This year’s NOV Annual Rig Census gave us an opportunity to analyze the composition of the global drilling fleet just as the North American land rig markets began to rebound. Land rig utilization during this census period was historically low, at 22% and 15% for the U.S. and Canada, respectively. Around the world, overall land rig demand continues to drift lower, perhaps showing signs of an inflection point in 2017, as oil prices stabilize.
Offshore rig markets continue to be challenged by low E&P activity as a large number of new-builds are expected to be delivered over the next three years. In response, rig owners have accelerated both the retirement of aged and obsolete assets, as well as the cold-stacking of rigs with lower opportunities of getting work in this competitive environment. For the first time in years, the number of scrapped rigs and new cold-stackings combined, was able to offset the 30 new-builds that the market absorbed in the last 12 months.
The precipitous drop in drilling activity, resulting from two consecutive years of contraction in global E&P spending, has caused thousands of rigs to be sidelined since the end of 2014. While our census methodology keeps all rigs that were active in the past three years as “available supply,” it is possible that a large portion of these displaced units will not return to service, facing competition from newer, more capable rigs.
The available and active rig counts used for the census are calculated every year, during a 45-day period in early summer. This year, that period coincided with the lowest reported land rig counts in North America for any year on our records. A widely available industry report, published on May 27, noted that the total land rig count for the U.S. fell to 374 units, or 80% lower than it was during fourth-quarter 2014. Canadian land drilling demand also found an apparent cyclical bottom at just 34 active units on the day our census period began.
The number of available offshore rigs in the world decreased as a result of rig owners working to retire and mothball idle capacity to offset the 30 new units delivered to the market. Available offshore mobile units totaled 782 rigs, with 473 of those rigs performing work during our 45-day window (60% utilization). This represented a decrease of 144 active rigs year-on-year.
To continue reading the Census Highlights, open the NOV 63rd Annual Rig Census link below, published in the November 2016 special section of World Oil.
Published Date: 2016-12-15
Source: National Oilwell Varco