Sector Report - No general recovery, but signs of life in 2021

Estimate up on oil price and JS performance New projects on top of the agenda We stick to

Awilco Drilling PLC - In a war with Keppel FELS

Both newbuilds terminated… …and subject to ~USD 100m arbitration claim TP up to NOK 5 (3)

Shallow help from Malaysia

In its 3-year plan, Malaysian NOC Petronas suggests the 2021–2023 jack-up count will be 7–10 rigs, compared to an average of 10 rigs for 2019–2020 and a peak of 14 rigs in early 2020. Compared to the previous plan, the new plan suggests a 45% reduction in jackup demand for 2021–2022. The only positive is that as many jack-ups rolled off contract in late 2020 and currently sit idle, the jack-up count is set to increase from the four rigs currently contracted. With a subdued future rig count, we believe local contractors, which own eight premium jackups, are likely to cover most of the demand. F...

No help from Petrobras

Our initial impression from the detailed 5-year plan from Petrobras is that there is no aid for the oil services sector in the coming years. Overall spending is seen down 28%. Capital discipline appears high, with focus on pre-salt production (Buzios), resulting in among others exploration spending down c50%, likely to hurt both seismic and drilling. Compared to what was already known, no new FPSOs were introduced, which we consider negative for subsea and drilling demand.

More realistic market comments from US large caps

Over the past few days, US large-caps Schlumberger and Halliburton have reported Q3 numbers, with both reporting decent margins. However, it is clear that a recovery is still quite far out in time, especially with the global resurgence of Covid-19. We consider their offshore-related market commentary to be fairly realistic, seeing subdued international activity over the next 12 months. That said, we remain concerned about the offshore fundamentals even beyond this, with key clients continuing to prioritise other asset classes (renewables) and regions (shale). For the companies under our covera...

Northern Lights

Northern Lights