Sector Snap: Drillers down, but analyst bullish
National oil companies have been locking in drilling contracts in recent months while most publicly traded oil majors "have been waiting on the sidelines," analyst Omar Nokta wrote in a client note."Now, with limited availability and record high leading edge rates, they must combat declining reserves and production to satisfy stakeholder demands."And here: Energy Sector Roundup: Oil Backs Off a Record
Nokta and colleagues boosted their forecasts for average drilling rates by $50,000 per day, meaning that they now expect the priciest ships, which can operate in very deep water under harsh conditions, will fetch an average of $600,000 per day over the next three years.
"We believe Transocean (RIG) stands to benefit the most from the tight deepwater market as it controls seven of the 16 ultra deepwater rigs available to market through the end 2010," Nokta wrote. "We expect the company to negotiate attractive contract terms that allow for substantial visibility deep into the next decade."
Major oil companies "have their backs against the wall" when it comes to getting offshore drilling contracts, according to Dahlman Rose & Co. managing director Omar Nokta.
Nokta says Brazil's national oil company, Petrobras, has aggressively locked up a significant amount of rig capacity. As a result, dayrates have been pushed to record levels.
"We expect the few deepwater rigs available during the next three years will see significant enquiry and lead to higher dayrates and contract durations," said Nokta. "We are raising our dayrate assumptions for ultra deepwater floaters (7,500-feet drilling capability or more) to $570,000/day, harsh environment ultra deepwater floaters to $600,000/day and standard 5,000-feet deepwater floaters to $475,000/day. These dayrates are $50,000/day higher than our prior forecasts."
Nokta thinks Transocean Inc. could benefit most from the tight deepwater market since it controls seven of 16 rigs available through the end of 2010.