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Offshore Market DCR Optimistic About Future Of Offshore Drilling Sector While it may be impossible to predict when offshore rig utilization will begin a meaningful recovery. Duff & Phelps Credit Rating Co. (DCR) has noticed certain industry developments that sug- gest improved conditions. Operating rates for drilling rigs have increased steadily over the past 12 months as drilling day rates for a shallow water jackup rig have risen from a low of $22,000 to current levels of approxi- mately $50,000, the DCR report explains. Offshore drilling rig utilization has also steadily increased from a low of 72 percent during the summer of 1999, to 81 percent in February 2000. Yet. the report continues, utilization of the worldwide mobile offshore drilling We'll Turn Your Wheel See us at OTC, Booth #2937 2000 HP Iso-DRIVE SCR System in 26"x36"x90" Enclosure for Propulsion, Thruster or Winch • Digital system: touch screen interface for monitoring, settings and maintenance; self diagnostics with status panel • Convenient front access to all components • No field adjustments for quick-disconnect single module regulator • NEMA 1, NEMA 4, or NEMA 12 enclosures available • Built to your specifications with worldwide regulatory bodies; i.e., USCG, ABS, and DNV • We also provide: • Compatible generator controls to accompany D.C. drive • Complete system integration and power management • Upgrades/repowers of older SCR systems • Experienced engineering and service personnel • Reliable On-Time Deliveries TECH POWER CONTROLS CO. 10507 Fallstone, Houston, TX 77099 Phone: (281) 530-8800 Fax: (281) 530-8803 E-Mail: tpcsales@flash.net Circle 298 on Reader Service Card M Safety at sea - Rox System penetration seals \ Rox System adaptable penetration seals are used onboard FPSO's and oilrigs to seal cables and pipes to prevent the spreading of jetfire, gas, tire and water. The MultiDiameter technology makes the seals easy to install and guarantees reliable and reopenable installations. Rox System's six basic moltlle sizes I minimize the need lor large stocks. Roxtec Inc. 12402 E. 60th Street, Tulsa, Oklahoma 74146-6922, USA Ph +1 918 25 49 872, Fax +1 918 254 2544 World wide: info@roxsystem.com, www.roxsystem.com £)) ROXSYSTEM fleet is only about 81 percent, compared to about 99 percent two years ago when West Texas Intermediate and North Sea Brent crude prices reached their last post Gulf War peak of $22 and $24 a barrel, respectively. However, the current state of offshore drilling activity is not a surprise, reports DCR. Historically, there has always been a delay or lag effect between com- modity price movements and demand for offshore drilling rigs. For example, an oil price recovery that began in Feb- ruary 1994 was not followed by mean- ingfully higher rig utilization until about May 1995. And. in late 1998, when oil prices were approaching $11 per barrel, rig utilization was still close to 95 per- cent. Instead of responding immediately to brief and highly uncertain changes in crude prices, major integrated oil com- panies have frequently elected to wait for a sustainable pricing range that will support an appropriate level of spend- ing. This pattern can be altered by sev- eral factors, according to DCR. Some E&P companies are utilizing increased cash flow from higher oil and gas prices to reduce debt levels, strengthen their balance sheet or postpone spending decisions until after they complete reor- ganizations or acquisitions. Some of the recent mergers that have taken place are having a dampening effect on indepen- dent E&P companies' capital spending until the major E&P companies sell off properties they do not see fitting with the newly merged operations. Also, advances in seismic and drilling tech- nology reduce the number of rigs that are required. Improved drill bits allow the same amount of footage to be drilled with fewer rigs, and better seismic data reduce the number of dry holes. The drilling industry may have learned from their mistakes during the mid-1980s when the sector experienced speculative rig building, namely in the shallow water jackup market. Commod- ity prices dropped and a number of drilling companies had no contracts to support the over abundance of rigs. Most current construction projects, either newbuilds or conversions, for the deepwater market have been undertaken only upon the signing of a drilling con- tract, which should help maintain a bal- ance between supply and demand for this market. Overall, the DCR report states, the current oil price environment will be beneficial for all segments of the energy industry, including the offshore drilling market. 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