* Ultra-deepwater contract durations nearly doubled in Q3
* Rates up sharply and heading higher
* Jackup market looking more over-supplied, retirements loom
* Diamond shares up 1.6 pct, Noble up 4.1 pct
By Braden Reddall
Oct 18 Recent deals struck by Diamond Offshore
Drilling Inc and Noble Corp paint a picture of a
market in which deepwater oil rigs will be in high demand for
years, while other drilling segments may end up being too well
supplied, executives said on Thursday.
Noble expected ultra-deepwater rates to keep heading higher,
even after a strong rise so far this year, and Houston-based
Diamond saw the same market momentum driven by demand off
Australia, both coasts of Africa, as well as closer to home.
"In the U.S. Gulf of Mexico, we have seen resurgence in
activity in the deepwater and ultra-deepwater arenas over the
past year," said Michael Acuff, Diamond's senior vice president
of marketing, predicting as many as 40 deepwater rigs could be
working there next year, up from 31 now.
As for elsewhere, Diamond highlighted the signing of its
Ocean Endeavor rig, which had been making $285,000 per day in
Egypt, to an 18-month contract starting in December 2013 at
$521,665 per day, including half the potential bonus. The
company would only say it will be located outside of the
Also, its Ocean America rig has been signed up by Chevron
Corp for 18 months off Australia at a rate of $475,000
per day starting in mid-2013, versus the current dayrate of
$405,000, Acuff said.
Diamond, which like Noble is among the world's top five
contractors by market value, reported a better-than-expected
quarterly profit on Thursday. Late on Wednesday,
Noble had posted weaker-than-anticipated profits due to downtime
problems that should now be largely resolved.
Diamond shares had risen 1.6 percent to $70.88 by midday on
the New York Stock Exchange, while Noble climbed 4.1 percent to
$39.24, helped by a bullish outlook for several newly built
Roger Hunt, Noble's senior vice-president for marketing and
contracts, said that industry-wide there were 34 ultra-deepwater
rigs being built through 2016 that do not yet have contracts,
but he anticipated ample demand for those.
The average contract duration for ultra-deepwater rigs -
which can work in up to 10,000 feet of water - signed over the
past 90 days had nearly doubled to about four years compared
with the first six months of 2012, while average dayrates rose
to $575,000 from $533,000 over the same period of time, he said.
On the shallow-water side, however, there were at least 85
rigs, called jackups, to be built by mid-2015, and Hunt wondered
if that market segment could support 20 percent growth over
three years. "It's probably going to be challenged," he said.
Yet about half of the current jackup fleet industry-wide is
30 years or older, added Noble Chief Executive David Williams,
who expected many of those to be pulled off the market.
"You'll see more retirements in the next 10 years than you
have in the past 10 years," Williams said. "So it is not just an
additive exercise, there's going to be some addition and
subtraction in the overall fleet."
Noble is not so concerned about finding work for its six
brand-new, highly capable jackups that will hit the market over
the next two years, with one already contracted and another deal
for a one-well assignment just signed in the Middle East.
Noble, like industry leader Transocean, does want to
spin off a tranche of older rigs in order to focus on its
more-capable units. In a similar vein, rival Ensco Plc
announced the sale of two older rigs late on Wednesday.