Diamond, Noble see years of strong demand

by on October 18, 2012 5:23 pm GMT

Noble expected ultra-deepwater rates to keep heading higher, even after a strong rise so far this year, and Houston-based Diamond saw the same market momentum driven by demand off Australia, both coasts of Africa, as well as closer to home, Reuters reported.

“In the US Gulf of Mexico, we have seen resurgence in activity in the deepwater and ultra-deepwater arenas over the past year,” Michael Acuff, Diamond's senior vice president of marketing, said according to the news wire.

He predicting as many as 40 deepwater rigs could be working in the Gulf next year, up from 31 now.

As for elsewhere, Diamond highlighted the signing of its Ocean Endeavor rig, which had been making $285,000 per day in Egypt, to an 18-month contract starting in December 2013 at $521,665 per day, including half the potential bonus.

The company would only say it will be located outside of the Mediterranean Sea.

Also, its Ocean America rig has been signed up by Chevron for 18 months off Australia at a rate of $475,000 per day starting in mid-2013, versus the current dayrate of $405,000, Acuff said.

Diamond, which like Noble is among the world's top five contractors by market value, reported a better-than-expected quarterly profit on Thursday.

Late on Wednesday, Noble had posted weaker-than-anticipated profits due to downtime problems that should now be largely resolved.

Diamond shares had risen 1.6% to $70.88 by midday on the New York Stock Exchange, while Noble climbed 4.1% to $39.24, helped by a bullish outlook for several newly built rigs.

Roger Hunt, Noble's senior vice

-president for marketing and contracts, said that industry-wide there were 34 ultra-deepwater rigs being built through 2016 that do not yet have contracts, but he anticipated ample demand for those.

The average contract duration for ultra-deepwater rigs – which can work in up to 10,000 feet of water – signed over the past 90 days had nearly doubled to about four years compared with the first six months of 2012, while average dayrates rose to $575,000 from $533,000 over the same period of time, he said.

On the shallow-water side, are at least 85 jack-ups to be built by mid-2015, and Hunt wondered if that market segment could support 20% growth over three years. “It's probably going to be challenged,” he said.

Yet about half of the current jack-up fleet industry-wide is 30 years or older, added Noble chief executive David Williams, who expected many of those to be pulled off the market.

“You'll see more retirements in the next 10 years than you have in the past 10 years,” Williams said. “So it is not just an additive exercise, there's going to be some addition and subtraction in the overall fleet.”

Noble is not so concerned about finding work for its six brand-new, highly capable jack-ups that will hit the market over the next two years, with one already contracted and another deal for a one-well assignment just signed in the Middle East.

Noble, like industry leader Transocean, does want to spin off a tranche of older rigs in order to focus on its more-capable units.

In a similar vein, rival Ensco announced the sale of two older rigs late on Wednesday.