U.S. offshore drilling company Rowan, expected to be acquired by its UK rival Ensco, sees improvement in the offshore drilling space.
Rowan, which owns a fleet of 25 offshore rigs, on Wednesday, posted a net loss of $144 million for the third quarter, compared to a loss of $20.9 million in the corresponding quarter of 2017.
Revenue for the quarter was $192.9 million, down from $291.6 million a year ago.
Tom Burke, President, and Chief Executive Officer said Rowan’s third-quarter results reflected the “current soft market conditions in the offshore drilling industry.”
Burke said: “However, we are seeing signs of improvement, with oil prices providing a supportive backdrop as customers plan their 2019 capital budgets. Among the anticipated industrial merits of our proposed combination with Ensco are cost savings for the combined company and an improvement in Rowan’s position to benefit from an anticipated recovery in offshore drilling.”
In support of Burke’s view that the offshore drilling industry is seeing marks of improvement speaks the fact that the company on Tuesday announced three offshore rig contracts.
One was a new contract for its Rowan Reliance drillship with Fieldwood Energy for one-year in the Gulf of Mexico. The other two contracts were extensions in Trinidad and Gulf of Mexico with BP and Cantium, respectively.
Ensco CEO: 100 tenders out there
Ensco, a large driller which is set to buy Rowan in an all-stock deal valued at $2.38 billion (as announced on October 8), has earlier this week also posted weaker third quarter result compared to 3Q 2017.
Ensco, which in October last year bought rival Atwood, saw its revenues decrease to $431 million in third quarter 2018 from $460 million a year ago “primarily due to the sale of three rigs that operated in the year-ago period and a decline in the average day rate to $129,000 from $166,000 in third quarter 2017.” Reported utilization increased to 58% from 55% in third quarter 2017.
Also, Ensco’s contract drilling expense increased to $327 million in third quarter 2018 from $286 million a year ago primarily due to the addition of 11 legacy Atwood rigs and three newbuild rigs, partly offset by the sale of three rigs that operated in third quarter 2017.
Net loss was $145 million, compared to a loss of $25 million in the third quarter of 2017.
Despite the numbers being lower than in 3Q 2017, Ensco CEO Carl Trowell was optimistic in his comments about the offshore oil industry outlook on the back of higher oil prices and several recent contract wins.
He said Ensco’s recent contracts were evidence that recovery was underway. He also said the increasing oil prices have given oil companies confidence in offshore projects, enabling them to increase their budgets “with an eye towards securing rigs for their offshore programs.”
The CEO earlier this week said there were over a hundred open tenders across the world, and that Ensco was in talks with clients over a potential deployment of its rigs.
He did warn that the recovery would come in phases and would be “protracted”, with the shallow water rigs leading the offshore drilling pack, and deepwater being in the early stages of recovery.
Trowell also said he was excited about the merger with Rowan for several reasons:
“First, the combined company will be a premier offshore driller with greater geographic and customer diversity, a proven track record of safety and operational excellence, and the ability to continue investing in technology and innovation to differentiate our services and lower costs.
“Second, we will have an industry-leading fleet of high-specification assets capable of operating across all water depths, with particular strength in the highest-specification seventh-generation drillships, as well as harsh environment and modern jackups where we are seeing higher levels of customer demand.
“Third, the combined company will have an even stronger financial position with greater liquidity and improved access to the capital markets.”
Ensco – Rowan merger in 1H 2019
The proposed all-stock merger between Ensco, one of the world’s largest offshore rig companies, and Rowan, was announced earlier this month. The merger will create the world’s largest offshore drilling company by fleet size.
The merged company will have 82 offshore rigs, many of which hi-spec. Norwegian oil and gas industry analysts Rystad have described the soon to be merged entity “an industry-leading drilling contractor capable of working across all water depths with a truly global footprint.”
The merger is expected to be completed during the first half of 2019, following the regulatory and court approvals, and Ensco and Rowan shareholder meetings to approve the transaction.
Offshore Energy Today Staff