Big fan of your work, Tommy. Slowing building positions in the offshore names in advance of the turnaround. Your insight is a huge asset for us in this space
Thank you for reading. Had the Eldorado/TPAO rumor/news on Dorado and Draco drillships been known at the time of writing this, I would have featured it. Positive development should it be confirmed. Glad to be read in Texas!
My goal is to do independent research on this market. I don’t own offshore stocks to avoid bias. My background is as a debt investor and am income-oriented (my preference). If I built my own portfolio, it’d probably be Noble, Odfjell and Borr 1L 2028s (good yields) — diversified income from drillships, NCS Semis and jackups. I post thoughts mostly to inform others to make their own decisions for their unique investment preferences.
I’m not in wait and see mode. I spend time on this market because I’m a bull on offshore capex.
Thanks for the detailed, accurate commentary, especially pointing out that pessimism in the off shore sector is highly and unreasonably unfavorable among most analysts. Eventually the worm will turn.
There's too many people extrapolating the downcycle of 2015-2022 to today's market, which I think is fundamentally wrong on various levels but pessimism exists given this industry's challenging past. I believe the next 12 months are shaping more positively than the last 12 months. Thank you for the comment and continuing to read.
WOW, thanks for the rapid response. Watching the slow down, maturing, in the U.S shale sector, also thinking the Iran affair will make the majors seek stability in the off shore sector.
I've just discovered your substack and started reading your articles. I have also followed you on X. Very informative. You obviously have very deep knowledge of offshore drilling.
I was hoping you might be willing to answer a few questions that I have.
I have seen references to improvements in drill ship technology. Is that the difference between 6G, 7G and 8G? Or are there upgrades that can be made to 7G drill ships? You refer to 7G+ drill ships I believe. Can any 7G be upgraded to a 7G+ or are the 7G+ ships just more recently built 7Gs (that still fall short of the latest 8G)? If a 7G can be upgraded, will those improvements, if widely adopted, reduce the demand for drill ships, as each ship can do more? You clearly expect utilization rates to climb over the next few years. Just hoping for some insight into this.
You refer to infrastructure bottlenecks pushing back deepwater projects. Presumably the bottlenecks will ease as new equipment is built. How long do you think it will take to fix the bottlenecks?
I've seen charts in offshore drillers' presentations estimating future EBITDA of some of the offshore drillers based on day rates and I have read some of Praetorian Capital's newsletters and HFI Research's analysis of this. You have said that there are many deepwater projects with good economics related to onshore. How much would higher day rates for drill ships impact those economics? How much of the breakeven cost for offshore is dependent on drill ship costs?
How likely do you think it is that Transocean's and Valaris's cold stacked ships will ever be reactivated? Will it likely depend on whether they are 6G or 7G?
I have read in various presentations that it takes approximately 5 years for a new drill ship to be built. Is that a fair estimate?
On drillship build time, it’s probably 3-5 years depending on yard availability. They can build these pretty fast when building in bunches like they did in 2011-2013 order boom, which is maybe 2-3 years but unlikely to see a newbuild in a VERY long time! Don’t worry about them.
Thanks Andrew. Briefly, rigs are 5-9% of the cost in recent announced deals depending on project nature. $600k dayrates not changing economics that much. It’s kind of FPSO’s where costs are causing some NOC’s to complain. Not rigs.
7G+ is mostly a U.S. Gulf thing. Shell likes them. Efficiency gains from 7G+ pushed out lesser efficient 6G’s in US Gulf. The standard 7G still very desired in other parts of the world.
Some of these answers I keep private on free substack. Really appreciate your interest and being a reader.
Thanks for getting back to me. Really appreciate the info. I have been reading through all of your articles for the last year. Just a wealth of information.
Thanks Tommy. I always enjoy your pieces, learn a lot and appreciate your work. Cheers John
I appreciate you continuing to read, John. More to come in hopefully a more exciting 2H of 2025.
Somehow this got lost in my mailbox.
