High-dollar sunglasses or laboratory instrument-filled Hummers are not needed to pull a CSI (crime scene investigation) offshore. The evidence from the Gulf and across the globe is visible to anyone who investigates the rapidly developing offshore market.

That evidence includes offshore rig rates, which continue to move higher, particularly in the higher spec portions of the fleet. It includes strong permitting levels in the Gulf of Mexico, and it encompasses an expanding new rig construction effort in anticipation of greater operator demand for offshore drilling services over the next half decade.

The ultra-deepwater (UDW) market remains the major focus for spiraling rates since global UDW equipment availability is sold out for 2012. Operators are looking to 2013 with at least one observation that the market will remain under supplied with UDW floaters through 2015.

The UDW trend was best illustrated when Transocean Ltd. secured a two-year contract in March 2012 for the Deepwater Expedition drillship at $650,000 per day, which remains the highest rate to date in the current cycle.

Transocean’s leading-edge rig rate compares to the most recent trough of $400,000 to $450,000 for UDW equipment after the Macondo well blowout. Several recent fixtures in the UDW space have exceeded $600,000 per day in international markets.

Closer to home, recent UDW fixture announcements include an April 2012 five-year, $522,000-per-day contract between BP and Ensco Plc for the newbuild ENSCO DS-6 UDW drillship. The ENSCO DS-6 will begin work in the Gulf by year-end after BP-ordered modifications post-delivery. The unit is the fourth of five drillships in the Samsung DP3 series and increases Ensco’s rapidly expanding UDW fleet to 10 rigs.

Elsewhere, rig rates are also increasing in the deepwater segment along with higher tender activity. In May, the Transocean Spitsbergen, a sixth-generation, harsh-environment, DP semisubmersible, received a two-year extension in the North Sea at $542,000, up from $500,000 previously.

Separately Seadrill announced multiple recent fixtures, including a three-year contract for a deepwater semisubmersible to begin work in 2013 in offshore West Africa. Seadrill values the contract at $710 million, including performance bonus.

Additionally, there is discussion that operators are now approaching contractors for direct negotiations in the UDW and deepwater markets rather than open bidding while additional demand for higher-spec floaters is expected shortly from the national oil companies.

New Rig Construction

Besides rig rates, evidence for a tightening market is found in the number of speculative newbuilds that contractors have undertaken over the last few months.

Seadrill continues its aggressive newbuild strategy, which includes five, new, UDW unit announcements in 2012 alone. The company announced April 30 that it is building a sixth $600 million UDW drillship with delivery expected from Samsung in mid-2014.

The company currently has five similar drillships under construction with delivery dates spanning from 2013 to 2014. Like its five predecessors, the new drillship sports a 2.5-million-pound hookload and is capable of working in water depths up to 12,000 ft. Seadrill is targeting deepwater operations in the Gulf of Mexico, Brazil, and the west and east coasts of Africa.

All six drillships are currently being built on spec, though the UDW market features rising demand over the next half decade in Africa, Southeast Asia, the Mediterranean, and the Gulf of Mexico.

Separately, the company will build a second, harsh-environment semisubmersible UDW unit capable of drilling in waters up to 10,000 ft deep. Delivery on the $650 million unit will occur by year-end 2014. The vessel will be constructed at Hyundai Samho Shipyard, and it is fully winterized and targeted for the North Atlantic.

Seadrill’s semisubmersible contract came 30 days after the company announced its initial harsh-environment UDW semisubmersible in April. Furthermore, Seadrill negotiated a fixed-price option for a third unit and will decide whether to exercise the option in August 2012. The two semisubmersible units bring to 18 the number of newbuilds in Seadrill’s ongoing construction program.

Besides the six UDW drillships and the two harsh-environment semisubmersibles, the company is building five tender rigs and five jackups with expected delivery through 2015.

Arctic rig announcements followed news of a newly executed Rosneft/Statoil joint venture to explore Arctic waters off the Russian coast. Russian interest in offshore exploration has taken several steps forward over the last year.

The Rosneft/Statoil joint venture echoed similar agreements between Rosneft and ExxonMobil and, earlier Eni Petroleum, as Rosneft pursues stakes in oil and gas projects outside of Russia while partnering with technically advanced western firms to explore for oil and gas in Sakhalin, the Russian Arctic, and the Kara and Black seas.

Ensco also ordered a new UDW drillship in April 2012, the sixth Samsung DP3 drillship in the company’s fleet. The unit, which is scheduled for delivery in the third quarter 2014, will measure 755 ft in length and 125 ft in width and feature a 2.5-million-pound host system.

The rig incorporates amenities in a standardized design system that increases operating efficiency, including redundant offline tubular-stand building and a 164-ton, active, heave-compensating construction crane.

The unit is designed to drill in water depths up to 10,000 ft. Four of Ensco’s DP3 drillships are contracted through 2017 in the Gulf of Mexico, Brazil, and West Africa.

Not to be outdone, Diamond Offshore Drilling Inc. also announced it had ordered its fourth UDW drillship, the Ocean BlackLion. The $655 million unit, which will be built by Hyndai Heavy Industries Co. Ltd. and delivered in the fourth quarter 2014, will be capable of operating in water depths up to 12,000 ft.

The current count on global drillship construction has topped the 53-unit marker as part of a broader, 155-rig newbuild effort stretching back to the fourth quarter 2010.

Gulf Permits Still Strong

April Gulf of Mexico permits fell just two shy of the recent high of 58 in February 2012, continuing a strong run as the region shakes off the fog from the moratorium hangover.

Over the last three months, the Bureau of Ocean Energy Management has issued 161 total permits for rigs in the Gulf. April’s numbers include 13 new well permits, including eight on the shelf.

Of note, the breakdown includes 35 shallow-water permits, which implies increased interest in oil and liquids rich targets following recent acquisition and divestiture activity.

Contact the author, Richard Mason, at rmason@hartenergy.com.

Offshore