The drilling market is turning out to be worse than in 2008-9 and is expected to continue into 2016 and beyond, says Norway’s Akastor as it feels the brunt of the low-oil price driven down turn.
The former Aker Solutions company is planning to reduce its workforce by a further nearly 600 by the end of the year, after already cutting staff by 13.5% to 6585, as it battles a drop in business at its biggest business unit, drilling solutions and services business MHWirth.
Akastor says: “The current down cycle in the offshore drilling market is turning out worse than in 2008-9. Contract awards and tenders are almost completely gone with 21 new floater fixtures so far this year compared to 89 in 2014. Floater utilization rates are at approximately 85% (78% including passive fleet). At the same time the new building book is at an all-time-high with 84 ultra-deep water (UDW) units under construction. The market is responding by scrapping at an unprecedented rate with 36 floaters announced removed/scrapped in the current down cycle. No new build orders for high end floaters had been placed as of end of May this year* and the current oversupply in the global rig market indicates that this situation will continue into 2016 and beyond.”
On the Norwegian Continental Shelf, operator Statoil has cancelled a number of rig contracts, most recently for the COSL Pioneer, Scarabeo 5 and Ocean Vanguard semisubmersibles. To date, global drilling rig operator Transocean has announced its intent to scrap 20 floaters.
MHWhirth revenues fell 32% in 1H 2015, compared to 1H 2014, and 48% in Q2, compared to the same period last year. In Q1 this year, the firm announced plans to cut 750 jobs, to leave 1000 in post at the business unit by the end of the year.
Causing further pain is uncertainty around some projects. A significant proportion of MHWirths backlog is for delivery of seven drilling packages to Jurong Shipyard in Singapore, for operations in Brazil. Due to the financial uncertainty of Jurongs client; Sete Brazil, progress on the Jurong drilling packages has been slowed down until the situation in Brazil is concluded, said Akastor.
Akastor was split off from Aker Solutions last year. Other Akastor companies include Frontica Business Solutions, AKOFS Offshore, Fjords Processing, and real estate business.
The firm said all of its portfolio companies were focusing on making the necessary adjustments to their respective cost bases, as well as improving operational efficiency. Overall Q2 revenues were NOK 3,693 million, down from 39% compared to the same period last year, at NOK 6,013 million, with NOK 2.3 billion order intake, taking the order backlog to 18.7 billion.
Today the company announced it has appointed Kristian Røkke as CEO, succeeding Frank O Reite, who is taking the position of CFO at Aker ASA.
Reite said: “We are taking actions to align our companies to the current market environment, and the majority of our portfolio companies have had a decent performance in the first half of 2015. We are working in close cooperation with the management teams to strengthen and develop each of our businesses. We have a long-term perspective, but must at the same time assure that our portfolio companies have the required flexibility to operate in a challenging market."
Røkke, currently chairman of Aker Philadelphia Shipyard, will take up the new role 10 August, with Reite proposed to become chairman of Akastor.
Røkke, born in 1983, has experience in offshore service and shipbuilding from several companies in the Aker group. He has spent the past eight years at Aker Philadelphia Shipyard, most recently as chairman of the Board and previously as President and CEO. Before that, he was SVP Operations. Røkke holds an MBA from The Wharton School, University of Pennsylvania and is both a Norwegian and United States citizen.
*Source, Clarksons Platou Rig Monthly, June 2015.
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