Norwegian harsh environment offshore drilling company Odfjell Drilling swung to profit in the second quarter of the year, with a reported net profit of $27 million, compared to a loss of $6 million in 2Q 2020.
Odfjell Drilling's operating revenue grew to $233 million, an increase compared to $167 million in the second quarter of 2020.
Odfjell Drilling group's contract backlog at the end of the quarter was $2.4 billion, of which $1.4 billion is firm backlog. For comparison, at the end of the second quarter in 2020, the company's backlog was $2.2 billion, of which $1.2 billion was firm.
The Mobile Offshore Drilling Units business, the company's largest business branch, saw revenue grow to $160 million, up from $118 million in 2Q 2020.
The increase was due to the Deepsea Stavanger offshore drilling rig being operational - in Norway - for most of the second quarter of 2021. In the corresponding period of 2020, the rig was undergoing a special periodic survey at the yard and was preparing for a contract with Total - now TotalEnergies - in South Africa.
Also, Deepsea Nordkapp and Deepsea Aberdeen semi-submersible drilling rigs contributed to the increased revenue in the quarter mainly due to higher day rates compared to the second quarter of 2020.
The company also offers energy and well services.
Appetite increased, uncertainty still there, HE Utilization sound
"The drilling and oil service market has developed positively in recent years due to a strong focus on cost discipline and more efficient operations, combined with a healthier oil price development. We have observed an increased appetite for field development and production spending across the segment, with the exception of some regional differences," Odfjell Drilling said, providing its outlook on the offshore market.
Still, Odfjell Drilling said the negative developments in 2020, with the COVID-19 outbreak and the drop in the oil price, have increased the uncertainty within the drilling and oil service market.
"Although the oil price has recently recovered, we note that the oil companies globally have adjusted their activities for the short to medium term. Additionally, the strong shift in the energy discussion towards renewable sources has created a discussion about energy composition for the future," the company said.
Odfjell Drilling said that the general situation for the global offshore industry was challenging with a substantial rig oversupply.
"We observe that several of the global offshore drilling contractors are or have recently completed restructuring processes. We believe several players in the offshore drilling industry will seek to consolidate in the short to medium term," Odfjell Drilling said without sharing if the company itself was looking to become part of the expected consolidation.
Odfjell Drilling further said that utilization 'looked sound and in balance' in the harsh environment drilling market it operates in.
The company said: "Odfjell Drilling benefits from having a modern fleet of high-end harsh environment 6th generation units and strategic frame agreements with major oil companies operating in harsh environments. Our Group has been successful in adding more backlog due to our operational track record and strong client relationships, combined with a healthy balance sheet."
"The Norwegian government has granted a temporary tax incentive scheme tailored for E&P companies on the NCS which triggers increased activity over the next few years."