GLOBAL RIG AND OFFSHORE CONSTRUCTION MARKETS

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1 Information Analytics Expertise OCTOBER 214 GLOBAL RIG AND OFFSHORE CONSTRUCTION MARKETS Slowdown on all fronts? Evgenia Kukina, Sr. Product Manager +44 ()

2 BLACK SEA OFFSHORE CONFERENCE/OCT 214 Content and Presentation Sources 2

3 BLACK SEA OFFSHORE CONFERENCE/OCT 214 Field Development Trends 3

4 Number of Discoveries BLACK SEA OFFSHORE CONFERENCE/OCT 214 2/3 of global offshore finds in past decade were made in Southeast Asia, Europe and Africa 7 Global offshore discoveries 24-present SE Asia Europe Africa Latin America Australia/NZ North America Middle East CIS 4

5 BLACK SEA OFFSHORE CONFERENCE/OCT 214 Those will be the regions that will drive demand Offshore field development start-ups in Middle East & Caspian 8% Mediterranean 7% Australia/NZ 5% SE Asia 26% North America 9% Latin America 11% NW Europe 22% West Africa 12% 5

6 Number of Projects BLACK SEA OFFSHORE CONFERENCE/OCT 214 Fewer project sanctions will lead to a reduction in new projects in 2-3 years 6 Global Offshore FEED awards 25 Global Offshore Field Development Projects Completed Construction Planned Tendering 6

7 BLACK SEA OFFSHORE CONFERENCE/OCT 214 due to cost escalation and uncertainty over oil price Prospects of lower oil prices Weak demand growth Rising costs Tight contractor capacity Less project sanctions Postponements Revisions Decline in new orders 7

8 Subsea project awards per month BLACK SEA OFFSHORE CONFERENCE/OCT 214 Only five subsea awards this year the longest order drought in years! Global Subsea Tree Awards

9 BLACK SEA OFFSHORE CONFERENCE/OCT 214 Construction Fleet 9

10 BLACK SEA OFFSHORE CONFERENCE/OCT 214 Heavy lift fleet almost doubled in the past ten years Global Heavy Lift Fleet Supply Existing vessels Newbuilds The current fleet consists of 56 vessels, with 1 under construction 1

11 Supply/Demand, vessel days Utilisation, % BLACK SEA OFFSHORE CONFERENCE/OCT 214 Heavy lift market will remain heavily oversupplied 25, 8% 7% 2, 6% 15, 5% 4% 1, 3% 5, 2% 1% Demand (vessel days) Supply (vessel days) Utilisation % 11

12 BLACK SEA OFFSHORE CONFERENCE/OCT 214 unless older vessels are removed years 6-1 years years 16-2 years years 26+ years 12

13 BLACK SEA OFFSHORE CONFERENCE/OCT 214 The pipelay market has seen a large number of newbuild deliveries in the past ten years

14 Supply/Demand, vessel days Utilisation, % BLACK SEA OFFSHORE CONFERENCE/OCT 214 Increasing supply and slower demand for pipelay work are affecting utilisation rates 7, 1% 6, 5, 9% 8% 7% 4, 3, 6% 5% 4% 2, 3% 1, 2% 1% F 215F 216F 217F 218F Demand Supply Utilisation % 14

15 Utilisation rates for deepwater vessels will stay at a healthy level Offshore pipelay utilisation by vessel type (24-218) 12% BLACK SEA OFFSHORE CONFERENCE/OCT 214 1% 8% 6% 4% 2% % F 215F 216F 217F 218F Harsh&Deep Shallow&Benign Whole Fleet 15

16 BLACK SEA OFFSHORE CONFERENCE/OCT 214 Rig market 16

17 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Rig demand/supply Rig surplus BLACK SEA OFFSHORE CONFERENCE/OCT 214 Floating rig market will weaken in the next two years due to newbuild deliveries and poor demand 55 NW Europe semis supply and demand Demand Total supply Marketed supply Marketed surplus 17

