Offshore drilling contractor Northern Drilling is seeing an improvement in demand visibility for the harsh environment drilling rigs, which is supportive of continued recovery and further rate increase in the market.
The West Mira rig; Source: Northern Drilling
According to Northern Drilling’s 3Q 2019 report on Friday, the company continues to hold a constructive view on the market and is positive on the long-term fundamentals.
Each quarter more signs of market stability and industry improvements are visible with an expectation to see this trend continue, the company said. Modern harsh environment market utilization has remained greater than 95% for the full year, while there is little incremental supply entering the market, and vintage units rolling off contract are likely scrapping candidates.
Additionally, Northern said, demand visibility is improving as the majority of near-term options are exercised combined with E&P companies entering direct negotiations with contractors. This is supportive of continued recovery and further rate increase in the harsh environment market that continues to show a strong preference for high specification and modern rigs like the West Mira and West Bollsta.
Furthermore, the company said that the benign ultra-deepwater market continues its slow climb to find a rebalanced position. Since the summer, numerous awards have been disclosed which continue to push the rates upwards, and several spot fixtures have recently been concluded at around $250,000 per day.
Active ongoing tenders in the market also reflect the increased duration of drilling programs supporting a further increase in day rates, Northern said.
The company concluded it is well-positioned for the next 15 to 18 months with the forward delivery dates it has secured for its 7th generation ultra-deepwater drillship fleet and looks to capitalize on a rebalanced market with timing opportunities to secure contracts that can support the takeout financing from the shipyard.
In related news, Northern is in dispute with South Korea’s DSME over a canceled drillship West Cobalt. The yard is challenging Northern’s cancellation, and the dispute is not expected to be resolved in the near future.
Offshore Energy Today Staff
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