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CURRENT ISSUE

OBAMA DRILLING MORATORIUM
Are new Administration limits on offshore drilling

a sensible precaution?
a knee-jerk overreaction?

June 14, 2010

Uncertainty in Gulf rig market

Dahlman Rose & Co. sees uncertainty in the offshore drilling segment. "New contract awards have been very few in recent weeks, and, with operators taking a step back from the market, there is risk to dayrates seeing negative pressure," the firm notes in its weekly offshore drilling report.

Dahlman Rose says that there were no floater fixtures reported last week and overall contract awards have been very light since the Deepwater Horizon accident.

"We are concerned that operator pull back may impact dayrates negatively. Thus far the only sector with a high utilization rate is the 350 ft+ jackup segment, which is running at 90 percent. With these ultra premium jackups on the cusp of pricing power, it will be interesting to see whether the recent events will have a negative impact," says the report.

The number of floating rigs on standby mode in the GoM is up to 12, of which Transocean operates six, Noble owns three, Diamond owns two and Ensco and Seadrill each own one.

"There continues to be uncertainty regarding the earnings impact and whether force majeure provisions will be exercised," notes Dahlman Rose. "We estimate another 10-15 rigs will reach idle status over the course of the 6-month deepwater drilling moratorium."


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