• 3 minutes "Biden Is Running U.S. Energy Security Into The Ground" by Irina Slav
  • 6 minutes How Far Have We Really Gotten With Alternative Energy
  • 9 minutes "How to Calculate Your Individual ESG Score to ensure that your Digital ID 'benefits' and money are accessible"
  • 21 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 10 days 87,000 new IRS agents, higher taxes, and a massive green energy slush fund... "Here Are The Winners And Losers In The 'Inflation Reduction Act'"-ZeroHedge
  • 12 mins Energy Armageddon
  • 18 hours "Natural Gas Price Fundamental Daily Forecast – Grinding Toward Summer Highs Despite Huge Short Interest" by James Hyerczyk & REUTERS on NatGas
  • 2 hours Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in
  • 4 days "The Global Digital ID Prison" by James Corbett of CorbettReport.com
  • 4 days "Forget Oil, The Real Crisis Is Diesel Inventories: The US Has Just 25 Days Left" by Zero Hedge - 5 Stars *****
  • 4 days "Europe’s Energy Crisis Has Ended Its Era Of Abundance" by Irina Slav
  • 4 days The Federal Reserve and Money...Aspects which are not widely known
  • 2 days Is Europe heading for winter of discontent with extensive gas shortages?
  • 6 days Goldman Betting on Cryptocurrencies
  • 9 days Сryptocurrency predictions
  • 14 days Putin and Xi Bet on the Global South

Breaking News:

Oil Prices Jump On Major Crude Draw

Oil Futures Market Points To Sluggish Demand

Oil Futures Market Points To Sluggish Demand

The structure of the oil…

Canadian Banks Slammed For Continued Fossil Fuel Investments

Canadian Banks Slammed For Continued Fossil Fuel Investments

Investors are levying strong critiques…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Why The Bust For Offshore Drillers Might Last Another 2 Years

Statoil cancelled a contract for a drillship with Seadrill, which it had intended to use for drilling operations in the Atlantic, near Newfoundland. The cancellation is the second drillship contract to be terminated for Seadrill, coming shortly after Exxon canceled a contract for its drillship, West Capella, that had been dispatched off the Nigerian coast.

West Hercules, the Newfoundland drillship, was bringing in $445,000 per day for Seadrill, and it was supposed to continue to do so until January next year. Statoil, however, has decided to save some money and pay Seadrill some $61 million as compensation for canceling the contract. Revenues until January 2017 would have exceeded $90 million.

Things are not looking good for offshore drillers at the moment, and Seadrill is not the only one that’s had contracts canceled. Drillers have accumulated huge piles of debt and have been left with few ways of tackling it in an industry where everybody is thinking about cutting costs. What makes the downturn worse for these drillers is that they don’t have an alternative source of revenue, while major integrated E&Ps can rely on their downstream operations to support their balance sheet until prices recover and upstream operations rebound. Related: Clinton Chasing Votes With Fracking U-Turn

There’s gloom across the drilling world. Demand for drilling services is extremely weak. Although most industry leaders are still in the black, there are not enough new orders coming in to sustain these performances. Credit rating agencies are revising their stance on drillers downward, despite positive quarterly results, and some are forced to suspend dividends as a way to realize more cost savings. Bad news all around.

There is some good news, however. At least in the medium term, there will be a pick-up in demand for drilling services as existing fields are depleted and E&Ps are forced to look for new ones. Once prices start climbing back up, and demand begins to outstrip supply, drilling should return. Related: The Consequences Of $50 Oil

Estimates as to when this will happen vary from two to five years. With new oil discoveries at a 60-year low, and severe cut backs in spending assuring that exploration will remain moribund for the next few years, chances are that demand will inch up higher than supply sooner rather than later.

When this happens, the surviving drillers will get a new chance to thrive. Meanwhile, in a bid to guarantee their survival, some are betting on consolidation: Technip and FMC recently announced their planned $13-billion all-stock tie-up that should result in annual cost savings of up to $400 million. More deals like this could follow in offshore drilling as mergers and acquisitions have remained the only option for some embattled drillers.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • aaron on May 27 2016 said:
    The first sentence isn't true, which you can see if you click on the link in the second sentence.

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News