While the prospects of deepwater exploration continue to make Oil Patch pulses quicken, it is largely shallow water activity that is breathing life into much of the U.S. Gulf industry. The last two MMS lease sales told a story for today.

The shallow water shelf properties are at a short-term premium for gas exploitation, the mid-water depths are temporarily forsaken, and the deepwater Gulf waters still remain the long-term king of oil production prospects in the U.S. But everyone wants to know—where are the deepwater rigs? Industry insiders say deepwater rigs can be had, at almost a moment's notice, and perhaps at a discount to the market dayrate price.

"The tightening of the deepwater rig market is a common belief, but it's almost a misperception," said Lewis Ropp of Frost Securities. "All the rigs are leased, but the fact of the matter is that they all don't have solid prospects to work on for the foreseeable future. While the rig guys would have you believe that the market is really tight, there's a lot of slop in it. In a heartbeat, people would sub-out rigs for 30- or 45-day windows at a time just to keep them busy."

Tom Marsh of Offshore Data Service agrees. "We've found that's the case right now. There are 64 rigs worldwide that are rated for 3,500 feet water-depth or more, and 62 of them are under contract. But, that said, only 55 are actually working, which means seven rigs are on the secondary market right now. There is available capacity, but we think that will dry up next year."

"There's probably an active secondary market because there are people who need rigs," said Michael Dawson, director of investor relations for driller Global Marine. "I think that happens all the time. When people contract these rigs for three and four years, they usually don't have three- and four-year's worth of their own projects. There was a time a few years ago that some companies' strategy was to get a rig to gain an entree into deepwater. People will trade acreage for rig time."

Said Ropp: "If a new player tried to come in right now and went to all the rig companies and asked for a rig, he would be turned away. But if he went to a Shell or a Conoco and said I have this great prospect and we'll use your rig, he could drill it next week."

MODU rigs under construction add up to six deliveries in 2001, two in 2002, and one in 2003, according to numbers from Offshore Data Services and Bassoe Offshore.

Of the six deliveries in '01, three had no contract for work at the time of writing, including the 390 ft Chiles Discovery jack-up and the Rowan Gorillas' VII and VIII jack-ups, rated for 400 ft and 550 ft, respectively.

"The mid-water depth range activity remains soft relative to ultra-deepwater demand and shallow-water demand," said analyst Mark Urness of Salomon Smith Barney. "Mid-water markets tend to be driven by the majors who have generally been slow to ramp up spending. They are tending to focus primarily on the ultra-deep market." However, the strong jackup market, particularly for the high-end units, might eventually help the older semis. In open-water exploration drilling deeper than 350 feet, semis could offer a cheaper solution.