With the beginning of 2019, we have witnessed the drilling activity, particularly onshore, has picked up again. With the ongoing momentum, there appears to be more room on the upside for oil prices. Thanks to the emergence of major shale plays, there has been an overwhelming requirement for complex drilling and an increased demand for new land rigs.
On the contrary, the offshore drilling didn’t enjoy the same rate of recovery. The price slump has forced the top energy companies to cut spending due to lower profit margins. This, in turn, has meant less work for the offshore drillers. With old contracts rolling off, the companies are either getting rigs stacked or bear high reactivation costs and accept much-reduced day rates. Overall revenues are impacted. However, steadiness of oil prices at the current levels is driving operators to make longer-term plans, as deepwater projects become cost effective if taken up for a long term. This could increase demand for offshore drilling rigs.
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