Empirical analysis of dayrate factors

Document Type

Article

Publication Date

1-1-2013

Abstract

A large number of factors have the potential to influence dayrates and a body of “common knowledge” has developed over the years regarding their impact. The purpose of this chapter is to critically review these expectations and the empirical evidence to support/refute selected claims. Some of the claims can be tested, but many cannot, and our evaluation is limited by the availability and reliability of data and factor analysis. We examine the effects of oil prices on rig demand and evaluate the relationship between dayrates and oil prices, utilization, rig specifications, contract length, E&P ownership, contractor size and well type. We show that oil prices explain a large proportion of the variation in the number of active rigs and average dayrates, while utilization is a weaker predictor of dayrates with effects varying by region and time period. We find no evidence that large contractors are able to use their market power to capture higher dayrates than would be expected by their fleet specification. State-owned oil companies, however, tend to pay higher dayrates than private oil companies, and appraisal drilling is found to be more expensive than developmental or exploratory drilling.

Publication Source (Journal or Book title)

Lecture Notes in Energy

First Page

93

Last Page

108

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