no way in HELL nobody will go bankrupt before the end of the year unless the price of crude recovers and dayrates rise
this cannot be sustained!
This morning, Diamond Offshore announced a contract agreement for the Black Rhino that implies about the lowest dayrate an ultra-deepwater (UDW) drillship built this cycle has ever received.
The Black Rhino - image credit: shipspotting.com
Specifically, Diamond Offshore inked a blend and extend agreement with operator Murphy to work the Black Rhino in the GOM for an additional 7 months. The incremental backlog implies a leading edge dayrate of roughly $220,000 per day. That’s down from a market peak of around $650,000 per day.
Source: Diamond Offshore, Oilpro estimates
Recently, the Noble Danny Adkins, a 6th gen semi delivered in 2009, reportedly received a similar dayrate near $200,000 (Noble didn’t disclose the dayrate, but industry sources indicate it was around the $200k/d mark). But modern construction high-spec drillships have been expected to perform a bit better than 5-year old semis like the Adkins. This new fixture is important because it marks leading-edge dayrates for new UDW drillships down to levels that lesser UDW floaters have recently received - a sign that a rig’s ability is no match for the excess availability in this market.
The last time leading edge dayrates for UDW rigs were this low, modern drillships weren’t even a glimmer in their owners’ eyes. UDW rigs haven’t earned dayrates consistently below $250,000 per day since the 2004-2006 time-frame. That was well before the latest construction wave, which heated up in 2010 and pushed over 100 newbuild UDW rigs into the market.
Source: Company Filings, Oilpro estimates
With drillship availability increasing and demand continuing to deteriorate, dayrates are likely to test cash operating cost break-even levels over the next 6-12 months, forcing contractors to make some very tough decisions. This realization is likely why Diamond and others are agreeing to these blend and extend arrangements - securing guaranteed work at $220k/d in this environment is a win for desperate UDW contractors.