FPSOs and drillships are two of offshore’s most expensive assets, but they live under very different financial rules. This analysis compares how each is financed, how revenue behaves and what dayrate a newbuild drillship needs to match FPSO returns.
Financing
| FPSO | Drillship | |
|---|---|---|
| Debt share | 70–80% | 50–60% |
| Cost of debt | ~6% | 8–10% |
| Contract length | 10–20 years | 1–5 years |
| Revenue driver | Uptime guarantee (95–98%) | Utilization |
Key points
- FPSO equity IRRs exceed 12% at lease rates near $500k/day.
- A newbuild drillship needs about $710k/day at 85% utilization, or $635k/day at 95%, to reach a 12% IRR.
- At 60% utilization, drillship breakeven exceeds $1 million/day.
- Drillship operating costs of $100–150k/day erode returns quickly when the rig is idle.
- Lenders favour FPSO structures: long contracts support higher leverage, while drillship debt is shorter and covenants are tighter.
Takeaway
Without longer contracts or FPSO-style financing, drillship economics remain fragile.