Image Source: Michael Elleray
Structure of the Energy Services – Offshore Drilling Industry
The offshore drilling industry is driven by hydrocarbon demand and spending by oil and gas companies. The group has traditionally been subject to intense price competition and volatility. Periods of high demand and higher day rates are often followed by periods of low demand and lower day rates. Contracts vary in terms and rates depending on the nature of the operation to be performed. An oversupply of drilling rigs in any market area is a key risk to pricing dynamics and underlying profitability. We’re not big fans of the industry structure, though long-term contracts can offer stability to performance.
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