Offshore Rig Owners Fall Most in More Than Month on Drop in Oilby
The world’s largest owners of offshore drilling rigs fell the most in more than a month as oil’s drop below $40 extended their pain.
Diamond Offshore Drilling Inc. fell 5.7 percent to $21.42 at 12:22 p.m. in New York after earlier dropping as much as 7.4 percent, the worst intraday tumble since May 9. Competitors Transocean Ltd., Ensco Plc and Noble Corp. all had their biggest intraday fall since July 5.
Explorers have slashed more than 40 percent from offshore spending since 2012, and more cuts are expected next year, Marc Edwards, chief executive officer at Diamond Offshore, told analysts and investors Monday on a conference call. The correlation of offshore drillers to the tumbling oil price is becoming magnified, J. David Anderson, an analyst at Barclays Plc in New York, said in a phone interview.
"I don’t think anybody expected to hear a turn in offshore drillers today," Anderson said. "It’s just more of an awareness of how bad offshore is right now, relative to others."
While oil-service giants Schlumberger Ltd. and Halliburton Co. called the bottom of the market when they reportred earnings last month, the same can’t be said for owners of the rigs that can drill in water more than two miles deep, said Edwards, a former Halliburton executive.
"Utilization is still declining at almost 5 percent per quarter, and contracting is essentially next to zero," Edwards said. "Before we can declare a bottom, we at least need to see a level of fixture awards that matches a number of contracts that are reaching the end of their term. And for our industry sector, this has yet to happen."