Offshore drilling contractor Maersk Drilling delivered a 32% increase in profit that amounted $222 million for the first quarter 2016, compared to $168 million in the same period last year. The company also saw a boost in revenues during the quarter.
The underlying profit was $223m, a 14% increase when compared to $195m in the prior-year quarter, positively impacted by $60m due to Chevron’s early termination of a contract for the Mærsk Deliverer semi-sub and cost savings partly offset by more idle days.
The company’s revenues for the quarter increased to $654 million, from $630 million in the same period last year.
The offshore drilling industry is facing significant challenges as oil companies continue to postpone or cancel exploration and development projects in order to restore profitability and cash flows in the current low oil price environment, the company said. Maersk Drilling further added that the reduction in demand for offshore rigs has caused an all-time low capacity utilization in the market resulting in a strong downward pressure on day rates across all market segments.
According to the offshore drilling contractor, the visibility regarding a recovery in demand for offshore rigs remains low and the market is likely to stay challenged for the medium term, emphasizing the need for further scrapping and cold stacking of rigs to resolve the structural supply-demand imbalance. The long-term outlook remains positive, particularly for higher specification assets, said the company.
In 1Q 2016, Maersk Drilling reduced costs by 4% compared to 1Q 2015, excluding exchange rate effects. Since the launch of the cost reduction and efficiency enhancement program in 4Q 2014, Maersk Drilling has reduced cost by 12%. The cost savings have been achieved by optimizing yard stays, vendor re-negotiations, and reduction of staff at head office, layoffs of rig crews, salary freeze and a general optimization of the operations.
The economic utilization of the fleet was 83%, versus 88% in the prior-year quarter, adversely impacted by four rigs being idle or partly idle.
The total revenue backlog by the end of 1Q amounted to $4.7bn, compared to $5.9bn in the same period last year.
Offshore Energy Today Staff