Post by bjspokanimal on Dec 30, 2021 16:16:10 GMT -5
Spok op-ed;
With all of the concern in the current E&P operating environment, I've seen 2 developments
within it that I see as actually being quite positive.
Of course, one concern, is all of the cap-ex that's being diverted toward greenie, renewable
applications that COULD be used for exploration. Yet another concern is the generally
conservative stance of IOCs and, to some extent, NOCs, as they repair their balance sheets,
buy back shares, and restore dividends to their shareholders. Oil producing NOCs have been
hit hard by the oil price swoons of 2020 and have also been financially strapped as they
recover with higher oil prices. Even Saudi Arabia only recently overcame the fiscal deficits
and are now running government surpluses... along with a pledge to build up their balance
sheet more than in the past rather than start drilling willy-nilly.
But there are 2 silver linings in all of this that I'm happy to see.
Firstly, there are 2 or 3 dozen smaller countries around the world that are looking at significant,
undeveloped or under-developed oilfields and fretting that there may not be a market for
that oil 20 or 25 years from now as the global transition to low-carbon, renewable energy
sources eventually takes hold more significantly. To the extent that such countries really
need hard foreign currency via exports of those oil reserves, they are becoming very anxious
to tap those resources soon in order to get them producing BEFORE the world gets significantly
past peak oil demand 10 or 15 years from now and they know it takes years just to get those
fields producing oil.
As most onshore and shallow water prospects have already been tapped, those undeveloped
fields are heavily skewed toward deep water locations and they are, in the aggregate, lighter
and sweeter (eg: lower carbon) grades than most existing global production.
So, we're seeing a significant sense of urgency to get cracking on the development of those
fields and a renewed willingness from such NOCs to partner with deeper-pocketed,major IOCs
to hasten that development... often in concert with lower taxes and fees and/or other financial
incentives, such as more favorable profit sharing arrangements from such host countries.
We haven't seen a lot of drillship fixtures from all of this urgency yet, as it takes time to put
such partnerships and financial arrangements together, not to mention drilling lease auctions.
But I'm seeing a lot of activity in at least one or 2 dozen countries, and that excludes countries
like Mexico and India who are ramping activity simply for production that would feed their
own respective country's appetite for hydrocarbons.
The 2nd silver lining I'm seeing, is that the likelihood of future peak oil consumption and
green energy transition is greatly impeding any thoughts of expanding the global drilling rig
fleet, and that portends a continued downsizing of the global fleet, even as utilization likely
continues it's upward trajectory in the years to come.
Regarding newbuilds, their aren't any to speak of. There are a bunch of high-spec jackups
being built for specific use in shallow water, middle-east prospects, but other than that, there is
only one floater I've heard about aside from Transocean's 2, new, 8th generation drillships,
Atlas and Titan.
Of course, there are "stranded" rigs still owned by shipyards that couldn't get them delivered
during the 7 year slump we've seen. There are about 50 of them, according to esgian, and I'm
not certain how many are drillships, rather than jack-ups, although I do know of at least a half
dozen such ships.
But those stranded units aren't moving much. There is a gap between what the shipyards want
for them, given the recovering industry, and what drilling contractors are willing to PAY for them,
given their patience toward getting their boats contracted and stacked units un-stacked. I believe
only 2 or 3 stranded drillships have been sold... mostly to actual "countries" that could afford the
asking price(s), while one other is sold, but only on the contingency that it can first get a decent
contract (noble, I think it was). In the meantime, I think we can plan on most stranded units
continuing to rust in the shipyards for at least another year or so.
But the bottom line is that no commercial driller has shown any interest in fleet expansion, while
esgian reports that many rigs that have been stacked for more than 3 years may never be
be re-activated without expenditures that would be increasingly prohibitive. So it's clear to me that
even with rising dayrates and utilization over the next 12 to 24 months, were only going to see more
fleet attrition, and none of the wild newbuild or acquisition campaigns like we saw in the years leading
up to 2014.
So, in the end, I see more demand for rigs over the next few years than all of the hype over energy
transition would suggest to the average neophyte investor, and I see that demand being met with
fewer rigs than in past cycles as drillers play it close to the vest when it comes to acquiring any new
or nearly new rigs with the 30 year useful lives that would take them deeply into a future era that's
heavily dominated by wind turbines, solar panels, and millions of AOCs and Greta Sundbergs out
there polluting our planet with their rhetoric.
