Offshore (OIH) exploration and development wells are drilled with the use of rigs. Rigs come in various sizes and with various characteristics.
Jack-ups are normally used for drilling in shallow waters. Floaters, which are used in deep water and ultra-deepwater drilling, include semisubmersibles and drillships.
Transocean pure floater company
Transocean (RIG) has agreed to sell 15 high-specification jack-ups—ten existing jack-ups and five newbuilds under construction—to Borr Drilling. This transaction will leave Transocean with only floaters in its fleet. Read more about this deal in Transocean Sold 15 Jackups, and Evercore Just Weighed In.
Offshore driller’s views
Offshore drillers have different views on the floater and jack-up market. Seadrill expects the utilization rate for its floaters to worsen before it gets better, while it expects jack-up utilization to be challenged in the foreseeable future. A pricing recovery isn’t expected.
According to Atwood Oceanics (ATW), demand in the floater market has fallen further, and most of this fall has been in the ultra-deepwater segment. On the other hand, there’s been an uptick in demand for jack-ups. Higher oil price expectations have translated into higher demand for jack-ups, especially in the Middle East.
History tells us that lower capital commitment activities such as land drilling and shallow water drilling recover faster than larger capital-intensive activities such as deepwater drilling.
Oil prices improved in 4Q16, and OPEC’s (Organization of the Petroleum Exporting Countries) production cuts supported oil prices. As a result, tendering activity has been pushed to late 2017, especially for jack-up rigs. The floating market seems to be pushing off in 2018.