E&P corporations planning drilling campaigns in British waters subsequent yr may face a surprisingly small collection of semisubs to select from attributable to ever-shrinking prepared provide within the phase.

Too many rigs and never sufficient work has been the norm within the British semisub phase because the 2014 oil worth crash, which has meant utilization and dayrates have been lagging for a number of years now. 

Attributable to continued oversupply and plentiful availability, E&P corporations have been capable of drill in the summertime months when offshore situations are favorable, avoiding winter months the place there’s a greater likelihood of downtime and added prices attributable to inclement climate. 

This has resulted within the UK semisub market changing into extremely seasonal, with greater utilization from round March/April after which dropping once more from round September/October. The standard dayrate benchmark for semisubs on this phase is at present across the $140,000 to $160,000 vary – solely simply overlaying working prices and unsustainable for the drillers who personal and handle them.

Nevertheless, the tide is starting to show inside this phase, and operators on the lookout for a floating MODU subsequent yr could also be in for a little bit of a shock. The worldwide Coronavirus pandemic and oil worth shock have added further issues to the already distraught market and due to this fact drillers with rigs within the area – a few of that are going by means of Chapter 11 proceedings –  have been making drastic choices, which could have a long-lasting impact on the provision of such models sooner or later.

The primary of those choices is the everlasting elimination of rigs from the energetic fleet, by means of gross sales for recycling or conversion

As may be seen from Determine 1, in keeping with information from Bassoe Analytics since 2018 there was six models faraway from the UK and Norwegian aggressive semisub fleet, and scrapping of extra models is predicted to be introduced imminently. 

Drillers have been weighing up the prices related to sustaining, reactivating, and/or working an asset and if this outweighs the money move potential, it should seemingly be into consideration on the market. Subsequently, the entire variety of rigs within the UK fleet has diminished to only 11, of which three are idle however not out there for near-term work.
Determine 1: North Sea semisub gross sales for recycling or conversion 2018–2020 (Bassoe Analytics)

Which brings us to the following choice rig homeowners have been making, and that’s to chilly stack (or one of many varied different phrases comparable to good stack, istack, tepid stack) rigs relatively than protecting them heat or hot-stacked. Storing a unit within the latter standing prices extra, nonetheless, it means rigs can return to work extra shortly and with out such an costly shipyard reactivation program. However with so few drilling prospects for the rest of 2020, corporations comparable to Diamond and Transocean have opted to chilly stack as an alternative

Because of the excessive prices related to reactivating a cold-stacked semisub, these drillers would solely contemplate placing their models again to work for a long-term marketing campaign, normally with a minimal of round one yr of labor. 

As may be seen from Determine 2, there are three models in-country that are actually classed as chilly stacked and usually are not available.
Determine 2: UK semisub fleet. Daring signifies free and clear availability with no contract choices out there (Bassoe Analytics)

Accessible provide within the UK market subsequent yr totals simply 5 models, however one in all these has solely very restricted availability, which can be an issue contemplating that between Q1 and Q3 subsequent yr there’s anticipated to be between 10 and 12 new campaigns off UK and Norway, with a number of already out as tenders and extra anticipated to return quickly. These campaigns differ from one or two-well campaigns to as much as round 200 days, however few could be thought-about lengthy sufficient in length to justify a rig reactivation.

As has been witnessed in previous years, nonetheless, there are some rigs that may transfer between the UK and Norwegian sectors however availability in that market shouldn’t be significantly huge both. As may be seen from the rigs highlighted in daring in Determine 3, there are six models in Norway, which have free and clear availability between This autumn 2020 and Q3 2021, however two of those won’t be free till late Q2 or early Q3. There may be potential to see a couple of of those Norwegian models transfer to the UK for work, however most are unlikely to take action and availability would nonetheless be restricted even when they do.

Of the 19 models proven in Determine 3, eight are chilly stacked with two of those, Deepsea Bergen and Transocean Arctic, now confirmed to be headed for the scrap heap. As well as, it is also rumored that the majority, if not the entire remainder of the chilly stacked models can even head for everlasting retirement shortly. 

It is a stark reminder that in at the moment’s market, as soon as a rig strikes to chilly stack it’s nearly assured that it will not return to work. Except operators are prepared to make it price their whereas, rig contractors won’t be able to reactivate rigs. Within the present setting the place everyone seems to be making an attempt to save cash, it’s unlikely that dayrates will skyrocket sufficient to have the ability to cowl the price of a reactivation, which is normally at the very least tens of tens of millions of {dollars}.

As mentioned in the newest Bassoe Analytics article, most drilling contractors are actually contemplating scrapping extra tonnage from their fleets, with models as younger as eight and 9 years outdated now confirmed for retirement.

Determine 3: Norwegian semisub availability This autumn 2020 – Q3 2021. Daring signifies models with free and clear availability on this interval (Bassoe Analytics)
So, what does this imply for the UK semisub market going ahead? Relying if all deliberate 2021 rig necessities come to fruition, it may imply operators must rethink the timing of their deliberate campaigns. It could imply contemplating drilling throughout the harsher months of the yr to safe a slot. Rig-share campaigns could possibly be a possible answer by tying collectively a couple of of the short-term campaigns and using one rig, nonetheless, these types of packages have been comparatively unusual up to now because of the complexity in organizing such a deal.

An necessary level to notice is that this appreciable change shouldn’t be one that may be counteracted simply. There may be not a stack of North Sea-capable newbuilds sitting dormant in shipyards awaiting supply. This will probably be a everlasting or at the very least a long-term shift within the phase which could possibly be additional exacerbated, with extra models chilly stacked or scrapped, if operators don’t discover a solution to proceed with plans within the coming yr.

Republished with permission. The article above was initially printed on Bassoe Offshore’s web site.