Information Analytics Expertise OCTOBER 214 GLOBAL RIG AND OFFSHORE CONSTRUCTION MARKETS Slowdown on all fronts? Evgenia Kukina, Sr. Product Manager +44 ()231 593 38 Evgenia.kukina@ihs.com
BLACK SEA OFFSHORE CONFERENCE/OCT 214 Content and Presentation Sources 2
BLACK SEA OFFSHORE CONFERENCE/OCT 214 Field Development Trends 3
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 6 5 4 3 2 1 SE Asia Europe Africa Latin America Australia/NZ North America Middle East CIS 4
BLACK SEA OFFSHORE CONFERENCE/OCT 214 Those will be the regions that will drive demand Offshore field development start-ups in 214-219 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
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 5 2 4 15 3 1 2 5 1 29 21 211 212 213 214 Completed Construction Planned Tendering 6
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
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 8 7 6 5 4 3 2 1 27 28 29 21 211 212 213 214 8
BLACK SEA OFFSHORE CONFERENCE/OCT 214 Construction Fleet 9
BLACK SEA OFFSHORE CONFERENCE/OCT 214 Heavy lift fleet almost doubled in the past ten years Global Heavy Lift Fleet Supply 7 6 5 4 3 2 1 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 219 Existing vessels Newbuilds The current fleet consists of 56 vessels, with 1 under construction 1
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% - 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 Demand (vessel days) Supply (vessel days) Utilisation % 11
BLACK SEA OFFSHORE CONFERENCE/OCT 214 unless older vessels are removed 3 25 2 15 1 5-5 years 6-1 years 11-15 years 16-2 years 21-25 years 26+ years 12
1975 1976 1977 1978 1979 198 1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 BLACK SEA OFFSHORE CONFERENCE/OCT 214 The pipelay market has seen a large number of newbuild deliveries in the past ten years 16 14 12 1 8 6 4 2 13
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% 24 25 26 27 28 29 21 211 212 213 214F 215F 216F 217F 218F Demand Supply Utilisation % 14
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% % 24 25 26 27 28 29 21 211 212 213 214F 215F 216F 217F 218F Harsh&Deep Shallow&Benign Whole Fleet 15
BLACK SEA OFFSHORE CONFERENCE/OCT 214 Rig market 16
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 214-16 14 5 12 1 45 8 6 4 4 35 2 3-2 214 215 216 Demand Total supply Marketed supply Marketed surplus 17
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
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 215-216 55 5 45 4 35 3 NW Europe jackups supply and demand 214-16 8 7 6 5 4 3 2 1-1 -2-3 214 215 216 Demand Total supply Marketed supply Marketed surplus 19
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
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 214 46% of newbuilds uncommitted Drillship supply 1995-22 Semi supply 1995-22 2 3 3 2 18 16 25 25 15 14 12 Supply 1 8 2 15 Additions/ removals 1 2 Supply 15 1 Additions/ Removals 5 6 5 1 4 2 5-5 -5 1995 1999 23 27 211 215 219 Add Del Fleet Add Del Fleet 21
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, 8 6 4 2 >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
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
Huge increase in jackup fleet WHATEVER HAPPENED TO THE BLACK NORTH SEA SEA OFFSHORE RIG MARKET? CONFERENCE/OCT / SEPTEMBER 214 7 Jackup supply 1995-215 8 144 jackups under construction 88% uncontracted Little attrition underway Over half being built in China 6 5 4 3 Additions/ Attrition 2 1 7 6 5 4 3-1 1995 1999 23 27 211 215 2 1-2 Jackup - Add Jackup - Del Jackup - Exist 24
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
Contact us Americas: +1.8.IHS.CARE (+1.8.447.273); customercare@ihs.com Europe, Middle East, and Africa: +44.().1344.328.3; customer.support@ihs.com Asia and the Pacific Rim: +64.291.36; supportapac@ihs.com. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. For more information, please contact IHS at customercare@ihs.com, +1 8 IHS CARE (from North American locations), or +44 () 1344 328 3 (from outside North America). All products, company names or other marks appearing in this publication are the trademarks and property of IHS or their respective owners. V2.-29.4.14