RigData Insights

U.S. Land Day Rates See an Increase in Q1

  • Friday, April 13, 2018
  • Posted By Greg Tsichlis

The average day rate for US land rigs in March posted its biggest QTQ increase since Q2 2017, according to the Platts Day Rate Report. Q2 2018 logged a sequential gain of 1.8% and alone surpassed the combined increases of both Q3 and Q4 2017. While market conditions are improving, many drillers still see day rates as falling short.

Certainly this disconnect owes largely to the perception that there remains much ground to be made up. The numbers bear it out. As the nearby chart shows of sequential shifts in day rate for the three major rig classes, the loss in day rate value was more than double, by percentage points, of the subsequent recoupment in value throughout this cycle.

The numbers seem to uphold the notion that the industry is moving toward a single-rig market, courtesy of the Class D rigs, which are nearly three-fourths of all active rigs. During the downturn in 2015–2016, the Class C rigs led the way down, with a cumulative net total decline of 38%.

But the D Class was close behind at a drop of 32%. The B Class fell by 21%. On the way back up, however, the D Class mustered a 16% gain in day rate, followed by the C Class at 13% and B Class at just 8%. As the Class D chokehold on the market tightens, we can expect this premium to dwindle again because, on a sustained basis, it will account for all but a sliver of drilling activity.

Call 1-800-627-9785 to subscribe to S&P Global Platts Analytics Day Rate Report, the exclusive monitor of U.S. drilling contractor day rates.Day Rate image 040617

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