Stack'em high

Jack-up outlook dismal

"A grim future for jack-ups was forecast today as industry pundits warned that the drop in shallow-water drilling seen this year and the large order book still to come into the market was unlikely to help steer a U-turn from current poor utilisation.

“One-third of the total jack-up fleet is available,” Sven Zeigler, partner at brokering company RS Platou, told the Trends in the Offshore Drilling Industry conference in London today.

“There are currently around 140 jack-ups not contracted with 60 of these units stacked. Meanwhile, there are 165 units on order.

“As long as utilisation of jack-ups does not exceed 90%, dayrates will not go up. Dayrates are likely to stay close to operational costs."

Steve Robertson, the director of Douglas Westwood, supported this view.

“In 2009 (so far) there has been an 11% drop in shallow water drilling,” Robertson told the conference.

“Demand will be focused more on deep-water drilling,” he said, adding that Douglas Westwood forecast around 12% of total global demand to be supplied by deep-water drilling by 2015.

In terms of financial support from banks, the picture for the rig group was not any better.

“Banks don’t like jack-ups,” said Hugh Baker, head of shipping for Americas at HSH Nordbank.

“The jack-up market is more volatile - contracts are usually shorter and chartering is usually weaker,” he said.

“There is a much weaker environment for jack-ups.”

Jack-up demand has been hit hard as oil prices tumbled from last year's peak over $140 a barrel.

The US market has been hit particularly hard, with utilisation rates halving year-on-year."