Shipbuilders to launch fire sales of jackup rigs on back of immense glut

Blame it on the Chinese yards.

Shipbuilders will be forced to launch distressed sales of uncontracted jackup rigs as a massive glut hits the market.

According to Nomura, scheduled jackup rig deliveries will jump 103% year-on-year in 2015. This will be the second-highest annual deliveries on record, only surpassed by the 76 units delivered in 1982. Out of the 67 rigs scheduled for delivery, only 7% are contracted to date.

“The Chinese yards are the main culprit, after their irrational willingness to accept 1-5% downpayments excite rig speculators to place massive newbuild jackup rig orders with them since 4Q12. We expect the likely flooding of the resale market with Chinese-built jackup rigs (at possibly distressed prices) to delay the expected commencement of the supply-side rig replacement-driven orders to 2H16F. Indeed, even if crude oil prices are to recover as expected, we expect newbuild jackup rig orders to be subdued in 2015F,” stated Nomura.