By OGJ editors
HOUSTON, June 9 -- The supply of jack up rigs in the Gulf of Mexico stands at a 10-year low of 111 rigs, and that also compares with 150 rigs for the same time 2 years ago, said J. Marshall Adkins, a Houston analyst with the St. Petersburg, Fla.-based Raymond James & Associates Inc.
"We expect the market to tighten further in the near future as drilling contractors still have the incentive to move additional rigs to international markets based on the large day rate discrepancy that exists today," between drilling areas worldwide, Adkins said.
Any slight increase in drilling demand or the departure of any more jack ups from the GOM in coming months would put a severe stain on the market, pushing day rates higher, he said. Premium jack up day rates are expected to lead the GOM jack up market recovery during the next several months.
"Once operators are forced to wait months and not weeks for jack ups in the GOM, reality will begin to set in, and day rates should shift meaningfully higher," he said.
Fleet utilization, day rates
The GOM fleet utilization now stands at 76%, but the market actually is much tighter than that utilization number suggests, he said.
"After excluding 13 cold-stacked rigs (rigs that require significant capital investments before returning to work), effective utilization of the marketed GOM jack up fleet is 86%. More importantly, the vast majority of idle jack ups are shallow (less than 100 ft) workover-type rigs, while premium and standard jack ups are both enjoying above 90% utilization," Adkins noted.
Day rates typically shift meaningfully higher once marketed utilization reaches 85%, he noted.
"We believe operators will soon be forced to pay significant higher day rates than current levels if they hope to keep additional jack ups from leaving the region," he said.
