US Gulf jack-up rig fleet could fall by 15-20 by 2008: Rowan CEO

New Orleans (Platts)--22Mar2006

Operators in the Gulf of Mexico must offer more long-term contracts to
drilling companies or face further migration of rigs to other parts of the
world that will push dayrates even higher, Rowan Companies CEO Danny McNease
said Wednesday.

"It's a very serious problem," said McNease, adding that he expected
15-20 Gulf of Mexico jack-ups to move elsewhere by the end of next year, based
on contract negotiations already under way.

Of those on his migration list, McNease said seven would likely depart by
this summer.

"Rigs will continue to leave the Gulf of Mexico unless people offer
longer contracts," said McNease, noting that jack-ups could now command terms
of two to five years in the Middle East. "The national oil companies are
offering longer terms to lure these rigs there," he said.

McNease offered his comments during a presentation about his
Houston-based company at this year's 34th annual Howard Weil energy
conference.

He said Rowan was adopting a much broader global face than it has in the
past and has four rigs set to start work soon on offshore drilling projects in
the Middle East.

McNease predicted that the Middle East could soon challenge the Gulf of
Mexico for numbers of offshore drilling projects with 80 jack-ups currently
under contract, compared with 85 in the Gulf.

"If you have a rig, you can put it to work," said McNease, adding: "There
are deficits everywhere."

McNease estimated the total worldwide rig deficit at 29-40 and said the
55 jack-ups under construction would not begin to fill the gap until 2008.

He warned that a continued shortage of rigs will only drive dayrates
higher, raising the costs for operators in the Gulf as rigs move elsewhere for
longer terms.

McNease said Rowan's average dayrate in the Gulf had jumped dramatically
in the last five years to $130,000 from $50,171. At the same time, utilization
has improved to 99% from 91%.

"Undersupply scenarios will continue in many regions of the world
throughout 2006 and 2007," he said.

--Gary Taylor, gary_taylor@Platts.com

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