Offshore Operators Shed Costs, But Can They Keep Them Off?

Photo courtesy of Maasmond Maritime.
The Transocean Sedco 707 is one of many older offshore drilling rigs that is being scrapped this year. The semisubmersible cannot compete with the many new rigs that have come on to a depressed market.

Offshore drillers have been battered by the plunge in oil prices with falling day rates and a growing number of older rigs headed for demolition.

Lower oil prices added to the pain of a down market due to a glut of drilling capacity. A wave of new, efficient drilling rigs coming into service created an oversupply that has been magnified by more productive drilling operations, said Bob Fryklund, chief upstream strategist at IHS Energy.

He said day rates for new contracts are off by more than 50%, with rigs once commanding day rates of USD 650,000 now leasing for USD 250,000, he said.

For oil companies, “it is a good time to renegotiate contracts. It is a bad time to be on the other end,” Fryklund said during a presentation at the 2015 Offshore Technology Conference (OTC).

Drilling rigs are the highest profile target for cost cuts, but “operators are seeking reductions in the cost of most things,” said Andrew Meyers, a manager at Douglas-Westwood, which provides market data and consulting services for companies working offshore.

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Offshore Operators Shed Costs, But Can They Keep Them Off?

Stephen Rassenfoss, JPT Emerging Technology Senior Editor

01 July 2015

Volume: 67 | Issue: 7