Posted in News on 23 Sep 2016
Onshore North American contractors appear to be hardest hit by commodity prices, and squeezed tightest in contract negotiations. The market is in a state of flux, creating uncertainty around the value of assets.
With so many acquisitions having taken place recently, the value of assets has become a hot topic with insureds, as utilisations ultimately have started to slide, so too has the value of equipment causing concern for replacement cost values in claims adjustments.
Historically the rig count has been a good metric for oil price changes but the advancement of rig technology (walking rigs etc.) improving well site efficiencies dramatically, suggests there could be a decoupling of the two. Furthermore, it could appear that the drop in rig count could overstate how bad the situation actually is in the US. However, it is the steepness with which the rig count has fallen that would suggest that production has to fall and it will be purely a question of how much by. Looking at the Alesco portfolio of Contractors it certainly appears to be a trend that the Rig Contractors are facing far worse conditions than the oilfield service providers.
Rig contractors seem to be more insulated from short-term swings in oil prices but are seemingly starting to feel the heat as oil and gas producers slow activity and ask for better contract terms. Alesco allows for contractors to adjust their premiums based upon the actual utilisation of their fleet, allowing significant credits for stacked/idle assets.
Download our infographic for more information on the state of the oil market and for details on the Alesco rig facility.