Good times continue for Aban Offshore

Aban Offshore has won a contract for the deployment of ‘Deep Driller 2’, its jack-up rig, for drilling three wells in offshore Malaysia. Contracted at a day rate of about $1,89,000, this order will earn the company over $17 million over a period of 90 days. This reiterates the strong demand environment for jack-up rigs in the near-term, since the day rates procured under the new contract are on par with the rates commanded under its contract with Chevron Offshore.
In December 2007, ‘Deep Driller 2’ had been deployed for use by Chevron Offshore at a day rate of about $1,90,000 for seven months. The new contract, which will come into effect as soon as the rig’s current contract lapses in July 2008, not only ensures a high-utilisation level, it also does away with any opportunity loss, which would have arisen, had the rig been left idle.Near-term demand
The sustenance of the firm day rates for ‘Deep Driller 2’ highlights that demand for jack-up rigs continues to be strong. Buoyed by a demand-supply mismatch, Aban has been able to command day rates in the range between $1,80,000- $2,25,000 for its rigs. Further, the company has also contracted the same rig for use by another operator after the 90-day period, when the new contract would lapse. The second contract for ‘Deep Driller 2’ has been procured for approximately $38 million for a period of 210 days. This translates into a day rate of about $1,80,000, which is over 4 per cent lower than the rate sealed under the first contract.Rates to taper
Day rates for jack-up rigs were expected to taper down over the medium term and the dip in rates secured under the second contract may be construed as early signs of the moderation in rates. An increase in supply of rigs over the next few years, in addition to the shift in focus towards deepwater offshore-spending may temper demand and this may reflect on day rates for jack-up oil rigs, which are primarily used for shallow water offshore drilling.