Big fan of your work, Tommy. Slowing building positions in the offshore names in advance of the turnaround. Your insight is a huge asset for us in this space
Thank you for reading. Had the Eldorado/TPAO rumor/news on Dorado and Draco drillships been known at the time of writing this, I would have featured it. Positive development should it be confirmed. Glad to be read in Texas!
Tommy, are you building positions yet in the space or in "wait and see" mode? Can you share your favorite names?
My goal is to do independent research on this market. I don’t own offshore stocks to avoid bias. My background is as a debt investor and am income-oriented (my preference). If I built my own portfolio, it’d probably be Noble, Odfjell and Borr 1L 2028s (good yields) — diversified income from drillships, NCS Semis and jackups. I post thoughts mostly to inform others to make their own decisions for their unique investment preferences.
I’m not in wait and see mode. I spend time on this market because I’m a bull on offshore capex.
Great stuff, Tommy. Thank you again for the insights.
Thanks for the detailed, accurate commentary, especially pointing out that pessimism in the off shore sector is highly and unreasonably unfavorable among most analysts. Eventually the worm will turn.
There's too many people extrapolating the downcycle of 2015-2022 to today's market, which I think is fundamentally wrong on various levels but pessimism exists given this industry's challenging past. I believe the next 12 months are shaping more positively than the last 12 months. Thank you for the comment and continuing to read.
WOW, thanks for the rapid response. Watching the slow down, maturing, in the U.S shale sector, also thinking the Iran affair will make the majors seek stability in the off shore sector.
Good article
Thank you for reading!
Hi,
I've just discovered your substack and started reading your articles. I have also followed you on X. Very informative. You obviously have very deep knowledge of offshore drilling.
I was hoping you might be willing to answer a few questions that I have.
I have seen references to improvements in drill ship technology. Is that the difference between 6G, 7G and 8G? Or are there upgrades that can be made to 7G drill ships? You refer to 7G+ drill ships I believe. Can any 7G be upgraded to a 7G+ or are the 7G+ ships just more recently built 7Gs (that still fall short of the latest 8G)? If a 7G can be upgraded, will those improvements, if widely adopted, reduce the demand for drill ships, as each ship can do more? You clearly expect utilization rates to climb over the next few years. Just hoping for some insight into this.
You refer to infrastructure bottlenecks pushing back deepwater projects. Presumably the bottlenecks will ease as new equipment is built. How long do you think it will take to fix the bottlenecks?
I've seen charts in offshore drillers' presentations estimating future EBITDA of some of the offshore drillers based on day rates and I have read some of Praetorian Capital's newsletters and HFI Research's analysis of this. You have said that there are many deepwater projects with good economics related to onshore. How much would higher day rates for drill ships impact those economics? How much of the breakeven cost for offshore is dependent on drill ship costs?
How likely do you think it is that Transocean's and Valaris's cold stacked ships will ever be reactivated? Will it likely depend on whether they are 6G or 7G?
I have read in various presentations that it takes approximately 5 years for a new drill ship to be built. Is that a fair estimate?
Thanks,
Andrew
On drillship build time, it’s probably 3-5 years depending on yard availability. They can build these pretty fast when building in bunches like they did in 2011-2013 order boom, which is maybe 2-3 years but unlikely to see a newbuild in a VERY long time! Don’t worry about them.
Thanks Andrew. Briefly, rigs are 5-9% of the cost in recent announced deals depending on project nature. $600k dayrates not changing economics that much. It’s kind of FPSO’s where costs are causing some NOC’s to complain. Not rigs.
7G+ is mostly a U.S. Gulf thing. Shell likes them. Efficiency gains from 7G+ pushed out lesser efficient 6G’s in US Gulf. The standard 7G still very desired in other parts of the world.
Some of these answers I keep private on free substack. Really appreciate your interest and being a reader.
Thanks for getting back to me. Really appreciate the info. I have been reading through all of your articles for the last year. Just a wealth of information.
Regards,
Andrew