Transocean repositions, merges with Ocean Rig

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Offshore drilling contractors, whose drilling activities speak volumes in both the deepest waters and harshest environments – Transocean are now reported to have bought Ocean Rig to the tune of US$2.7 billion.

Leslie Cook, principal analyst, upstream supply chain at Wood Mackenzie was quoted to have said: “The purchase of Ocean Rig is in line with Transocean’s strategy to have the number one fleet of premium ultra-deepwater and harsh environment rigs.

“The announcement is not a surprise. Industry consolidation is necessary to get these premium assets back to work over the next two to three years. The Ocean Rig fleet aligns very well with Transocean’s best-in-class portfolio.”

She was also reported to have added: “It is Wood Mackenzie’s view that the premium ultra-deepwater drillship market has reached the bottom and rates for some of the highest-spec assets have the potential to double in the next couple years as active utilization begins to tighten.

“Operators are already demonstrating a preference for newer rigs that offer greater efficiency in their drilling programmes.”

“As rates begin to float back up, the need to keep drilling costs down will drive demand for these newer rigs that can offer efficiency gains.

“By buying Ocean Rig, Transocean is positioning itself to offer the industry premium rigs at competitive dayrates.

This is a winning deal – for Transocean, for Ocean Rig and for the industry”, Ms Cook said.

Meanwhile there has been reported increase in demand in offshore drilling rigs even through to 2020 especially for deepwater projects, to be triggered, according to IHS Markit by the consistently higher oil prices and greater cost–efficiency in offshore projects.

IHS Markit had in its first worldwide mobile rig forecast for 2020, which relies on data from its Petrodata RigPoint database estimated that the average global demand for mobile offshore drilling units, comprising jack ups and floating rigs, was expected to increase by 13% between 2018 and 2020 as the offshore market wakes up from its prolonged downturn.

Global offshore rig demand is expected to average 521 units in 2020, exceeding the average of 453 units expected through 2018, demand figures for the whole of 2018 through 2020, with all the seasonal fluctuations and regional trends.

“Broadly speaking, much of this increase in global demand can be attributed to the price of oil being sustained at a higher level than when the downturn was in full swing”, an international oil and gas journal quoted Justin Smith, offshore rig analyst at IHS Markit and an author of the rig forecast as saying.

“In addition, costs associated with the offshore industry have been slashed in recent years. This has led operators to reconsider exploration, appraisal, and development programs that were not economically viable while the market was bottoming-out”, Justin was also quoted to have said.

Demand for jack-ups is not only expected to improve but also climb from an average of 321 rigs this year to an average of 352 in 2020, which would be an improvement of 9.7% during the period, says HIS Markit who also believes this would be triggered by floating rigs, specifically semisubmersibles and drillships, as operators step up activity in deepwater areas around the globe.

“The vast majority of this offshore rig demand increase will come from the Middle East, led by Saudi Arabia, and other notable additions in Qatar and the United Arab Emirates,” Smith was quoted to have said.

“Saudi Aramco alone will account for roughly a third of this increase as the operator continues its push for more offshore production, a sentiment echoed by Qatargas, which is aiming to increase its LNG exports.”

Smaller upticks in the jack up rig segment, says the report would be expected in several regions which will not exclude Northwest Europe, Central America, West Africa, and the Indian Ocean. Interestingly the report says, the US Gulf of Mexico has made a considerable rebound from its lowest point of the downturn of four contracted units in October 2016.

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