.
The report also points out that in 2021 there will not be many contracts left for E&P firms to cancel, meaning the sector will be dependent on new contracting activity to maintain survivable levels of utilisation.