Pareto World Wide Offshore AS - Pareto Project Finance

new resources globally this year. This has spurred renewed
optimism in Norway, particularly in the Arctic north.
We have already seen seismic acquisition activity respond
almost immediately and additional drilling efforts are
sure to follow in the coming years. In turn, this will
enhance the need to support services from supply vessels
and, when the fields are finally developed, from offshore
construction vessels. Given the harsh environments in
these areas, this will be yet another example of how larger
and more complex units need to be built and the general
need to modernize the offshore fleets to cope with new
demands.
utilization in the premium jack-up market has stabilized
above 95 %, rates are moving upwards more slowly. On
the other hand, utilization and rates for standard jack-ups
have risen substantially with such units commanding rates
that are only 10 %–15 % below premium units. This is a
bullish sign.
Roughly 40 new jack-ups have been ordered for a total
of more than USD 9bn. There are options for another
23 units. Yard prices have risen about 15 % during this
period. In the past quarter, however, ordering activity has
subsided as access to funding has become more limited
and the various players’ appetite for risk has come down.
We are now seeing that some of the yard options are left
undeclared. There is an awful lot of take-out financing to
secure to take delivery of the speculatively ordered rigs,
and right now, risk capital is hard to come by. This may
present larger players with M&A opportunities. In this
respect, the latest transaction of a premium jack-up newbuild
at around USD 220m demonstrates that buyers are
willing to pay top dollars for a modern rig.
Global utilization standard jack-ups
Source: Teknisk Ukeblad, Rystad Energy
Drilling
The drilling industry continues to be brimming with optimism,
as evidenced by the USD 25bn of newbuild orders
that have been placed so far in the cycle. This has been a
response to clients’ needs for modern and more capable
units, as well as to the general, fundamental outlook for
the oil markets. Established rig yards now have full order
books well into 2014 and are quoting higher prices. As a
result, rig owners are sourcing yard slots from more inexperienced
yards at high prices, but with potentially earlier
delivery.
Are there too many rigs on order Investors should take
comfort from the fact that 40 % of the global drilling fleet
is 30 years or older. There is a lot of replacement need in
addition to the demand growth mentioned above. Therefore,
a global orderbook that constitutes approximately
20 % of the current fleet is likely to be insufficient, meaning
that the market looks set to tighten significantly in
the coming 2–3 years. On the other hand, a lot of rigs are
coming out of yards at the same time (2013), which could
result in a temporarily overcrowded buyers’ market. This
potential threat, however, lies some years down the road.
Jack-ups
Global jack-up utilization and dayrates have recovered and
have spread to the market for standard jack-ups. Although
Source: Pareto Securities, ODS-Petrodata
Floaters
Leading edge floater dayrates have topped USD 500k/d
for the first time in the cycle, with the majority of ultra
deepwater fixtures being in the USD 450–500k/d range.
Rig availability is very tight in the near term and is
unlikely to ease off until the rigs from the current newbuilding
cycle starts getting delivered from 2013 and
onwards.
Norway is a bright spot in the industry with the abovementioned
fixture of USD 500k/d and Statoil’s award
of 8-year contracts for the use of 2 category D rigs, with
expected delivery during the second half of 2014. The two
large discoveries offshore Norway is likely to add more fuel
to a very tight Norwegian market. Transocean’s acquisition
of Aker Drilling this summer at an implied rig price of
USD 930m/rig is a perfect example of this.