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.
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
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monitor of U.S. drilling contractor day rates.