Maersk Drilling CEO: Slow Deepwater Rig Market Coming

Posted by Joseph Keefe September 24, 2014

Maersk Drilling Chief Executive Claus Hemmingsen talked to Reuters on the sidelines of A.P. Moller-Maersk's annual capital markets day.

Maersk Drilling has focused on two areas - harsh environment rigs primarily in Norway and deepwater rigs in the Gulf of Mexico and off West Africa.

ON DAY RATES FOR DEEPWATER RIGS

"The deepwater market will be slow, for the rest of 2014 and in 2015. We do believe however it will come up in the mid-term and long-term.

"If you go back one and a half years ago, you would say (the day rates would reach) $500,000-600,000, a few above that, but that would be in Angola.

"Currently, we're probably talking about $400,000-$500,000 for day rates. So we have seen, and will see, a decline in day rates for deepwater (rigs)."

ON CONTRACTS FOR NEW RIGS

"We have actually six rigs out of eight coming out (of shipyards) with very strong contracts.

"The two rigs (without contracts) are for the deepwater market and when you see a market that is going in the wrong direction, there is of course concern. We have just managed to land a contract extension for one deepwater rig in Angola.

"We've landed on a one-year extension with a jackup in Malaysia; that's a smaller rig; that's $56 million revenues to the end of 2016. And we actually have a letter of award for the first of the uncontracted drillships for a short-term contract in South East Asia...I can't reveal any more details about it.

"Those things will take our contract coverage of the Maersk Drilling company up to 78 percent for 2015. I think many of our peers in the industry will probably envy that percentage."

ON THE MARKET OUTLOOK FOR NORWAY

"Rates are not falling in the Norway part because we have not seen any fixtures to that effect but there is a pause, a little bit of a slowdown, in terms of decision-making on the oil companies' part with new projects.

"So far, all the assets are fully occupied in Norway. Our fleet has very long contracts for all rigs, except for one of them.

"So we're actually pretty confident that, yes, it will settle a little in Norway, but its not going to be a market that is hugely affected. Whereas the deepwater market, yes, it will be affected.

"Because first of all, you get a lot of new rigs out, and secondly, there is a very slow decision-making process from the oil companies on new projects."