Tuesday, June 25, 2013

Rig Count in Indonesia - Investor opportunity?

In this post, I want to have a brief look on the rig count in Indonesia. Generally speaking, rig counts represent how many rigs are actively drilling for hydrocarbons. The most authoritative in industry is Baker Hughes that reports rig count every week, summarizing over the year. It is natural, that the more rigs are in business, the more money comes for the companies. Thus, each company determines their spending as related to the global economic environment. In recent year, with high oil prices, globally producers are employing more rigs. As an example, in the USA since beginning of the year until June the rig count increased by 88. At the same time, the prices for natural gas are going on the lower side – thus, in the last months the natural gas rigs number is going down. On the other hand, – when thinking about future - more rigs drilling generally means companies feel bullish on the environment – and more rigs – more expected supplies in future. 
I will provide a number of illustrations that can help to understand the situation....
 Let us look at numbers:
This is the situation with historic graph:
  Rig Distribution in Indonesia (2010)

 Source: Baker Hughes; Compiled by Frost & Sullivan
It is obvious that for the last years the rig counts for Indonesia are going down. This is illustrated by this data:

Source: EnergyDigger
 And the latest data from Baker and Hughes:
As to the companies that own rigs, here is this table:

 In particular, for land rigs:

 In August 2006  KS Energy Services Limited from Singapore formed a JV with  PT Citra Tubindo Tbk (“PTCT”) to manage the upgrading or refurbishment of onshore and offshore oil rigs in Indonesia as well as to procure contracts for these rigs. It took quite a while and $30 million and in May 2013 the first two skidding rigs were manufactured in Indonesia by PT Citra Tubindo Engineering (CTE) in their facility in Batam, Riau Islands. The first rig (DS-9) is owned by Pertamina Drilling Services Indonesia (PDSI); the second by (DS-8) Atlantic Oilfield Services (AOS)  and will be operated by by the Joint Operation Pertamina Drilling Services Indonesia-Atlantic Oilfield Services. The construction took 14 months and was assisted by the companies: Lee C. Moore, Lee Tourneau and NOV. Design and tower was domestic, but many components were imported from the USA.
PT Petrodrill Manufacturing Indonesia (Cibening, Pamijahan District, Bogor Regency, West Java) is reportedly capable to produce various types of drilling rigs (from 150 to 2000 HP).  Currently, the plant is capable of producing 9 rig units at the cost of each rig around U.S. $ 550,000 - U.S. $ 700,000
Here is the picture from company’s Web-site:
 So, in my opinion, the current situation is slowly moving on - BUT: this is an excellent opportunity for investors... just a few numbers:
It was reported that the cost of building for one rig in Indonesia is about $30M - which is really doubtful... generally speaking realistic number for one powerful rig is about $150-200M
Here is some old data on rental:
In 2007 the following day rent data was revealed:
-  for 500 – 1,000 HP rigs - $ 10,000-20,000 per day
- 100,000 HP jack-up rigs - $ 150,000 per day
As I know the numbers for  powerful rig rent is now from $40,000 to $ 60,000 per day. Thus, if the company starts manufacturing heavy rigs (capable of deep drilling - which is in huge demand in Indonesia) - the lease profit is rather good???




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