Odfjell Drilling returns to 2Q profit

Norwegian offshore drilling company Odfjell Drilling has managed to return to profit in the second quarter of 2016.

The company on Thursday posted a net income of $9 million, an improvement from a net loss of $224 million reported a year ago.

Operating revenue for Q2 2016 was $183 million down from $286 million a year ago, a decrease of 36%. Operating revenue decreased this quarter due to a reduction in activity in all segments from Q2 15 to Q2 16.

The company’s offshore drilling segment had a reduction of $80 million, mainly due to Deepsea Stavanger rig being partly idle in Q2 2016 and a lower day-rate than the previous year. Both Drilling & Technology and Well Services are still facing a challenging market and reduced revenue compared to Q2 2015, the company said. The drilling and oil service market remains weak and we do not see any signs of improvement near term, the company said.

Outlook

The soft market is due to the substantial supply of newbuilds, especially in the UDW market. At the same time, oil companies still focus on cost cutting programs and capital spending reductions which have further reduced demand for drilling capacity. The results are an increasing number of stacked units and continued downward pressure on day rates and asset values.

Within the next few years, Odfjell Drilling said, the company believes the ongoing scrapping of older rigs in combination with required exploration and development drilling will bring the market back to balance and subsequently to improved day rates.

In the longer term, Odfjell Drilling said it was of the opinion that the oil industry’s demand for drilling services will continue to be supported by the need for replacement of reserves and by continued spending on exploration and field-development in the main offshore regions. The Group’s business segments are positioned for taking advantage of the future market improvements, the company said.

Refinancing of Deepsea Atlantic and Deepsea Stavanger

Odfjell Invest Ltd., a subsidiary of Odfjell Drilling Ltd. and holding company of the rig-owning entities of Deepsea Atlantic and Deepsea Stavanger, received on 24 August 2016 a firm offer from DNB Bank ASA, as facility agent on behalf of the lenders, to refinance the senior secured term loan facility that matures
in November 2016.

The new loan facility will be of $525 million, the same amount as was outstanding under the existing facility as at 30 June 2016. The facility is to be repaid by quarterly installments of $12.5 million, the first time in Q1 2017, and interest will be payable at 415 basis points above LIBOR. The facility will have a tenor of 3 years from drawdown which is scheduled for September.

“The quarterly results reflect our great operational performance and quality in operations, and the effect of our continued initiatives to reduce costs in our organization.  We are further pleased to inform that we have received a firm offer from our bank syndicate to refinance the drilling units Deepsea Atlantic and Deepsea Stavanger,” says CEO, Simen Lieungh.

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