Danish drilling contractor Maersk Drilling delivered a profit of $478 million for the full year 2014, compared to $528 million in 2013.
The company has said that the profit was positively impacted by high operational uptime as well as a gain of $73 million relating to the divestment of the drilling barge activities in Venezuela.
However, the result was negatively affected by impairments of $85 million and the high number of yard stays. The underlying profit of USD 471m (USD 524m) was in line with expectations, the company has said.
Additional operating cost was incurred during 2014 related to start-up costs and operational expenses for the five newbuildings with contract commencement during 2014 and start-up costs for the remaining three newbuildings to be delivered in 2015 and 2016. The cost level on the existing fleet excluding newbuildings was on level with costs in 2013.
“2014 was a year of delivery for Maersk Drilling. We took delivery of five new rigs, where all five successfully have commenced operation during the year. Furthermore, we completed five yard stays and two offshore upgrades, making 2014 a very busy year. Sustaining our solid operational performance during the year proves the strength of our business and gives us a solid foundation for the challenges to come,” says Claus V. Hemmingsen, CEO in Maersk Drilling and member of the Executive Board in the Maersk Group.
Exploration and development budgets of the oil companies were curbed in order to improve their free cash flows, which have been under pressure as a result of escalating costs and declining oil prices. Consequently, the tendering activity for offshore rigs was reduced and day rates decreased across all segments. As a consequence of the deteriorating market outlook, Maersk Drilling made an impairment of USD 85 million (USD 73m after tax) of which USD 50m (USD 38m after tax) relates to the joint venture EDC in Egypt.
“Maersk Drilling has a solid contract backlog, which limits the near term exposure to the downturn in the market. However, we have in response to the deteriorating market launched a cost reduction and efficiency enhancement programme that will improve our competitiveness in the current market,” says Claus V. Hemmingsen.
By the end of 2014, Maersk Drilling’s forward contract coverage was 80% for 2015, 52% for 2016 and 30% for 2017. The total revenue backlog by the end of 2014 amounted to USD 6.0bn (USD 7.9bn).
Maersk Drilling expects the underlying profit for 2015 to be higher than in 2014 (USD 471m) “We remain positive on the long term market outlook, and we maintain our long term financial aspiration, but the required additional units to reach the target will only be added against solid, long term contracts,” Claus V. Hemmingsen ends.