Jack-up Rig Utilization, Pricing to Hit Pre-pandemic Levels in 2022, Shelf Drilling CEO Says

Tendering activity for jack-up drilling rigs continues to improve, especially in the past two months, with global utilization expected to hit pre-pandemic levels in 2022.

This is according to David Mullen, CEO of shallow-water oil and gas drilling rig contractor Shelf Drilling, who shared his view on the offshore drilling market in Shelf Drilling's quarterly presentation on Thursday.

Shelf Drilling posted first-quarter revenues of $156.0 million, a 14.7% sequential increase compared to Q4 2021 and also an increase compared to the 1Q 2021 revenue of $136 million. The company’s net loss was $4.6 million.

Mullen said that the revenue bump was related to the start-up of three rig contracts in West Africa and India.

Mullen added: "Tendering and marketing activity in the jack-up sector continues to improve in all geographies where we operate, and we have seen an acceleration over the past two months.

Shelf Drilling CEO said that as of March 31, 2022, the company's contract backlog was $1.7 billion with 28 of our 30 rigs under contract, representing a marketed utilization of 93%.

"We anticipate that our recent contract awards coupled with other contracts and extensions that are in advanced discussions will drive a further increase in our backlog during the second quarter of 2022. The significant improvement in the commodity price backdrop, combined with our strong customer relationships and proven operating track record will position Shelf Drilling very well. We expect global jack-up utilization and pricing to surpass pre-pandemic levels during 2022," Mullen said.

According to global offshore drilling rig stats provided recently to Offshore Engineer by Wood Mackenzie, the global jack-up rig utilization in April was around 67%, with 294 jack-ups on a contract, and 146 available.

In the second quarter so far, Shelf Drilling has secured a three-year contract extension for the High Island V jack-up rig in Saudi Arabia until May 2025, an extension for the Key Singapore rig in India until May 2023, and a short term deal for the Shelf Drilling Scepter rig in Vietnam, scheduled to start in July.