Since mid-March, when COVID-19 was declared a pandemic and Saudi Arabia initiated an oil price war, the industry has been anticipating a precipitous short-term decline in deepwater activities. Though WTI has crept up into the high $30 range, even eclipsing $40 briefly, we are now seeing the effects of the plunge in oil prices on deepwater drilling. This has most immediately been seen in the reduction of deepwater drilling rigs over the past three months. As of early March, the active deep water drilling rig count was 22 rigs. What has become apparent is that as terminated or expired rig contracts present themselves, rigs are being idled. The result has been a reduction in the active deepwater count by 7 rigs, and with only 15 active deepwater remaining, the demand for deepwater OSVs is down significantly since the beginning of the year. Numerous deepwater OSVs have been idled in just the past few weeks. Though the recent trend has been negative, there is optimism about how the industry is evolving through this downturn.

Many super major offshore companies are not anticipating any meaningful reduction in their current levels of activity. This improves confidence that the recent precipitous decline in offshore activity has bottomed and the industry is stabilizing. The recent recovery in oil prices will have to continue with gradual improvements necessary to drive additional deepwater rig activity and OSV demand, which is more likely to happen than not.