Many of these rigs were scheduled to come off of their previous contracts and were also due for their five-year classification surveys. When we consider the oversupplied market and the low dayrates being awarded to those drilling rigs that are able to receive contracts, it is much more economical to scrap these rigs than for the owner to pay in excess of $100 million to perform those surveys.
We can expect this increased rate of rig scrapping to continue going forward as older drilling rigs continue to come off of their current contracts. This will have the effect of steadily reducing the supply of rigs in the market as thus reducing the current oversupply.
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