Understanding rig rates
AbstractWe examine the largest cost component in offshore development projects, drilling rates, which have been high in recent years. To our knowledge, rig rates have not been analysed empirically before in the economic literature. Using econometric analysis, we examine the effects of gas and oil prices, rig capacity utilisation, contract length and lead time, and rig-specific characteristics on Gulf of Mexico rig rates. Having access to a unique data set containing contract information, we are able to estimate how contract parameters crucial to the relative bargaining power between rig owners and oil and gas companies affects rig rates. Our econometric framework is a single equation random effects model, in which the systematic part of the equation is non-linear in the parameters. Such a model belongs to the class of non-linear mixed models, which has been heavily utilised in the biological sciences.
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 696.
Date of creation: Jun 2012
Date of revision:
Rig contracts; GoM rig rates; Panel data;
Other versions of this item:
- Petter Osmundsen & Knut Einar Rosendahl & Terje Skjerpen, 2013. "Understanding Rig Rates," CESifo Working Paper Series 4532, CESifo Group Munich.
- Osmundsen, Petter & Rosendahl, Knut Einar & Skjerpen, Terje, 2012. "Understanding Rig Rates," UiS Working Papers in Economics and Finance 2012/9, University of Stavanger.
- C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
- Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
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