Delayed deliveries of rigs completed in 2015 indicate a possible peak in 2016.
The oil shock and the subsequent plunge in demand for newly built rigs and drillships has resulted in drilling companies pushing back deliveries or cancelling orders.
IHS Maritime’s Sea-Web.com data show that 72 rigs are due to be delivered in 2016, while just 17 of the 78 rigs due for 2015 delivery have been released to owners.
Due to this, Deutsche Bank analyst Kevin Chong said in a report that tough times for Singapore rig builders Keppel Corporation and Sembcorp Marine would continue into 2016.
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Cold stacking has accelerated, with 51 floating rigs readily stacked as of July, up from 17 this time last year.
With few contracts being signed and many nearing completion, the number of idled assets would increase through 2015 and 2016.
The number of contracted floating rigs peaked at 275 in September 2014 and has since been in relatively steep decline, with July 2015 count standing at 230.
The steepest declines have been witnessed in Brazil (down from 63 in September 2014 to 51 in July 2015, West Africa (down to 10 from 39 in October 2014) and Southeast Asia (down to six from 13 in September 2014).
Chong said, “Our US oil services team highlights that peak newbuild deliveries are still to come and they think the market should get worse before it gets better. Nearly all un-contracted newbuilding rigs have seen their delivery dates pushed back and it now appears that 2016 will be the peak for supply growth.”
Chong noted that fewer than 10% of the roughly 130 jack-ups on order have contracts and until these rigs find work, day rates will remain weak.
He said, “The scrapping of jack-up rigs is yet to get going despite having a more negative supply outlook and is likely a function of greater market fragmentation. We remain cautious on Singapore’s offshore and marine sector as we see challenging prospects as the industry remains in a cost-cutting mode, [and] the offshore rig market is oversupplied.
“Keppel and Sembmarine are exposed to country-specific risks (e.g. Brazil). We believe new order prospects for Keppel and Sembmarine should remain weak and any contracts up for tender would attract aggressive bidders, driving down prices and margins.”
This post was sourced from IHS Maritime 360: View the original article here.
