Industry Trend Analysis - Latam Rig Growth To Outpace EM Peers - OCT 2017

BMI View: A sharpened focus on upstream investment in Latam will support rig demand over the next year. A mandated slowdown in key oil producing markets will accelerate utilisation rates in Latam relative to other EM regions through Q118 .

The global recovery in rig demand has been slow and scattered. From a peak of 3,670 just after prices began to tumble in 2014, total rig demand was cut by more than 60% to 1,405 in May 2016. In the more than 12 months since, the strengthening of oil prices and significant cost reductions have returned global rigs to 2,110 units as of July 2017. This recovery has been dominated by the US and Canada where a dramatic improvement in unconventional project economics has propelled a more than doubling of the rig count y-o-y.

However, when looking at regions outside of North America, the trend is much more nuanced. Both Europe and Sub-Saharan Africa have experienced continued declines over the past year on the back of a slowdown in deepwater developments in the former and an uptick in insecurity in the latter. Among the three remaining markets, Latin America (Latam) has been the outperformer, having benefited from a region wide pullback in key Middle Eastern OPEC member states and a thinning upstream project pipeline in Asia.

Latam Outpacing The Rest
Regional Rig Demand +/- vs. May 2016
Source: Baker Hughes

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