Bob Henderson, WSJ
NEW YORK
EnergiesNet.com
While U.S. oil-rig growth has plateaued, demand for offshore rigs for overseas drilling has swelled. That is causing day rates to skyrocket and the stocks of drilling contractors to soar.
There are now 622 oil rigs operating in the U.S., according to Baker Hughes, up from 480 at the start of the year. Still, the count is unchanged from six weeks ago and down from the 683 in operation in March of 2020 at the onset of the pandemic.
Meanwhile, offshore rigs are hot commodities: day rates recently topped $400,000, up from $300,000 in June and less than $200,000 two years ago, according to S&P Global. The stock prices of drilling contractors Transocean Ltd., Valaris Ltd. and Noble Corp. PLC have all leapt by more than 35% this quarter.
The causes of the sea change are multifold, according to James West, senior managing director at Evercore:
- Major public oil companies such as Exxon Mobil, Chevron and Conoco Phillips have secured the U.S. rigs they need while their private rivals aren’t expanding either, due to lower oil prices and year-end budget constraints.
- The majors are moving more of their drilling offshore and overseas because U.S. shale-oil opportunities have been drying up with all the “good acreage” now drilled.
- National oil companies including those in Abu Dhabi, Kuwait, and Saudi Arabia are expanding offshore production in a bid to take market share from the majors who have become increasingly focused on returning profits to shareholders instead of investing in growth.
Saudi Arabia and Abu Dhabi in particular, says Mr. West, “are locking up as much spare [rig] capacity as they can.
“They’re squeezing the market,” he said, “so pricing is going straight up, and it’s going to squeeze out a lot of the majors who aren’t going to be able to find rigs shortly.”
