Rig charter rates mixed in May

Business & Markets 2013
Written by AmResearch
Tuesday, 21 May 2013 10:31
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Oil and gas sector
Maintain overweight: According to the IHS Petrodata’s monthly
offshore rig day rate index report, the movement of rig charter rates has
been largely mixed on a month-on-month (m-o-m) comparison in May
this year but utilisation increased in all rig market categories except the
mid-water depth semisubmersibles.
Nevertheless, the day rate index for the mid-water depth
semisubmersibles increased in May, while the Northwest Europe
standard jackup day rate index was unchanged.
But the drilling rig day rate index for the US Gulf of Mexico 250ft to
300ft jackups decreased this month after record highs in recent months
while the deepwater floating rig day rate index also experienced a
considerable drop on May 20, 2013
The mid-water depth semisubmersible day rate index registered the
best uptrend among all four categories, rising by 77 points m-o-m to
888 points in May. While this is slightly higher than in May last year,
utilisation fell in May 2013 to 76% from 80% in April. This segment’s rig
rates are still below the peak levels of over 900 points recorded over
the last 12 months.
The Northwest Europe standard jackup day rate index was unchanged
m-o-m at 589 points, but this is still 53 points higher than the index level
recorded in May 2012. Fleet utilisation increased by 10% to reach
100% this month, after being relatively flat for the previous 15 months.
The US Gulf of Mexico 250ft to 300ft jackup day rate index dropped by 24 points m-o-m to 514 but utilisation rose by 5
percentage points to 73% — the highest utilisation level recorded for this category since January 2009. As a comparison, rig
utilisation was just 58% in May 2012.
The deepwater floating rig day rate index decreased by 45 points m-o-m and 13 points year-on-year to 884. As utilisation for
this category of rig increased by 2 percentage points in May 2013 to 98% — a return to the near-full utilisation levels
experienced over a good part of 2012, we expect this segment to recover over the next two months.
In Malaysia, rollout of new contracts in the second quarter of 2013 (2Q13) slumped quarter-on-quarter (q-o-q) during the
run-up to the 13th general election. To date, we note that there were only RM399 million contracts awarded in 2Q13 (versus
RM4.2 billion in 1Q13), largely due to the progression cycle of more complex projects. But rig charter rates are slowly rising,
as experienced by UMW Oil & Gas Corp Sdn Bhd’s Naga 2 jackup rig which secured a contract from PetroVietnam Drilling
Well & Services Corp last month.
But in the short- to medium-term, excitement in the sector will still largely stem from the domestic rollout of fresh projects,
including the enhanced oil recovery projects for Semarang, Bokor and Dulang fields; gas cluster developments for the North
Malay basin; as well as jobs in Sabah and Sarawak which are tied to the completion of the Bintulu LNG complex expansion in
2015.
Additionally, the RM60 billion refinery and petrochemical integrated development (Rapid) roject in Pengerang, Johor, and
prolific tank terminal projects in southern Johor will continue to drive excitement in the sector.
In view of the multiple flows of contracts this year, we maintain our “overweight” call on the sector with “buy” calls for
SapuraKENCANA PETROLEUM BHD [], ALAM MARITIM RESOURCES BHD [], DIALOG GROUP BHD [] and PETRONAS
GAS BHD []. — AmResearch, May 20