Deepwater rig spot market emerging with increased subletting

The deepwater drilling rig market is emerging as a spot market because producers are becoming comfortable with the idea of subletting rig time to other operators, said Oscar Hernandez, an analyst for ODS-Petrodata Group.

May 14, 2001

2 min read

"Subletting has grown from comprising 2-4% of the US Gulf of Mexico activity in 1996-97 to 15% or more of the market," Hernández told OGJ Online during the Offshore Technology Conference earlier this month.

Oil and gas companies built a backlog of deepwater leases to explore during 1996-98, and they have committed to long-term contracts on deepwater rigs. Producers are willing to sublet their time on deepwater rigs when they are not using the rigs yet or when less-capable rigs can fulfill their requirements.

"Operators are able to get rigs, and they are growing increasingly comfortable that they can get a rig on the spot market," Hernández said. He defined deep water as 2,000-5,000 ft.

EEX Corp. of Houston sublet the Glomar Arctic 1 deepwater rig to Anadarko Petroleum Corp. of Houston. EEX had contracted the rig at $131,000/day but sublet it for $55,000/day, Hernández said.

Meanwhile, Shell Exploration & Production Co. sublet the Noble Jim Thompson, an ultradeepwater rig, to BP PLC. The contract was for $170,000/day, and the sublet was for $159,000/day, Hernández said.

"It varies from operator to operator how much of a discount they are willing to take," Hernández said of the sublet rates.

ODS-Petrodata Group is among the companies owned by OneOffshore Inc., Houston, which was formed in July 2000 with the merger of Offshore Data Services, Houston, and Petrodata Ltd. of Aberdeen.