Fred. Olsen narrows loss. Sees no improvement in Norwegian floater market

Fred. Olsen Energy, a Norwegian offshore driller, has warned that the depressing conditions in the Norwegian floater market are expected to spill over into 2017 as well.

According to the company’s second quarter presentation, where it reported a narrowed second-quarter loss, the company said there has been a considerable reduction in the utilization of the rig fleet in Norway during the last year, and this is expected to continue, with scarce contract opportunities in the second half of 2016 and into 2017.

The company also expects to see an increase in the number of cold stacked units.

Fred. Olsen itself has ten offshore rigs, four of which are cold-stacked, namely Bredford Dolphin semi-sub in Kvinesdal, Norway; Belford Dolphin drillship in Labuan, Malaysia; and Borgholm Dolphin accommodation rig and Borgny Dolphin semi-sub in Harland & Wolff shipyard in Belfast, N. Ireland.

It seems also that the Borgny Dolphin has reached a point of no return. Fred. Olsen said that he 1977-built, self-propelled, drilling rig would be decommissioned, with the transaction estimated to take place in third quarter 2016.

Regarding the two remaining semi-subsmersibles in Norway the Bideford Dolphin during the second quarter continued operations under a three-year drilling contract for Statoil ASA. The contract expires in January 2017.

Rig suspended

However, in June 2016, Statoil said it would suspend the rig for three months starting in the beginning of July. Compensation during the suspension is 80% of normal dayrate.

Also, Borgland Dolphin continued operations under the 18-well drilling contract with a Rig Management Norway AS (RMN) managed consortium of four oil companies.

The drilling contractor said the duration of the drilling program has been significantly reduced by some of the clients and the rig is now estimated to complete the contract in August 2016. Due to the significant deviation between original contract estimate and actual days of operations, the company will explore its legal rights to recover some of the reduced income, the company said.

As for the UK floater market, Fred. Olsen said the utilization is approaching a historical low, however, the company said it sees some requests and tender activity for work with start up late 2016 and into 2017.

A moderate improvement in drilling activity in UK is expected, Fred. Olsen said, adding that the low project and maintenance activity in general is affecting the accommodation segment, with no short-term visibility, meaning that the Borgholm Dolphin accommodation unit could remain in Belfast some more.

Financials

Regarding the second quarter financial result, Fred. Olsen managed to narrow its loss. The company reported the second-quarter loss of $114 million, an improvement from a $327.5 million loss a year ago.

Revenues dipped to $219 million, down from $326 million in the corresponding period of 2015.

The company’s operating expenses decreased to $76 million, from $117 million in 2q 2015.

Also, in May, the company repaid its bond loan (FOE 04), with an original amount of NOK 1,400 million (around $167 million). During the quarter, Fred. Olsen recognized an impairment charge of $159 million, due to a continued weak offshore market.

Offshore Energy Tdoay Staff