Rig oversupply looms as international oil firms slash spending: report

Big energy firms are reining in capex plans.

Shipbuilders are facing steep consequences as international oil companies continue to hold back on exploration and delay large development projects.

According to OCBC Investment Research, international oil companies are reining in their capex
plans, though national oil companies are still keen to sustain their
spending.

This has led to a softening in the day rates for deepwater and ultra-deepwater rigs, and though charter rates for jack-ups are still holding up, the report notes that there are greater downside risks going forward.

According to OCBC, “With international oil companies holding back on exploration and delaying large development projects, the floater market is likely to remain oversupplied in 2015 with continued delivery of newbuilds. For the jack-up market, demand has been primarily driven by national oil companies, and the market is still tight with high utilisation rates. However, with substantial newbuild deliveries starting in 2015, supply may start to outstrip demand. We note, however, that many deliveries are from Chinese yards, which are prone to delays. Slippage in deliveries would alleviate the demand-supply imbalance when they occur.”