Maersk Drilling expects to see a further rise in demand for hi-spec jack-ups, with floater market expected to remain “challenged.”
The Danish drilling company which owns drillships, semi-subs and jack-ups -23 rigs in total – on Friday posted 2Q 2019 revenue of around $315 million, compared to $308 million in 2Q 2018.
The better chunk of the revenue was generated by jack-up units, $200 million, with around $114 million coming from the floaters.
Its rig fleet utilization grew to 82 percent (from 73 percent), but the average dayrate fell to $185,000 from $208,000, due to the expiration of legacy contracts, and new contracts being signed at current market rates.
During the quarter, the company managed to grow revenue backlog to $2,3 billion, up from $2,2 billion in as at March 31, 2019.
Maersk Drilling signed eight rig contracts during the quarter and has also added two more rig deals in the third quarter so far.
While most of the contracts signed where for one to three wells, the company has during the third quarter also signed a three-year contract, plus two one-year options, for the Maersk Deliverer floater with Inpex Australia. The total contract value with Inpex is $300 million with a dayrate of around $266,200. The contract is expected to start in Q2 2020.
Jack-up demand set to increase
Maersk Drilling expects the demand for jack-up rigs, especially the high-end ones, to increase, while the pace of recovery in the floater market has been slower.
“In the broader jack-up market, the steady recovery seen over the past two years continued in Q2 2019. The number of contracted jack-up rigs continued to increase, and, with the marketed supply roughly unchanged, the global marketed utilization increased to 80% reaching its highest level since late 2015. Day rates also continued to trend higher,” the company said.
There are different demand and supply dynamics across the various jack-up rig categories, Maersk Drilling says: “In the segment for harsh environment jack-up rigs capable of working in the most challenging environments in the North Sea, the marketed utilization is now above 90%. Particularly, the niche segment of the most advanced and capable jack-up rigs (CJ70 design), in which Maersk Drilling has a market share of more than 50%, is characterized by full utilization for the rest of 2019. ”
Based on the current backlog as well as ongoing tenders and bilateral negotiations, the trend of increasing demand for jack-up rigs is expected to continue, the driller says.
“In the North Sea, there are several opportunities – both short term and long term durations – for harsh environment jack-up rigs with commencement late 2019 and first half of 2020.”
Slow recovery pace for floaters
The pace of recovery in the floater market has been slower over the past two years than what has been seen in the jack-up market, the company said.
Maersk Drilling said, however, that during Q2 2019 the number of contracted floaters increased, driving marketed utilization to 80%, its highest level since late 2015.
“Day rates are still at challenging levels but have moved upward over the past year. Despite the upward trend in activity and day rates, the forward coverage remains relatively low with many rigs rolling off contract and becoming available, and the floater market is expected to remain challenged.”
“With stronger free cash flow generation among oil companies, and more financially robust projects supporting increased sanctioning of new projects, demand for offshore rigs is expected to continue increasing. Therefore, Maersk Drilling continues to expect improvements in utilization and day rates longer term. However, the timing and magnitude of the recovery, particularly in the floater segment, remains uncertain,” Maersk Drilling said.