Offshore driller Seadrill Partners LLC has decided to reduce the quarterly distributions to its shareholders. The company cited the depressed drilling market as the reason for the move.
According to Seadrill Partners, the company will reduce the quarterly distribution to $0.25 per unit to its common unitholders, down from the current quarterly level of $0.5675. The revised distribution level will take effect in February 2016 upon payment of the fourth quarter 2015 distribution.
Seadrill Partners LLC is a London-based company formed by Seadrill Limited to own, operate and acquire offshore drilling rigs.
“The decision to reduce the distribution reflects the continuing challenges in the offshore drilling market. The revised distribution level will provide significant flexibility to manage our medium-term obligations and reduce leverage,” Seadrill Partners said in a statement on Friday.
This move is expected increase liquidity by over $250 million per year, including the reduction in distributions to non-controlling interests, and the Company expects to continue to set aside cash reserves for maintenance and replacement capex of approximately $200 million per year, Seadrill Partners said.
Offshore drillers have been hit hard this, seeing contracts cancellations, cuts in exploration budgets by the oil companies due to low oil prices, more rigs competing for less work, and low dayrates. To remind, Seadrill Partner in May this year saw a contract for its West Sirius semi-submersible drilling rig terminated by BP. Things haven’t changed for better for the sector since May, as Transocean on Friday said it lost a contract for one of its rigs with Norway’s Statoil.
Providing a comment on the market situation, Seadrill Partners on Friday said: “The Company’s underlying business remains strong with long-term contracts, efficient operations and creditworthy customers. While the market remains challenging, the Company believes its modern fleet is well positioned for a recovery and we continue to seek new contracting opportunities,” Seadrill Partners added.
Offshore Energy Today Staff