Utilization rate: The proportion of the total available rig fleet that is active at a given time. Computed by dividing the number of active rigs by the number of available rigs. Differences of opinion regarding the classification of “active” and “available” rigs mean that utilization rates reported by different sources may vary widely. In the marine industry, the percentage use rate for oilfield-related vessels.
Rig count: A survey revealing the number of drilling rigs in use during a particular period of time in a given market. Usually includes onshore and offshore rigs, unless specified otherwise.
Day rate: The rate paid to a drilling contractor for each day’s work under a day work contract, which stipulates that the contractor be paid based on time worked, not footage drilled.
Contango: A circumstance in which the futures price of a commodity has risen above the futures spot price. A contango implies that investors are willing to pay a premium for delivery of a commodity in the future rather than pay the carrying costs of buying the commodity today and holding it.
Backwardation: Sometimes referred to as normal backwardation. A theory that as a future contract approaches expiration, the trading price increases.