Offshore drilling rigs headed to junkyard as losses mount
Transocean Ltd. is finally sending Pathfinder to its grave, after two years in a Caribbean purgatory that cost about $15,000 a day.
The move by the world’s biggest offshore-rig operator signals just how bleak the future looks for deepwater drilling. Pathfinder is the most famous of six floating rigs the company is scrapping in burials that will add up to a bruising $1.4 billion write-off.
Competitors are going the same route, jettisoning more rigs in the third quarter than have ever been trashed in a 90-day stretch, according to Heikkinen Energy Advisors analyst David Smith.
That’s how bad it is, with predictions crude prices won’t go much higher than $60 a barrel in the next year compared with around $50 recently.
“Deepwater is going to be playing a much-reduced role on the global oil-supply stage relative to what the industry expected as recently as three years ago,” said Thomas Curran, an analyst at FBR Capital Markets in New York.
For all that, it could have been worse, in one way, for Transocean.
It has been the most aggressive in an unprecedented experiment with what’s called cold-stacking for big drillships.
After oil prices cratered in 2014, the company didn’t send all of its unwanted rigs out to sea in the time-honored temporary holding pattern where engines keep running and a crew remains on board — something know as warm stacking, naturally, that runs up a daily bill of some $40,000.
The offshore-drilling business enjoyed the highest of highs when oil topped $100 a barrel a few years ago. Companies including BP and Anadarko Petroleum could lease out an advanced ship for more than $600,000 a day. An army of boats and helicopters took workers and supplies out to these rigs, where meals often included steak and shrimp, and carved ice sculptures adorned lunch rooms.
Now it’s one of the most beaten-up sectors. Exploration and production companies are focusing on lower-cost shale-oil drilling on land.
There’s a glut of offshore equipment. Only about half the global supply of deepwater rigs is working today; back in 2013 almost every single one was running at full speed.
The latest projections call for a modest offshore recovery around 2019, or maybe 2020, according to Wells Fargo Securities.