18 BLACK SEA OFFSHORE CONFERENCE/OCT 214 Indicators of market change from IHS publications - Chevron looks for cost cuts on Rosebank (European Rigs Newswire - 25 November, 213) - Alarm bells ring over UK exploration decrease (European Rigs Newswire - 26 February, 214) - Oil & Gas UK expresses concerns over bareboat chartering tax measure (European Rigs Newswire - 2 March, 214) - Statoil lets Transocean Leader option lapse (European Rigs Newswire - 1 April, 214) - Sublets adding further market pressure (North Sea Rig Report - 1 July, 214) - Rosneft awards contracts to NADL and Northern Offshore (European Rigs Newswire - 3 July, 214) 18

19 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Rig supply/ demand Rig surplus BLACK SEA OFFSHORE CONFERENCE/OCT 214 Jackup rig market will also soften as little new work is emerging for NW Europe jackups supply and demand Demand Total supply Marketed supply Marketed surplus 19

20 WHATEVER HAPPENED TO THE BLACK NORTH SEA SEA OFFSHORE RIG MARKET? CONFERENCE/OCT / SEPTEMBER 214 Floater market softening Standard Marketed utilisation 85% Total utilisation 6% 25% cold-stacked Fixture rates USD 18,-3, Older rigs up for sale few buyers Deepwater (DW) Marketed utilisation 87% Total utilisation of 83% Fixture rates USD 2,-4, Declining rig values Scope for attrition of older deepwater units Ultra-deepwater (UDW) 95% marketed/total utilisation 72 units available before late 215 Most UDW rigs working way below water depth capacity 16 newbuilds available before late 215 Soft market expected until 216 Day rates slipping from highs of USD 63, to USD 375, 2

21 New supply incoming but little attrition 45% of newbuilds uncommitted 61 of 75 have wd>7,5ft WHATEVER HAPPENED TO THE BLACK NORTH SEA SEA OFFSHORE RIG MARKET? CONFERENCE/OCT / SEPTEMBER % of newbuilds uncommitted Drillship supply Semi supply Supply Additions/ removals 1 2 Supply 15 1 Additions/ Removals Add Del Fleet Add Del Fleet 21

22 Backlog Days per rig Sharp decline in 3,1-5,ft backlog WHATEVER HAPPENED TO THE BLACK NORTH SEA SEA OFFSHORE RIG MARKET? CONFERENCE/OCT / SEPTEMBER 214 Floating Rig Backlog by Rated Depth 2, 1,8 1,6 1,4 1,2 1, >7,5ft 5,1-7,5ft 3,1-5,ft <3,ft 1Q 1Q1 1Q2 1Q3 1Q4 1Q5 1Q6 1Q7 1Q8 1Q9 1Q1 1Q11 1Q12 1Q13 1Q14 Rigs on order and under construction are counted. Out of service rigs are not counted. 22

23 WHATEVER HAPPENED TO THE BLACK NORTH SEA SEA OFFSHORE RIG MARKET? CONFERENCE/OCT / SEPTEMBER 214 Jackup supply increasing but market remains for older rigs Premium (31ft+) Total utilisation of 94% Marketed utilisation 94% Fixture rates USD 15,-18, Stronger utilisation of higherspec vs. lower-spec rigs Day rate gap between older and newer rigs Oversupply looming 3ft IC Total utilisation of 86% Marketed utilisation of 87% Fixture rates USD 98,-17, Attrition rate for older rigs remains low Low-cost contractors being set up 25ft IC Total utilisation of 84% Marketed utilisation of 87% Fixture rates USD 12,-128, Attrition rate for older rigs remains low Low-cost contractors being set up 23

24 Huge increase in jackup fleet WHATEVER HAPPENED TO THE BLACK NORTH SEA SEA OFFSHORE RIG MARKET? CONFERENCE/OCT / SEPTEMBER Jackup supply jackups under construction 88% uncontracted Little attrition underway Over half being built in China Additions/ Attrition Jackup - Add Jackup - Del Jackup - Exist 24

25 BLACK SEA OFFSHORE CONFERENCE/OCT 214 Conclusions Cost escalation and uncertainty over the oil price will lead to a reduction in new field development projects in 2-3 years This will affect demand for pipelay, platform and subsea installation work Increasing supply and slower demand will bring down utilisation rates for heavy lift and pipelay vessels Floating and jackup rig markets will weaken in the next two years due to newbuild deliveries and poor demand Longer term, the oil price will be strengthening, as the global economy recovers, boosting field development activities 25

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