Seadrill posts $1.9 billion net loss on impairments

Seadrill posts $1.9 billion net loss on impairments

Offshore drilling contractor Seadrill on Tuesday reported a drop in revenue and net income for the third quarter of 2015. 

Revenues fell to $985 million from around $1.29 billion a year ago due to increased idle time and lowered dayrate on several rigs.

Seadrill also reported a net loss of $1.9 billion, due to a $1.8 billion non-cash impairment charges to investments and goodwill.

The company explained that $1.1 billion relates to the write-down to fair value of investments in Seadrill Partners, the initial recognition of which resulted in a non-cash gain on deconsolidation of $2.3 billion in January 2014.

Offshore drillers have been negatively affected by low oil and gas prices, wich moved oil and gas companies to scale back their exploration projects, and reduce the need for drilling rigs.

Furthermore, the depressing drilling market is hit by the oversupply of drilling rigs, with many more scheduled for delivery. Thus the drilling companies, such as Seadrill and Transocean, for example, have been in talks with the shipyards to delay newbuild deliveries until the market rebounds.

Per Wullf, CEO and President of Seadrill Management Ltd., said on Monday: „We have had a strong operating quarter and we continue to make good progress on our cost savings program. Our discussions with the shipyards continue to be constructive regarding deferrals.“

Seadrill currently has 14 rigs under construction. During the third quarter the company canceled the construction contract for the West Mira semi-submersible drilling rig, citing Seadrill currently has 14 rigs under construction

Wullf said the company expected the market conditions to remain challenging through 2016 and “the coming quarters will provide insight into the 2017 environment.”

He added it was important to recognize that “we are in a cyclical business.”

Wullf said: “The longer this downturn lasts, the more robust the recovery will be when it happens. Seadrill is in a position to capitalize on the upturn with the most modern fleet and world class operations.”

During the third quarter, Seadrill owned 19 floaters and 19 jack-up rigs in Northern Europe, US Gulf of Mexico, Mexico, South America, Canada, West Africa, Middle East, Southeast Asia and Australia. Also, Seadrill manages eleven Seadrill Partners rigs comprised of eight floaters and three tender rigs, and five jack-up rigs now owned by the SeaMex Joint Venture. Seadrill also managed one tender rig owned by SapuraKencana.

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