Here’s why Private Equity Banks want to buy idle Oil Rigs

Due to the economic climate many oil rigs in the Shipping and Offshore industries have been forced to remain idle. The idle oil rigs are thus generating more expense than revenues and the debts generated by operating the oil rigs are not being recovered.

Hope has arrived for oil & gas rig owners in the form of:

  1. Private Equity banks investing money into idle oil rigs
  2. A range of new rigs are on its way into the market

This information is according to Shipping Watch.


Why sell idle oil rigs to banks?

The idea is that owners will be forced to sell the idle rigs at huge discounts in efforts to repay debt, as the owners increasingly feel the pressure to divest assets in order to raise capital.

Because of the low oil price and subsequently causing several oil companies to halt exploration plans and renegotiated oil rig contracts, approximately a third of the oil rigs remain idle. At the same time, Bloomberg has reported that there is a range of newly built rigs that are on their way into the market.

Private Equity Banks invest in Idle Oil Rigs

Investment banks are working with private equity firms to buy up the many distressed oil rigs on the market which are burdening their owners due to expensive repayments and the current low oil price. The rationale is that banks with a high amount of rig debt owed to them will encourage owners to sell off idle rigs to be able to recover funds. [Source: Shipping Watch]

Pareto Securities – a Norwegian investment bank with a strong international presence in the oil & energy sectors – has been monitoring the oil & energy market and intend to invest in these idle rigs by first buying the oil rigs then selling it for a profit once the oil & energy market becomes favourable again. This is according to reports by Bloomberg.

How much is an oil rig worth these days?

Bloomberg’s article states that an analyst at Nordea Markets in Oslo – Janne Kvernland – has stated that there are many factors that come into play when calculating the price of a rig but at the same time mention that according to a Pareto note from Nov. 12, the chartering rates for the most advanced equipment have  actually dropped to USD 250 000 per day which is down from USD 650, 000 per day. 


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