Drilling Contracts for Floaters and Jack-ups Look Good for 2023.

Drilling News 2023 02 24: Offshore drilling contractors have had a great start to 2023, as they have reportedly kicked off the new year with 26 rig contracts (17 jackups, 9 floaters) for 38 rig-years of work (30 jackups, 8 floaters). According to Evercore ISI’s latest Offshore Rig Market Snapshot, this has included an “impressive” 16 contracts (>60%) with terms of one year or more (13 jackups, 3 floaters).

“We believe lengthening contract terms will be a sign of a strengthening floater market in 2023 as operators exhaust the availability of priced options fixed at below spot rates,” the firm commented in the report.

On the jackup front, contract terms are on track to trend higher for the fifth straight year from the 2018 trough, the firm said, with potentially India and Mexico playing catchup to Middle East operators in driving term demand.

Evercore estimates that 23 tenders for floaters will commence by the end of 2023, of which at least 10 and up to 13 will be for terms of a year or more. Nearly all of these term tenders will be for development projects.

On the jackup side, at least 22 and up to 26 of 42 tenders are expected to be for term, comprised of up to 15 for the Middle East, 3 each for NW Europe and West Africa, and two for Mexico.

Meanwhile, a recent report from Westwood Global Energy Group found that “high-impact” wells are delivering better results. The firm estimates that 81 high-impact exploration wells were completed globally last year, a figure that was similar to the numbers drilled the previous year. However, the returns were better, with the total discovered resource rising from 7.4 Bboe in 2021 to an estimated 9.2 Bboe in 2022.

In addition, the commercial success rate – the proportion of wells that could lead to a potentially commercial development – rose from 29% in 2021 to 36%.

There were play-opening deepwater discoveries in the Orange Basin offshore Namibia: Venus, operated by TotalEnergies, and Graff and La Rona by Shell, containing potentially more than 3.5 Bboe of discovered oil and gas resources.

There was further success in the Cretaceous carbonate play in the Eastern Mediterranean with gas discoveries in Cronos and Zeus offshore Cyprus and Israel.

Westwood says that there should be further wells this year offshore Namibia and frontier drilling off Morocco, Gabon and Mozambique, and probably five high-impact wells in the Eastern Mediterranean.