Drill ships’ rates to increase from $84M daily to $100M –WoodMackenziereport

A few months ago

KaieteurNewsreportedthat American drilling company, Noble Corporation is being p a i d o v e r $ 8 4 M (US$420,000)dailyforeach of its four drill ships that is beingutilisedintheStabroek Block, by ExxonMobil Guyana.

However, a new report from Wood Mackenzie, global research and consultancy group, has shown that as rig utilization has returned to pre-COVID levels,drivingratesupby40 percentinthepastyear,with anexpectedincreaseof18%.

Wood Mackenzie anticipatesbeforetheendof the year, rates of US$500,000/day or above may return for highlyprized, advantaged ultradeepwater rigs Benign ultra-deepwater rigs have averaged US$420,000/day inthefirsthalfof2023,with utilizationat90%.

“With increasing demand and rates, we are approaching the tipping point for new builds and reactivations,”saidCook.

“We haven’t reached it yet, but for new builds, it’s not a question of if, but when The need for d e c a r b o n i s a t i o n , technological advancement, more efficiencyand,ulti mately, fleet repl ace mentwilldriveanewcycle. If rig economics remain robustandrigcompaniessee contractual risks abate, this could be sooner rather than later.”

Wood Mackenzie also reportedthatthedemandfor rig utilization is forecast to increase another 20% from 2024-2025.

The report questioned, “Areweatthetippingpoint of the deepwater rig market?” as active floater utilisation has rebounded fromalowof65%in2018to over 85% in 2023, the number of contracted ultradeepwater (UDW) benign rigs has returned to preCOVID levels and day rates for best-in-class floaters havedoubledinthepasttwo years.

“Highe r oil prices, the focusonenergysecurityand deepwater’s emissions advantages have supported deepwaterdevelopmentand, to some extent, boosted exploration,” said Leslie Cook, principal analyst for Wood Mackenzie. “Active supply is now more in line with demand and rig cash flows are positive We expectdemand toconti nueto rise.”

Much of this expected growth will come from the “Golden Triangle” of Latin America,NorthAmericaand Africa,aswellaspartsofthe Mediterranean Wood Mackenzie projects that these areas will account for 75% of global floating rig demandthrough2027.

Notably, owing to the 2016 Production Sharing Agreement (PSA) Guyana signedontowithExxon–all of the company’s expense willberecovered.Underthe deal, Exxon receives profits after75percentiswithdrawn to cover operational expenses.

In Noble’s 2022 results review, the company disclosed that their day rate per rig is low-to-mid US$400,000, which is G$80Mormore.Assuch,for every day that the four drill ships work, Guyana will havetofootthebill.

This is as a result of contractthatExxonawarded to Noble during the fourthquarter of 2022, for an additional 7.4 rig years for ultra-deepwater drill ships Noble Tom Madden, Noble Sam Croft, Noble Don Taylor and Noble Bob Douglas to work in Guyana untilNovember2025.

Noblehadexplainedthat market-based day rates are resenttwiceperyear(March 1, and September 1) to the projected market rate at that time.

Notably,inMaylast,the company announced ExxonMobil Guyana has extended their contract for therentaloffouroftheirdrill ships at an average day rate of about US$420,000 (GYD$84 million) for each. With the new extension by ExxonMobil Guyana, drill ships Noble Sam Croft, Noble Don Taylor, Noble Tom Madden, and Noble BobDouglaswillworkin