Offshore driller Hercules Offshore, which in November last year emerged from Chapter 11 bankruptcy, expects, as all of its peers, a difficult business environment ahead.
As it has been repeatedly but accurately said, the offshore drillers have been impacted hard by a perfect storm of low oil prices, cuts in spending by oil majors, lack of demand for drilling rigs, and the oversupply of the rigs in the offshore drilling market.
All this is making it hard for the drillers to obtain new contracts, and when and if they do, they come with significantly cut dayrates. Talking about dayrates, earlier this month, Hercules Offshore received a notice from its client Saudi Aramco that dayrates for three Hercules Offshore jack-ups operating in Saudi Arabia would be slashed.
No rebound without oil price rally
Presenting the fourth quarter results on Wednesday afternoon, John T. Rynd, Chief Executive Officer and President of Hercules Offshore said: “We closed out 2015 with the drilling industry at its weakest point in over 30 years, driven by the sharp decline in the price of crude oil. Both our rig and liftboat segments in all regions have been negatively impacted.”
He said the company would continue working on cutting its costs to better reflect the weak environment.
“In an effort to realign our cost structure to better reflect the weak environment, we have made significant reductions to our organization and capital spending programs, and will continue to be vigilant with our cost curtailment efforts. As previously disclosed, we are also working diligently with our Board of Directors and advisors on reviewing our strategic alternatives to maximize the value of the company,“ CEO said.
To remind, Hercules Offshore in February said it was exploring its options, including a merger or a sale of the company.
Highlander progressing well, outlook uncertain.
Providing his take on the near future and beyond Rynd did not sound overly optimistic.
“Looking into 2016 and beyond, we do not expect business conditions to rebound without a material and sustained rally in oil prices. The duration of this low commodity price environment is uncertain, which places greater emphasis on liquidity and drove us to proactively restructure our balance sheet last year,” he said..
“We emerged from our restructuring process with significantly less debt and over $500 million in cash, including $200 million reserved for the final shipyard payment on our newbuild rig the Hercules Highlander.
Rynd said that construction of the Hercules Highlander rig is progressing as scheduled, with delivery expected during the second quarter 2016.
Once delivered, the rig will start a five-year contract with Maersk Oil in the UK sector of the North Sea.