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A logit model for the lay-up decision in the north sea Offshore rig market

Skeide, Markus; Horn, Helge
Master thesis
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URI
http://hdl.handle.net/11250/2454694
Date
2017
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  • Master Thesis [4656]
Abstract
The thesis examines the lay-up decision in the North Sea offshore rig market from 2010 through

march 2017. Using empirical analysis, we have specified a logistic regression model to

investigate how rig characteristics, firm size and market variables affect the decision to both

cold- and ready-stack a jackup or a semi-submersible rig.

We find that that younger jackups with deep water depth owned by companies with multiple

rigs in the North Sea, are less likely to be laid up. In a period with varying market conditions,

a higher value of the rig characteristics variable deck load, quarters capacity and blow out

preventer (BOP), as well as the specification severe environment, increase the probability of

laying up a jackup.

For semi-submersibles, we find that younger rigs with a higher value of max water depth and

quarters capacity, equipped with self-propulsion, DP-3 system and classified for severe

environment, were less likely to be laid up. While a higher value of variable deck load increased

the likelihood of cold-stacking a semi-submersible.

The regression results show that a higher day rate and expectations for a higher future oil price

strongly decrease the likelihood for both jackups and semi-submersibles being laid up.

The thesis supplements the existing literature of the offshore rig market. To our knowledge, no

economical investigation regarding the lay-up decision have been carried out on the North Sea

offshore rig market. This thesis therefore provides a basis for further research of this market.

We hope the findings will be of interest for drilling operators when deciding which rig to send

into lay-up. In addition, the findings may be of interest for brokers and banks when evaluating

rig companies.

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