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Global and Regional Markets

2019 NOV census shows robust international land rig utilization but softening in North America onshore

Except for harsh-environment semis, global offshore fleet continues to see a very slow recovery, although 69% utilization is the highest it’s been since 2015 By Tony Crawford, Tarjei Myklebust and Aylar Ibrahimoglu, National Oilwell Varco Rig demand in this year’s National Oilwell Varco census has shifted in both areas of geographic activity and in rig type. Late 2017 and 2018 demonstrated promising improvements in global land utilization rates and modest recovery in offshore drilling. 2019 can be characterized by strong international rig utilization and demand for land, steadily improving demand for offshore and weakening demand for land rigs in North America. Offshore rig demand in North America is improving slightly, but it has yet to see the type of growth ...

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Peak in shale’s capital efficiency could help to bring investors back

Analyst: Drilling industry also must show more capital discipline as investors prioritize returns over growth By Linda Hsieh, Editor & Publisher Outlooks for the drilling industry have historically hinged on the rise and fall of oil prices. Today, while oil prices still matter, they now wield much less power in terms of their ability to put rigs back to work. “What investors really want is for incremental cash flow to not go to the drill bit,” said Chase Mulvehill, Senior Analyst Oilfield Services for Bank of America Merrill Lynch Research. “They want it to come back to investors. So you will not see a lot of rigs being added, even with a higher oil price.” The reason for that, Mr ...

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Operator spending cuts may lead to 10% fall in 2020 land rig count

US onshore activity likely to suffer as cautious operators rein in budgets, plan to drill and frac fewer wells next year By Linda Hsieh, Editor & Publisher Another tough year is in store for the US land drilling and completions market in 2020. John Spears, President of Spears and Associates, said he expects the Baker Hughes rig count to fall by 10% next year. “That’s a function of the fact that the operators are going to be extremely careful about their capital spending programs. They are going to be mostly focused on trying to improve profitability and returns to shareholders, and not so much in terms of growing production. We think that means activity will move lower in the US ...

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IHS Markit: Offshore dayrates will be better in 2020, just not as much as drillers hope for or need

As debt covenants come due, offshore drilling contractors may be forced to push harder for higher dayrates By Linda Hsieh, Editor & Publisher Offshore drillers can expect to see a better market in 2020, but it won’t be the kind of dramatic recovery that the industry is hoping to see. “It will be an improvement over 2019, just not dramatically,” said Cinnamon Edralin, Senior Offshore Rig Market Analyst for IHS Markit. Globally, IHS Markit expects demand to increase by about 18%, or about 90 rigs, over this year. That translates into approximately 561 units – 400 jackups, 86 semis and 75 drillships, according to Ms Edralin. More than half of that increase is expected to come from the jackup segment. ...

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As operators reshuffle priorities, offshore exploration is losing out

Development drilling is likely to increase, but it can’t offset a bigger reduction in exploration drilling in 2020 By Linda Hsieh, Editor & Publisher The attacks on two Saudi Aramco oil facilities on 14 September took out approximately 5.7 million barrels per day from the global oil supply, leading to a quick spike in oil prices to nearly $70 in the second half of September. However, by early October, things seemed to be back to business as usual, with oil prices settling down into the $50s. “Of course, a large portion of the increase in oil prices was a risk factor premium,” said Audun Martinsen, Partner and Head of Oilfield Service Research for Rystad Energy. “It will be a short-term ...

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Investments needed to meet global oil/gas demand hurt by disconnect between public perception, reality

Impact can be seen in weak stock prices for oil companies, shift away from long-cycle deepwater projects By Linda Hsieh, Editor & Publisher For some time now, it’s been difficult to discuss the long-term outlook for the oil and gas drilling industry without also discussing things like renewables and electric vehicles. But now, it’s become increasingly difficult to examine even shorter-term outlook without also considering their impact. Clearly, public perception on issues like the energy transition and climate change is swaying where investment dollars go. “Broadly speaking, there’s a very big shift – a recommitment of oil majors’ balance sheets – from the big offshore projects to the short-cycle North American shale plays,” said Paul Bogenrieder, Ernst & Young Global ...

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Optimism rising for jackup outlook as utilization, dayrates both improve

Non-harsh environment floater market is relatively weaker, but positive signs can be found in new contracts signed in 2019 By Linda Hsieh, Editor & Publisher You can’t quite say the outlook for the offshore drilling market is rosy just yet, but some of the gloom is definitely letting up, according to David Carter Shinn, Partner and Head of Bassoe Analytics at Bassoe Offshore. Particularly in the jackup segment, 2020 should be a step above recent years, he said. “We’re much more optimistic than we were a year ago. With respect to jackups, we’re seeing strong growth in the number of rigs on contract and demand.” Bassoe Analytics, an open-source collaborative rig database, shows that there were around 340 working jackups ...

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