Supply-side discipline remains key

With uncertainty among investors due to flattish near-term deepwater demand and increasing availability of tier-2 deepwater rigs, we highlight that supply-side discipline has been a key driver this upcycle. As the industry is even more consolidated, we expect the high-end of the deepwater market to remain strong while lower-end units are likely to face greater day-rate volatility. We still see value chain bottlenecks (FPSO, subsea) unfolding, effectively putting a cap on drilling demand, as expl...

Valuation and market update

In this note, we show updated valuation and market statistics for the Offshore Drilling sector.

Delivering across the board

ADES building international footprint

ADES announced it has acquired two working premium jackups from Vantage Drilling for USD190m (Soehanah USD85m, Topaz Driller USD105m). Both are on long-term contracts in Southeast Asia, marking a strategic move for ADES in further increasing its presence in the region. Compared to consensus, we find the transaction metrics accretive on asset values and earnings multiples. For international drillers in our coverage, Borr Drilling is trading at USD138m per rig (has a more modern fleet of premium j...

Valuation and market update

In this note, we show updated valuation and market statistics for the Offshore Drilling sector.

Petrobras deepwater tenders progressing

Over the next weeks and months, we expect to see more news flow related to Petrobras’ deepwater tenders, as bids on Sepia and Atapu (3-rigs) closed late last week, the Roncador tender (2-rigs) is believed to be nearing conclusion and the rig pool (4-rigs) tender is scheduled to take bids late this month. Although outside rigs are seen participating, we believe rigs already in Brazil are likely to secure most of the jobs. As there currently is some investor uncertainty related to the deepwater ma...

Tier-2 deepwater risk in process of being reflected

As we flagged in an update in May, the risk of idle time or even stacking of tier-2 deepwater rigs was previously likely not reflected in consensus, leaving potential for negative revisions. Although our estimates remain (well) below consensus, we believe investors and valuations now reflect the uncertainty for tier-2 deepwater rigs to a greater extent. As for the investment case for offshore drillers, we continue to believe focus on cycle duration and earnings in the out-years (2026+) is key.

Steady upcycle building in duration

Our 18th annual spending survey lends support to an extended upcycle for offshore-focused oil services, with 2024–2025e offshore spending growth of 5–8%. As value chain bottlenecks (FPSO, subsea) are unfolding, we believe the foundations are in place for a longer and more stable upcycle, supported by oil companies’ discipline. In sum, service companies’ discipline and oil companies’ conservativeness are likely to extend the upcycle, avoiding past ‘boom and bust’ mentality.

More Aramco tactics and uncertainty

Various updates suggest Aramco has requested dayrate discussions from all its drilling contractors and service companies. For jackup contractors, the request to reduce dayrates follows two rounds of suspensions/terminations totalling 28 jackups. When Aramco has asked for dayrate concessions in the past, it has achieved various levels of discounts, typically for a specific period (e.g. 12 months). For drilling contractors and investors, such efforts from Aramco (to manage its rig count and achiev...

Valuation and market update

In this note, we show updated valuation and market statistics for the Offshore Drilling sector.

Valuation and market update

In this note, we show updated valuation and market statistics for the Offshore Drilling sector.

Valuation and market update

In this note, we show updated valuation and market statistics for the Offshore Drilling sector.

Valuation and market update

In this note, we show updated valuation and market statistics for the Offshore Drilling sector.

Valuation and market update

In this note, we show updated valuation and market statistics for the Offshore Drilling sector.

Another round of Aramco suspensions may unfold

News reports yesterday afternoon suggest that Saudi Aramco may suspend another 4–5 jackups in the near term (we also believe land rigs could be affected). We see this adding to various industry participants’ concerns that a second round of Aramco suspensions has been looming. Although likely to a lesser extent than the initial round of suspensions, we believe additional suspensions may create uncertainty among investors for jackup-focused names in our coverage (like Borr Drilling, Shelf Drilling...

Another Petrobras tender provides increased comfort on extensions

Updates suggest Petrobras launched a new tender for four deepwater rigs yesterday. Along with two other ongoing tenders, we believe this gives increased confidence for rigs coming off current Petrobras contracts between late 2024 and mid-2026 being able to secure extensions. We consider continued high Petrobras activity as positive for the deepwater market in general and in particular for Ventura Offshore, Constellation and Seadrill, which have Petrobras-contracted rigs coming off contract in th...

Industry-leading dividend yield

Oil service holding company with attractive sector exposure. High contract visibility at superior rates. Strong cash flow, exceptional dividend payout – BUY.

Paratus Energy - Initiation of coverage - All set for shareholder dist...

We believe good earnings visibility on contracted assets and a limited capex need leave Paratus Energy well placed for industry-leading shareholder cash distributions, that, coupled with a flexible capital structure, are set to be key for the equity story. We calculate a 19% dividend yield from 2025, and initiate coverage with a BUY and NOK80 target price.