Norwegian offshore drilling specialist Odfjell Drilling sees a better future for the offshore drilling space, following a couple of years of “severe decrease in activity” that followed the 2014 drop in oil prices.
The company on Thursday posted a net loss for the first quarter of 2018 of $7 million, the same as in the first quarter a year ago. Odfjell’s operating revenue for the offshore rig segment – it fully owns four semi-subs – in the first quarter was $119 million, an increase of $8 million, or 7%.
There was an increase in utilization and revenue for Deepsea Stavanger rig during the period compared to last year as the rig was idle in 1Q 2017 until the rig started the Maria contract for Wintershall Norway on March 20. 2017.
However, this increase in activity was partly offset by lower revenue for Deepsea Bergen due to lower day rates compared to Q1 2017, Odfjell said. Deepsea Bergen has been operating for OMV on the NCS in Q1 2018.
Increased appetite for drilling
Providing its take on the market situation, Odfjell said: “We are currently observing a recovery in the oil price with levels more sound and sustainable for the drilling and oil service market. This, in combination with a more favorable cost structure, has resulted in an increased appetite for exploration and production activities by the oil companies.”
While the message sounds optimistic, the company still says the global drilling and oil service market is still at a low level. Still, Odfjell Drilling says, some regions have seemed to recover at a higher pace than others.
“In harsh environments, a substantial number of mature units have been permanently withdrawn from the market over the last couple of years. In addition, newbuilds have proven to be significantly more efficient than mature units,” the company said.
Based on the preference of new and more efficient units combined with a high reactivation cost, Odfjell believes scrapping of older midwater and harsh environment drilling units will continue over the next few years.
“In combination with a more healthy market environment, we believe this will bring the harsh environment market back into balance with subsequently improved day rates,” Odfjell Drilling said.
This may be one of the reasons Odfjell has recently agreed to buy a harsh environment newbuild for which immediately secured a contract with Aker BP.