– For a long time it has been referred to the 80s as the weakest market in the history of offshore drilling rigs, but the market imbalance we move into seems to be even worse, writes Pareto Securities in a recent analysis.
the brokerage notes that after a 10 year long oppsykel in the oil service industry with an average growth in oil companies’ budgets at about 15 percent a year, driven by a tight oil market and only briefly interrupted by the financial crisis in 2008/2009, the pendulum reversed.
Pareto Securities writes in the analysis that demand for modern rigs suited to the current field and demand has been very high.
– With a tight supply and resultant high day rates were, for the first time since the 1980s, the refund on new construction investments so good that companies ordered rigs without having a contract ready despite a cost of well over 600 $ one million per rig, according to the analysis.
the brokerage emphasizes that this has led to a huge growth in supply, which because of the long lead time in the construction of rigs, enables several new rigs are still under construction yards.
– with the steepest downturn in demand ever and with a continued inflow of large new and advanced rigs from shipyards expected market imbalance of historic proportions, writes Pareto, and continues:
– Add to that the total amount of debt that has been taken up to finance the construction and upgrading of older rigs have never been greater, so the scene is set for some unpleasant year for the rig companies.
analysts have gone through demand for rigs of various types and calculates that the absolute market bottom will be a need for 150 floating drilling rigs (floaters).
– This in contrast to the 280 rigs were active on the market peak in the first half of 2014 and the 208 who were still employed when we celebrated in July 2015, according to the analysis.
Pareto Securities points out that demand is expected to fall by a further 50-60 units of today.
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