Drillers will see cancellation in contract volumes in 2020-21
BAKU, Azerbaijan, April 19
By Leman Zeynalova - Trend:
Drillers will see up to 10 percent of their contract volumes canceled in 2020 and 2021, representing a combined loss of revenue of about $3 billion, Trend reports citing Rystad Energy, an independent energy research and business intelligence company.
"The estimated contract value in 2020–2021 is $30 billion in total; $20 billion in 2020 and $10 billion in 2021. So far six rig years of contracts have been cancelled, translating to approximately $400 million in contract value. These numbers will only increase as operators continue to slash capex budgets and delay projects, our analysis shows," Rystad Energy said in its report.
Rystad Energy’s Head of Offshore Rig Market Services Oddmund Føre said that more than $22 billion in contract value was wiped off the books as a result of contracts being canceled between 2014 and 2017.
"Now, in the infancy of a new downturn, a market that was only beginning to return to a healthy level of contracting activity, contract volumes and dayrates has seen its hopes crushed," he added.
Rystad Energy analysis shows that offshore drillers and offshore vessel providers will generally be unable to pay their total outstanding debt of 2020 based on their cash flow from operating activities (CFO), unless they are able to make sufficient capex cuts. Otherwise, they will have to turn to capital markets for refinancing.
"Especially in 2021 there will hardly be any contracts left for the E&Ps to cancel. This means that the rig industry is already dependent on new contracting activity to maintain survivable levels of utilization – and new contracts will be really difficult to secure in the current environment," the company said.
"Any chances of returning to previous activity and price levels have been torpedoed by the twin effects of the pandemic and the OPEC+ dispute. We expect dayrates to be pushed down to opex levels once again as the industry now tries to continue to cut costs and improve its performance in a challenging environment," adds Føre.
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