Bermuda listed Seadrill, and Norwegian drillers Odfjell and Sevan Drilling reported their Q1 results this morning.
Intense focus on cost cutting and efficiency have helped all three, as it had with the likes of Ensco and Transocean, with utilization rates (often not including stacked units) up and costs down. But, the brutal reality is, as Sevan Drilling put it: "The offshore drilling market is currently entering its third year of a downturn." Rates are down, rigs are stacked and finding work is hard.
"More scrapping of older rigs has occurred in this last quarter, however the pace of scrapping has not offset the oversupplied rig market and day rates continue to be depressed," says Sevan.
Despite oil prices touching $50/bbl this week, there is little sign of a near-term rally, says Seadrill: "The weakening of the drilling and oil service market has continued since year-end 2015 and we do not see any signs of improvement near- to medium term."
"The soft market is due to the substantial supply of newbuilds, especially in the UDW market where the trend of postponing or terminating remaining newbuild deliveries has continued," it adds. "At the same time, oil companies still focus on cost cutting programs and capital discipline which have further reduced demand for drilling capacity. The results are an increasing number of stacked units and continued downward pressure on day rates and asset values."
While it might take a few years, Seadrill thinks the market will rebalance, however. "Within the next few years we believe the continued scrapping of older rigs in combination with required exploration and development drilling will bring the market back to balance and subsequent improved day rates," it says.
Seadrill, whose revenues dropped to $891 million in Q1, from $1.2 billion in the same period last year, said it had "record operational uptime" and continuing benefits of a cost reduction program, with more to come. Butl, key priorities for the year remain "cost reduction, managing newbuild deferments and concluding our financing plans," said Per Wullf, CEO and President of Seadrill Management.
Odfjell's operating revenue meanwhile was $179 million, down from $240 million in the same period last year, with EBITDA at $69 million, compared to $72 million in Q1 2015. Contract backlog was $3.3 billion, compared to $3.6 in the same period in 2015.
Odfjell says its results reflected high operational efficiency on units in operation, offset by the temporary lay-up of the Deepsea Atlantic, the finalization of Deepsea Stavanger’s contract in Angola and lower activity and continued pressure on rental prices in Well Services.
Odfjell's platform portfolio for Statoil will reduce from seven to two platforms from October 2016, following a decision by Statoil decision not to declare optional contract periods for five of the platforms.
The platforms leaving the Odfjell Drilling’s portfolio are Visund, Njord, Sleipner A, Snorre A and Snorre B while Odfjell Drilling will continue operating on the Heidrun and Grane platforms for which Statoil has declared a two year option.
But, Odfjell has some light at the end of the tunnel, with contracts to operate the Johan Sverdrup platform off Norway and the Mariner platform off the UK for Statoil when they come online during 2018.
Sevan Drilling saw its Q1 operating revenue drop to US$52.8 million, from $83.1 million in the same period last year. EBITDA in the corresponding periods was $12.7 million, down from $38.3 million. The firm posted a $20.4 million loss in Q1, compared to a $2.2 profit in the same period last year.
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