Rig demand is so dismal today that drilling contractors are rejecting notions of ordering newbuild rigs or even implementing major refurbishments, according to a recent survey by RigData’s Land Rig Newsletter.
The survey was prompted to gauge validity of some Wall Street analysts’ assertions that rig refurbishments could be economically viable in today’s market, considering that the newbuild pipeline has all but evaporated. Drillers were asked if they would consider newbuilds or major refurbs based on how their customers view the market outlook.
Every driller surveyed said clients see 2016 as down or flat at best for drilling. Among a few contractors undertaking some minor upgrades, some are replacing blowout preventers, swivels, and hydraulics, while others have upsized mud pumps—but none expect to be able to increase day rates to accommodate the extra expenditures. Instead, these contractors are upgrading components just to remain competitive today.
Even with a major, sustained recovery in commodity prices and rig demand, only a few drillers would consider a newbuild order, given market saturation.
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