Offshore drilling contractor Transocean Ltd has reported a net loss the first quarter 2015 of $483 million, mostly attributed to an impairment of its deepwater drilling rigs.
For comparison, the Switzerland-based drilling contractor’s net profit for the same period last year was $456 million. Revenues in 1q 2015 were $2 billion, compared to $2.3 billion a year ago.
As reported by the company, first quarter 2015 results included charges of $881 million.
These included: $481 million associated with an impairment of the Deepwater Floater asset group; $393 million in impairments of assets held for sale; $5 million in costs related to one-time termination benefits; and $2 million, primarily associated with discontinued operations and other items.
Declines in dayrates
Explaining the Deepwater Floaters situation Transocean said in a filing: “During the three months ended March 31, 2015, we identified indicators that the asset groups in our contract drilling services reporting unit may not be recoverable. Such indicators included a reduction in the number of new contract opportunities, recent low dayrate fixtures and contract terminations.
“Our Deepwater Floater asset group, in particular, has seen further declines in projected dayrates and utilization partly caused by more technologically advanced drilling units aggressively competing with less capable drilling units. As a result of our testing, we determined that the carrying amount of the Deepwater Floater asset group was impaired. In the three months ended March 31, 2015, we recognized a loss of $507 million ($481 million, or $1.34 per diluted share, net of tax) associated with the impairment of these long-lived assets. “
Excluding the above mentioned net unfavorable items, Transocean’s adjusted net profit was $398 million. As of April 16, 2015, the company’s contract backlog for continuing operations was $19.9 billion compared to $21.2 billion as of February 17, 2015.
Providing its view on the drilling market, Transocean said: “Although our long-term view of the offshore drilling market remains favorable, particularly for high-specification assets, we expect the near to medium term to be challenging given weak commodity pricing, coupled with our customers’ focus on capital allocation, cost reductions and delays of various exploration and development programs. The significant and rapid decline in oil and natural gas prices has accelerated the decline in demand for drilling rigs across all asset classes and regions.
“As a result of this decline in demand, coupled with the number of newbuild units being introduced into the market in the near term, we currently expect the pace of executing drilling contracts for the global floater fleet to remain stagnant in the near to medium term, giving rise to excess capacity, lower dayrates and idle time for some rigs. Additionally, this excess capacity may result in some lower capability assets in the industry being permanently retired, ultimately reducing the available supply of drilling rigs, all else being equal. “
Offshore Energy Today Staff