Growing demand for new offshore oil rigs, partly driven by the Gulf of Mexico spill last year, has led to a spurt of building in shipyards and raised tough questions about what to do with the old rigs. Reuters
What? Have they not looked at the Rigs-to-Reefs+++ page™ (a BOE exclusive)?
“At a certain point it just doesn’t make any sense to upgrade them or put another 5-10 million bucks into them,” said John Tasdemir, an analyst at Canaccord Genuity. “Better just to scrap them and either start over, or just do something else.”
Bud's Offshore Energy (BOE) 
The decision to upgrade or not is strictly made depending the state of the industry. If the “boom” is on, then every available piece of iron is pressed into service – some with a minumum of upgrade. At least one of the rigs battered and washed ashore after Katrina/Rita was back in service during the last boom – after it sat waiting for the scrap heap for a few years. When dayrates start to climb, even marginal rigs can make money.