Offshore Oil and Gas Sector Dying After Historic 300% Oil Price Crash

- Advertisement -
- Advertisement -
- Advertisement -
- Advertisement -

The offshore drilling market is set to be one of the worst-hit in the oil price crash and demand collapse, as companies are reassessing drilling programs and canceling or halting offshore contracts, IHS Markit said in its latest Offshore Marine Monthly analysis on Monday.

Demand for offshore supply vessels (OSV) is expected to take a hit in the coming months, as exploration and production (E&P) companies, big and small, rushed to cut capital expenditures (capex) following the double whammy of the oil price crash and the coronavirus pandemic, Richard Sanchez, Senior Marine Analyst at IHS Markit, said on Monday.

“E&P companies operating in the US Gulf have been historically quick to respond to falling oil prices. As offshore drilling rigs are idled and contracts are terminated early, excess capacity in the OSV spot market will grow, which puts downward pressure on day rates,” Sanchez added.

According to IHS Markit, more offshore drilling programs will be deferred, halted, or even outright canceled in the coming months amid the unprecedented global oil glut.

Westwood Global Energy Group also believes that the offshore drilling market faces tough times ahead. A month ago, Terry Childs, Head of Westwood’s RigLogix offshore rig intelligence service, said that “the number of idle rigs will increase substantially in short order.”

“Assuming low oil prices and COVID-19 continue in the coming months, the number of rigs going idle will be a key metric. Contracts where options are not exercised, delays to currently planned programs, and Force Majeure declarations and other contract termination options will all result in idle rigs.”

The price crash could lead to companies deferring as much as $131 billion worth of oil and gas projects slated for approval in 2020, Rystad Energy said in March.

Earlier this month, Rystad Energy said in an impact analysis that offshore drillers would see up to 10 percent of their contract volumes canceled this year and next, representing a combined loss of revenue of about $3 billion. According to the independent energy research firm, even the big offshore drillers could face financial challenges and may need restructuring.

“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,” said Rystad Energy’s Head of Offshore Rig Market Services Oddmund Føre.

Home of Science
Follow me

- Advertisement -

Discover

Sponsor

Latest

Penny Stocks – What Every Investor Must Know

If you are planning to enter the market of penny stocks, it is very important that you are aware of the first things that...

Shanghai Disneyland will offer Disney a blueprint for how to reopen its other theme parks

KEY POINTS Shanghai Disneyland will reopen on May 11. There are no plans for Disney to reopen any of its other international theme parks,...

Cristiano Ronaldo: Is Portugal legend the best Euros player ever?on June 4, 2021 at 5:20 am

Cristiano Ronaldo has a claim to being the greatest player ever to figure at the European Championship - with BBC Sport taking a look...

Super Bowl Web Design

As Super Bowl is drawing near, the timing of the Super Bowl has always been a cause for controversy. Today's internet service providers are...

Defending champion Kenin knocked out of Australian Openon February 11, 2021 at 5:41 am

Defending champion Sofia Kenin is knocked out of the Australian Open, losing in straight sets to Kaia Kanepi.Defending champion Sofia Kenin is knocked out...
Home of Science
Follow me