Newbuild and replacement cost functions
Document Type
Article
Publication Date
1-1-2013
Abstract
Rigs are the primary assets of drilling contractors and their newbuild and replacement costs are frequently required in corporate planning and financial valuation. In this chapter, newbuild and replacement cost functions are derived based on rig class, age and upgrade status, water depth, and other factors using 2010 market data. A U.S. jackup newbuild cost function explained 77 % of the variance in construction cost using water depth, drilling depth and an environmental indicator variable. Water depth was the single best predictor across all models and rig classes. Replacement cost models explained larger proportions of variance than newbuild models but this is likely due to the manner in which replacement cost estimates are performed rather than superior methodologies. A brief discussion of the limitations of analysis concludes the chapter.
Publication Source (Journal or Book title)
Lecture Notes in Energy
First Page
209
Last Page
222
Recommended Citation
Kaiser, M., & Snyder, B. (2013). Newbuild and replacement cost functions. Lecture Notes in Energy, 8, 209-222. https://doi.org/10.1007/978-1-4471-5152-4_13