A brief lull in winter weather across the North Sea over the weekend imperceptibly tightened the spot market for anchor-handling tug supply vessels (AHTS), until there were no vessels left for oil companies to charter.
That spot tightness in AHTSs, however, is what the midwater rig market will look like by year-end, industry watchers say. Adding to a rising count of exploration wells is a pipeline of developments one analysts said was “at a decent level” compared to the “dead silence” of three years ago.
For the past week, ship brokers in Norway have reported the brisk hiring of vessels for a fortnight of spot duty, as a weather window opened for rig moves, including several from Norway to the U.K. On January 16, there were seven oil company charters or anchor handlers, then three more the following day; two more over the weekend and four more today, as ConocoPhillips, Wintershall, Equinor, Repsol Sinopec, Neptune Oil & Gas, Dana Petroleum and Energean Norway all lined up rig moves.
While rigs are ordered for from 60 days to two years, and the spot-market for vessels is mostly about two-week jobs, the rig moves suggest oil company eagerness to get midwater floaters in place in time for prime drilling weather. With the North Sea rig market clearly improving, offshore-service vessel operators have ordered vessels back from Africa to tackle the demand.
The North Sea, said Sundal Collier analyst, Lukas Daul, is a bright spot if seen from a drilling contractor’s perspective. This winter, he said, “Is certainly up over last winter in terms of numbers of rigs working, the count of rig tenders so far and day rates rising.”
“I would say that we are seeing an increase in activity that helps put more rigs to work and improves pricing. Pricing-wise, you’re at a level where you as a driller can cover your operating expenses and your cost of finance. It’s not a party, but you’re not a beggar anymore,” Daul said.
Fully booked
With deepwater rigs still suffering from oversupply — most of the rigs built over the past decade have been deepwater floaters — Daul said more activity than what’s been seen would be needed to stimulate that market. Deepwater is still “challenged” as a segment “in its demand side”.
“On the supply side, 120 floaters have been scrapped, mostly midwater, so supply is down significantly, especially for 30-year-old rigs, not those that are just five years old,” he said, adding that, “During the course of 2018 and 2019, when looking at contract awards of 12 to 18 months, the vast majority of new jobs have gone to modern rigs, at least in Norway. Operators have shown a clear preference for newly equipped rigs, and these modern, midwater rigs are fully booked for 2019.”
Daul said that if drilling demand keeps clicking along as it has been, operators will start kicking the tires of older rigs in an effort to pick up the slack. Heavily subscribed offshore acreage rounds could also help tighten the market, as blocks are picked up adjacent matured drilling prospects.
At the weekend, Norwegian Sysla reported that there wasn’t a single AHTS available for rig moves on the spot market. While that spot market is hot, there are signs other offshore service vessel segments are also tightening somewhat, with contract wins OEDigital reported for Fugro, Esvagt and Maersk Supply Services.
The spot of work, whether short-lived or not, has provided Viking Supply Ships — so recently a poster child of the downturn — a chance to hire out three AHTSs in a week to Repsol Sinopec. The Repsol rig hire, the Stena Spey, is on its way to the U.K. sector from Norway.
To tow it there the Njord Viking, the Magne Viking and the Brage Viking — the last ships reportedly available at the weekend — will earn over $81,000 a day for Viking Supply Ships.