Addressing the 'White Space' Concerns

The US Gulf deepwater rig market has been navigating through a period of uncertainty, with contractors expressing concerns over 'white space'—gaps in rig availability—early in the year. However, recent fixtures have begun to address these gaps, shifting focus to projects scheduled for late 2025 and beyond. Since mid-2022, the US Gulf of Mexico has been a leader in the global market, boasting floater day rates exceeding $400,000. This trend has continued, with six worldwide fixtures reaching day rates of $500,000 or more, three of which occurred in the US Gulf market in 2024. Currently, most US Gulf deepwater rig providers are seeking clean rates between $500,000 and $515,000, with some aiming even higher.

Fixture Trends and Market Dynamics

The US Gulf and other global markets experienced a significant increase in fixtures in 2021, following a pandemic-induced slump. The market saw steady demand in 2022 and 2023, with 26 and 20 fixtures respectively. In 2023, the awards amounted to about 13 rig-years of work, surpassing the previous year by approximately one year. The first half of 2024 has seen another increase, with 21 fixtures accumulating to about 18 rig-years of work.

Of these 21 floater fixtures, 19 have been for drillships. BP and Occidental lead the way, respectively securing a cumulative duration of 2,555 days and 1,461 days, followed by Hess with a collective duration of 730 days. Among contractors, Diamond Offshore has secured the most backlog—2,520 days—thanks to BP extending the charters for Diamond Offshore drillships Ocean BlackLion and Ocean BlackHornet by two years each. Additionally, Diamond received another two-year extension from Occidental for drillship Ocean BlackHawk.

Upcoming Projects and Market Outlook

The US Gulf market has maintained an average floater market utilization of 92% since 2019. Drillships have seen an average total utilization of 97.5% with an average total supply of 21.6 units since January 2022. The semi market, however, might continue to experience limited immediate demand. The forecast indicates a similar supply/demand balance until the end of 2026.

According to S&P Global Commodity Insights, the outlook for the US Gulf deepwater in early 2024 suggests a continuation of the activity level seen in 2023. Oil companies are maintaining restrained capital expenditures, focusing instead on returning capital to shareholders. Four US Gulf operators have planned only five deepwater exploration projects for this year, with only two approved so far, identifying a total of 28 potential wells. None of these prospects have been spudded yet, but three companies already have floaters under contract through 2025.

Day Rate and Technology Trends

Around this time last year, the Drillship > 7500 market category in the US Gulf had an average day rate of $437,500. Over the past 12 months, this rate has increased to an average of $496,333. As of July, the category had a low day rate of $479,000 and a high of $505,000. This does not include the new day rates for 20,000 psi pressure control operations. Beacon Offshore awarded a two-well contract to Transocean drillship Deepwater Atlas at a day rate of $580,000 with options to perform two 20K completions at a day rate of $650,000. This work is anticipated to begin in 2026.

The US Gulf will soon be home to three rigs capable of drilling and completing wells requiring 20,000 psi (20K) pressure control. Stena Drilling, along with equipment supplier NOV and Shell, will start installing a 20K subsea blowout preventer (BOP) on drillship Stena Evolution in 2026. This unit, originally ordered by Ocean Rig and formerly known as Crete, arrived in the US Gulf in March 2024 and started its five-year maiden charter with Shell in April.

Future Prospects

The world's first two 'eighth-generation' ultra-deepwater drillships, Transocean's Deepwater Atlas and Deepwater Titan, have been operating in the US Gulf since October 2022 and May 2023 respectively. Both were designed to handle wells requiring subsea equipment rated to 20,000 psi. BP has reached a final investment decision (FID) for its Kaskida deepwater development, making it the fourth 20K pressure control project to reach an FID in the US Gulf. This project could potentially open up the northern Keathley Canyon area for additional activity.

In conclusion, the first half of 2024 has shown a strong marketed utilization in the US Gulf floater market, with an increasing trend in fixtures and deepwater day rates. Investment continues in high-pressure, high-temperature (HPHT) projects, with drillships dominating the market. Although availability in the semi market remains this year, short- to medium-term opportunities for both rigs continue to develop over the next 18 months. Demand for high-end, dual activity, MPD-capable rigs with large hookload capabilities remains strong, ensuring a dynamic and evolving market landscape.

This blog post written by Angel Gutierrez our Petrodata Rigs Senior Analyst provides a comprehensive overview of the current state and future prospects of the US Gulf deepwater rig market. If you need any further additional details, feel free to contact us!.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.