Case | HBS Case Collection | May 2011 (Revised August 2011)

The Offshore Drilling Industry in 2011

by Ramon Casadesus-Masanell, Kenneth Corts and Joseph McElroy

Abstract

After booming in 2007 and early 2008, the offshore drilling industry slumps in 2009. Lower oil prices lead oil companies to reduce drilling budgets, and rig utilization falls from essentially 100% to 70% in some markets. Day rates--the prices paid for a rig's services--fall by as much as 68%. The case illustrates how supply and demand work together to determine prices and utilization in the short run, as well as how long-run supply is determined in an industry where capacity additions take several years. Also describes how advances in deep-water drilling technology are changing industry structure.

Keywords: Technological Innovation; Metals and Minerals; Demand and Consumers; Price; Industry Structures; Supply and Industry; Mining; Mining Industry; Energy Industry;

Citation:

Casadesus-Masanell, Ramon, Kenneth Corts, and Joseph McElroy. "The Offshore Drilling Industry in 2011." Harvard Business School Case 711-543, May 2011. (Revised August 2011.)