Synopsis
A Crisil Ratings report forecasts that Indian offshore rig operators will benefit from a significant profit increase of 30-35% in the upcoming financial year, following a growth of 25-30% this year, driven by renewed contracts and favorable market conditions.Key Takeaways
- 30-35% profit surge expected for Indian offshore rig operators in 2025-26.
- Average day rates projected to rise to $67,000.
- Global rig supply remains subdued due to limited new orders.
- Demand for rigs closely tied to crude oil market dynamics.
- 88% of India's crude oil demand met through imports.
New Delhi, Feb 4 (NationPress) Indian offshore rig operators are projected to experience a remarkable surge in their operating profits by 30-35 percent in the upcoming financial year, following a growth of 25-30 percent in the current fiscal year, as reported by Crisil Ratings on Tuesday.
The anticipated increase stems from the ongoing renewal of rig contracts at rates more than double those of expiring contracts secured 3-4 years ago, fueled by sustained demand amid a modest rise in global rig supply,” the report indicated.
The average day rates are expected to rise to approximately $56,000 this fiscal year and $67,000 in the next, representing a 1.5-1.7 times increase compared to the average day rates observed from fiscal years 2021-2024, thereby significantly enhancing operating profits, as noted.
This trend will bolster the credit profiles and debt metrics of rig operators, especially in light of minimal investments in new rig acquisitions, the report further elaborated.
The Crisil Ratings analysis focuses on domestic jack-up rig operators, who represent about 50 percent of the national supply.
The report emphasizes that global rig supply is likely to remain subdued due to the lack of interest from rig operators in placing fresh orders, hindered by lengthy payback periods and limited long-term revenue visibility. Demand for rigs is closely tied to offshore exploration and production activities, which are influenced by the medium-term outlook for crude oil demand and pricing.
Global crude oil demand is projected to grow at less than 1 percent in 2025, with prices expected to hover around $75 per barrel. Despite this, these price levels will still support offshore exploration and production activities, leading to consistent demand for existing offshore rigs in the near future. Consequently, the order book for new rigs has gradually decreased to a record low of 3 percent of existing supply, down from a peak of 25 percent in fiscal 2015.
The report concludes that these demand-supply dynamics will maintain healthy capacity utilization for rigs, preventing a steep decline in rig charter rates in the near to medium term.
Moreover, the demand for offshore rigs in India is relatively stable, given that 88 percent of the country's crude oil needs are met through imports, alongside a continuous push for increased domestic production. Additionally, domestic day rates align with global trends, as rigs are mobile and can be deployed internationally. These factors bode well for domestic rig operators, as stated in the report.
