Ensco scraps five jack-ups, one drillship

Ensco, a UK-based drilling contractor, has decided to scrap five of its jack-up drilling rigs and one drillship in order to reduce costs. 

The rigs set for scraping are jack-up drilling rigs Ensco 56, Ensco 81, Ensco 82, Ensco 86, and Ensco 99, and a 1999-built drillship Ensco DS-1.

Ensco Chief Executive Officer and President Carl Trowell said: “Three floaters and three jack-ups previously classified as held for sale will also be scrapped.

“All 12 of these rigs have been cold stacked to significantly reduce expenses. By scrapping rigs, we eliminate costs and contribute to reducing global rig supply.”

Ensco on Thursday posted a net loss of $2.5 billion for the fourth quarter 2015, compared to $3.45 billion in the corresponding period the year before.

Fourth quarter 2015 results included:

– $2.584 billion of non-cash asset impairments out of which $2.468 billion in continuing operations, and $116 million in discontinued operations;
– $276 million of non-cash goodwill impairments in continuing operations;
– the impact of a previously disclosed customer notice regarding ENSCO DS5; out of which $45 million of fourth quarter contract backlog not recognized as revenue, and$17 million provision for doubtful accounts in contract drilling expense; and
– $11 million favorable discrete tax item in continuing operations.

Revenues were $828 million in fourth quarter 2015 compared to $1.16 billion a year ago primarily due to a year-over-year decline in reported utilization to 63% from 86% in fourth quarter 2014. Also, the average day rate for the fleet declined to $216,000 from $243,000 a year ago.

Dividend reduction

“As the downturn in the offshore drilling market continues given further declines in commodity prices — we believe it is prudent to take additional steps to increase liquidity and improve capital management flexibility by reducing our dividend,” said Trowell.

“Reducing the dividend will provide us with $130 million of additional liquidity on an annual basis, bolstering our current liquidity position of more than $3.5 billion, including $1.3 billion of cash and short-term investments and a fully available $2.25 billion revolving credit facility.”

Offshore Energy Today Staff