Land / onshore rigs outlook in Middle East

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Image 29.09.2020
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Market Summary

  • Significant reduction in terms of rig count and utilization. No recovery expected till 2022 and potentially 2023. Fit-for-purpose assets to be deployed first
  • Middle East market dropped by 101 rigs / 32% between January 2020 and August 2020
  • International drilling contractors are first to feel the pain, as NOCs would keep local drilling companies busy and terminate international rigs first
  • Day rates will take a long time to recover if will recover at all. It is hard to justify how a day rate can slide down significantly without removing any value. Getting back to full rates will be a challenge. A similar situation is seen with jack-up rigs between 2016 and 2019
  • Utilization levels are high and generally above 90% for local drilling contractors, but between 65%-70% for international rig contactors
  • Mixed picture on utilization – there is c. 594 rigs (many of them are not competitive, though) in the region with only 223 workings (BH Aug rig count). BH may not account for a large number of rigs
  • Lack of demand and cost reduction efforts may drive segment consolidation
  • Mixed messages in the market
    • Many international contractors reported 6%-15% reduction in activity and expect the rig count and pricing to continue sliding down over the remainder of the year
    • Some reported a single-digit day rate increase, compared to 2019
    • Some contractors report stable drilling activity and renewals

 

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