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Offshore drilling on the rebound for the foreseeable future, rig providers report

In one of the latest outlooks on global offshore drilling, contractor giant Transocean says that the market is recovering, with momentum accelerating.

By Tsvetana Paraskova for Oilprice.com – After years of uncertainty and stagnation, the offshore drilling market is on the rebound and is in the early innings of an up cycle in investment and activity that will outpace the 2016-2019 cycle, major services and rig providers say. Analysts and top offshore drilling executives say that offshore rig utilization and day rates are also rising in a market that is expected to tighten going forward.

In one of the latest outlooks on global offshore drilling, contractor giant Transocean says that the market is recovering, with momentum accelerating.

“While the past eight years have been extremely challenging for the entire industry, it is clear that the recovery in offshore drilling is underway, as contracting activity, utilization rates for high-specification ultra-deepwater and harsh-environment assets, and day rates all continue to rise,” Transocean CEO Jeremy Thigpen said last week, commenting on the company's Q2 performance.

“And, with a backdrop of hydrocarbon supply challenges, we are increasingly encouraged that this momentum could continue for the foreseeable future,” Thigpen added.

As the world continues to consume a lot of oil and gas and many governments are prioritizing energy security to an accelerated energy transition after the Russian invasion of Ukraine, the offshore drilling activity is set for an upturn.

“We believe the case is clear that E&P companies will continue to engage in exploration and development work to meet worldwide demand and replenish diminishing reserves. This is especially true in the offshore basins requiring our assets and services where recoverable reserve levels are high and carbon intensity is relatively low,” Transocean's Thigpen said on the earnings call.

“With sustained constructive commodity prices, the economics of offshore projects remain compelling for continued development,” the executive added.

The company sees a rapid tightening of the offshore market for high capability drilling assets in various regions with committed drillship utilization remaining above 90%, and further tightening is on the horizon, Thigpen said.

Last month, the world's largest oilfield services provider, Schlumberger, expressed a similarly optimistic view on offshore oil and gas drilling.

“The outlook for 2022, 2025 on offshore investments and FID activity will outpace visibly at 2016-2019 cycle. So we have early innings of this offshore cycle, but it's quite interesting,” Schlumberger's CEO Olivier Le Peuch said on the earnings call in July.

“We see also offshore, the return of offshore being a characteristic that will only expand going forward. If you were to just look at the -- in terms of numbers, the number of jack-up big operating in shallow waters is actually on par higher than it has been for the previous cycles, more than 300, and deepwater is starting to catch up,” Le Peuch added.