Seatrade Maritime is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Day rates for drilling rigs to fall further in 2016: ABN AMRO

Day rates for drilling rigs to fall further in 2016: ABN AMRO
Owners of offshore drilling rigs are set to see day rates fall further this year according to Jan-Jein Hesse from ABN AMRO Bank.

Speaking at the Marine Money Singapore Offshore Finance Forum, Hesse a senior energy banker for ABN AMRO painted a bleak picture of what lies ahead for the drilling rig sector in 2016.

“We see a further decline in day rates this year,” he stated.

Day rates for drilling rigs are already down to around $260,000 a day, a level which owners are still able to service their debt, however, if it the rate drops significantly further this will not be the case.

Transocean is reported to have accepted a day-rate of around $180,000 a day of Norway and Hesse said that Seadrill has indicated it would accept $165,000 per day. At these levels drilling rig owners would no longer be covering the cost of finance, and Hesse questioned why an oil company would take a rig at $260,000 per day if some owners were willing to accept lower levels.

This comes against a background of an already significant level of stacking of drilling rigs, with around 120 rigs standing idle at the end of 2015.

Hesse said that a 60% utilisation rate this year was “quite probable”.

“Oil companies will only drill their most strategic wells,” he said.

Many drilling rig owners were expected to have a difficult time this year and start talking to their banks and bondholders about restructuring, and Hesse expects to see a lot of financial restructuring over the next year and half.