Deepwater rig day rates top $600K

Day rates for deep-water drilling rigs  have climbed to a record high of $600,000 in the last year, driven by a lower rig availability amid rising demand,  Barclays equity research reported Monday.

The research note cited a recent two-year contract for Transocean’s Deepwater Expedition at a rate of $650,000 as an example of rising prices for ultra-deep-water units.

“We believe market psychology has shifted in favor of the contract drillers and we expect day rates to continue to climb in 2012,” Barclays wrote in the research note.

The study cites recovery in the Gulf of Mexico, activity in West Africa and an upsurge in North Sea exploration as  contributing to a high demand for rigs.  While the Gulf of Mexico moratorium following the Deepwater Horizon explosion and oil spill in April 2010 pushed day rates down, federal permitting is now returning to pre-spill levels. In February the government issued 58 well permits including 28 for new wells, indicating a steady growth of deep-water activity in the Gulf.

The study also notes that it’s getting harder for operators to secure  deep-water equipment.

“High commodity prices coupled with ample demand in Brazil, the Gulf of Mexico, West Africa, and emerging basins will likely maintain tightness even while the overall floating rig count grows,” Barclays wrote. “As a result, the scramble to secure ultra-deep-water units is now underway and day rates are rising accordingly.”