Early in the pandemic, the industry was further impacted by the market share war between Saudi Arabia and Russia that led to oversupply at a very low price, as well as an associated build in oil inventories that poor demand is slow to draw down. Operators quickly cut CAPEX budgets by 20-30%. As of late October, oil price was still only slowly regaining to a level at which operations can be stable and still some time away from a price that stimulates growth in rig demand.
Global rig demand in the census period has fallen by 82% from its peak in 2014. It now sits at the lowest point in census history, dating back to 1955. The North America land market has been the hardest-hit, with its active rig count dropping to 398. This is a two-thirds decline compared with the 2019 census, and it may fall even further before year-end. Within this market, the decrease was felt the most in the Permian Basin, where utilization dropped from 74% to a grim 26%.
Offshore has not been spared either, although the effects of the pandemic take longer to play out due to the longer-term nature of projects and contracts. Operators were quick to cancel or suspend any contracts that did not penalize early termination harshly. Many contracts were also renegotiated with lower dayrates. We expect the offshore utilization to continue its decline for the rest of the year, with a possible recovery beginning in the latter parts of 2021.
Click here to continuing reading the full NOV rig census, which was also published in the November/ December 2020 issue of Drilling Contractor Magazine.