Evercore: Aramco’s decision to suspend jackup rigs to put “slight” damper on dayrate progression
(WO) – Earlier in March, Saudi Aramco announced plans to reduce capital investment by roughly $40 billion between 2024 and 2028. This was mostly due to the Kingdom’s decision to maintain productive capacity at 12 MMbpd, resulting in the deferral of the Safaniyah and Manifa expansion projects.
As part of the decision, Aramco has suspended 17 rigs to date, with a potential for additional releases in the near term. So far, Aramco has suspended four Shelf Drilling jackups, four COSL jackups, one BORR jackup, three Arabian Drilling jackups, and five ADES jackups.
Investment firm Evercore ISI anticipates Aramco suspending additional Saipem, Egyptian Drilling, and ARO Drilling (Valaris) jackups, which are expected to rollover in the second half of 2024. Two potential ARO Drilling rigs that could get suspended are the Valaris 143 and the Valaris 146, which are both expected to rollover in December 2024.
Effect on global market. The overall jackup market is very tight. Even if jackups are suspended, Evercore views the marketed utilization to remain strong at about 90%. Incremental rigs released are expected to be absorbed in other regions, including Southeast Asia and West Africa.
Evercore expects Valaris to be less impacted than other contractors due to the 50/50 JV with Aramco. However, the investment firm thinks there will be a slight pullback on recent rapid dayrate progression.
