RigData Insights

Class D Rigs Day Rate Continue Upward Trend for 2018

  • Friday, May 4, 2018
  • Posted By Greg Tsichlis

 Class D rigs day rate 050418

There are signs of some tempering in the growth of day rates. Even amid talk of the rig count stabilizing last year and in the early part of this year, the average day rate took a healthy upward bounce in Q1. The gain surpassed the entire total gain in the second half of last year, according to S&P Global Platts Analytics Day Rate Report. While April showed another sequential gain, it fell in line with the monthly averages seen in Q1 of this year.

 

Certainly, the growth in 1H 2018 average day rate thus far exceeds the rate of growth in all of 2H 2017. But compared with 1H 2017, the current metric falls far behind. In 2017, the day rate expansion totaled 8%, but 2H 2017 accounted for only 1.7% of that increase, leaving a whopping 6.3% increase to 1H 2017. Class D day rates jumped by 10% in 2017, with 6 of those points in 1H 2017.  Q1 2018 managed a gain greater than that of all of 2H 2017. But instead of echoing 1H 2017, April came in at a rate comparable with Q1’s. Class D will continue to lead the overall trend for day rates, if for no other reason that they dominate the active rig count at almost 75%.

 

So while Q1 was a big improvement over 2H 2017, the average day rate isn’t spiking anywhere near what it was YOY, even with oil prices today flirting with $70/bbl. That should be a cautionary note for drillers:  Even with the current trend overwhelmingly reliant on the rig model that is driving the gains in day rates and with oil prices at three-year highs, we see 2018 day rates moving up in “comfortable” incremental increments that should have them cinching their belts up a bit even in this recovery.

 

Call 1-800-371-0083 or email CustomerService@RigData.com to subscribe to Platts Analytics Day Rate Report, the exclusive monitor of U.S. drilling contractor day rates.

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