Integrated drilling contractor Odfjell Drilling returned to profit during the third quarter 2016 despite a $55 million decrease in revenues.
The driller made a net profit of $21 million during the third quarter of 2016, compared to a net loss of $152 million in the prior-year quarter.
Operating revenues decreased during the quarter to $167 million compared to $222 million in 3Q 2015. Odfjell explained that the decrease in this quarter was due to a reduction in activity in all segments.
Mobile Offshore Drilling Units (MODU) segment had a reduction of $49 million, mainly due to Deepsea Stavanger rig being mostly idle in 3Q 2016, while both Drilling & Technology and Well Services segments are still facing a challenging market and reduced revenue compared to 3Q 2015. Odfjell’s contract for five of the platforms in the Statoil portfolio expired on October 1, 2016.
The company’s contract backlog is $2.8 billion, where $1.7 billion is firm backlog. The comparable figure at the end of 3Q 2015 was $4.3 billion, whereof $2.2 billion was firm backlog.
Looking ahead, the driller said there are some signs of market stabilization despite the weak drilling and oil service market. Due to the substantial supply of new build rigs in recent years, especially in the UDW market, the gap between supply and demand is still significant. Odfjell also added that the effect of the efficiency programs carried out by the oil companies have led to a substantial cost reduction in field development and production and his combined with an increased oil price may lead to increased activity level in the medium to long term.
The company further stated that, within the next few years, the continued scrapping of older midwater and harsh environment units in combination with required exploration and development drilling will bring the market back to balance and subsequent improved day rates.
Odfjell Drilling has a fleet of 6th generation semi-submersibles capable of working in harsh environments. Deepsea Stavanger is currently idle but has a contract with Wintershall that starts in April 2017. Deepsea Aberdeen is contracted until 2022 for BP West of Shetland, Deepsea Atlantic is contracted to Statoil until 2019 on the Johan Sverdrup field and Deepsea Bergen has a contract for Statoil ending mid-2017.
According to the company’s 3Q report, Odfjell Invest Ltd., a subsidiary of Odfjell Drilling, and holding company of the rig-owning entities of Deepsea Atlantic and Deepsea Stavanger, fulfilled the conditions for the refinancing on September 28, 2016. The new loan facility is $525 million and will be repaid by quarterly installments of $12.5 million, with the first payment due in 1Q 2017. The facility has a three-year tenor.