S.
With all of the concern in the current E&P operating environment, I've seen 2 developments
within it that I see as actually being quite positive.
Of course, one concern, is all of the cap-ex that's being diverted toward greenie, renewable
applications that COULD be used for exploration. Yet another concern is the generally
conservative stance of IOCs and, to some extent, NOCs, as they repair their balance sheets,
buy back shares, and restore dividends to their shareholders. Oil producing NOCs have been
hit hard by the oil price swoons of 2020 and have also been financially strapped as they
recover with higher oil prices. Even Saudi Arabia only recently overcame the fiscal deficits
and are now running government surpluses... along with a pledge to build up their balance
sheet more than in the past rather than start drilling willy-nilly.
But there are 2 silver linings in all of this that I'm happy to see.
Firstly, there are 2 or 3 dozen smaller countries around the world that are looking at significant,
undeveloped or under-developed oilfields and fretting that there may not be a market for
that oil 20 or 25 years from now as the global transition to low-carbon, renewable energy
sources eventually takes hold more significantly. To the extent that such countries really
need hard foreign currency via exports of those oil reserves, they are becoming very anxious
to tap those resources soon in order to get them producing BEFORE the world gets significantly
past peak oil demand 10 or 15 years from now and they know it takes years just to get those
fields producing oil.
As most onshore and shallow water prospects have already been tapped, those undeveloped
fields are heavily skewed toward deep water locations and they are, in the aggregate, lighter
and sweeter (eg: lower carbon) grades than most existing global production.
So, we're seeing a significant sense of urgency to get cracking on the development of those
fields and a renewed willingness from such NOCs to partner with deeper-pocketed,major IOCs
to hasten that development... often in concert with lower taxes and fees and/or other financial
incentives, such as more favorable profit sharing arrangements from such host countries.
We haven't seen a lot of drillship fixtures from all of this urgency yet, as it takes time to put
such partnerships and financial arrangements together, not to mention drilling lease auctions.
But I'm seeing a lot of activity in at least one or 2 dozen countries, and that excludes countries
like Mexico and India who are ramping activity simply for production that would feed their
own respective country's appetite for hydrocarbons.
The 2nd silver lining I'm seeing, is that the likelihood of future peak oil consumption and
green energy transition is greatly impeding any thoughts of expanding the global drilling rig
fleet, and that portends a continued downsizing of the global fleet, even as utilization likely
continues it's upward trajectory in the years to come.
Regarding newbuilds, their aren't any to speak of. There are a bunch of high-spec jackups
being built for specific use in shallow water, middle-east prospects, but other than that, there is
only one floater I've heard about aside from Transocean's 2, new, 8th generation drillships,
Atlas and Titan.
Of course, there are "stranded" rigs still owned by shipyards that couldn't get them delivered
during the 7 year slump we've seen. There are about 50 of them, according to esgian, and I'm
not certain how many are drillships, rather than jack-ups, although I do know of at least a half
dozen such ships.
But those stranded units aren't moving much. There is a gap between what the shipyards want
for them, given the recovering industry, and what drilling contractors are willing to PAY for them,
given their patience toward getting their boats contracted and stacked units un-stacked. I believe
only 2 or 3 stranded drillships have been sold... mostly to actual "countries" that could afford the
asking price(s), while one other is sold, but only on the contingency that it can first get a decent
contract (noble, I think it was). In the meantime, I think we can plan on most stranded units
continuing to rust in the shipyards for at least another year or so.
But the bottom line is that no commercial driller has shown any interest in fleet expansion, while
esgian reports that many rigs that have been stacked for more than 3 years may never be
be re-activated without expenditures that would be increasingly prohibitive. So it's clear to me that
even with rising dayrates and utilization over the next 12 to 24 months, were only going to see more
fleet attrition, and none of the wild newbuild or acquisition campaigns like we saw in the years leading
up to 2014.
So, in the end, I see more demand for rigs over the next few years than all of the hype over energy
transition would suggest to the average neophyte investor, and I see that demand being met with
fewer rigs than in past cycles as drillers play it close to the vest when it comes to acquiring any new
or nearly new rigs with the 30 year useful lives that would take them deeply into a future era that's
heavily dominated by wind turbines, solar panels, and millions of AOCs and Greta Sundbergs out
there polluting our planet with their rhetoric.
S.
