Impairments push Songa Offshore into red despite $80M revenue rise

Songa Offshore, an offshore drilling contractor, has reported a loss for the second quarter of 2016, mostly due to impairment charges which amounted to $118 million for the quarter.

The Oslo-listed company said on Friday that its loss for 2Q was $86.3 million, down from the $17.3 million profit made in the same period last year.

The midwater driller said total revenue for the second quarter was $200.2 million in comparison to $121.9 million in 2Q 2015.

Operating revenue for the second quarter 2016 was $184.1 million, compared to $98.3 million for the second quarter 2015.

Revenue contribution from the Songa Equinox, Songa Endurance, and Songa Encourage drilling rigs is largely responsible for the increase in revenue for the quarter when compared to last year’s 2Q.

The three mentioned rigs contributed with $42.2 million, $41.7 million, and $34.1 million respectively. Revenue was partly offset by the absence of revenue from the Songa Trym which was $33.4 million in 2Q 2015. The rig is stacked in Norway, being marketed for more work.

While revenue grew, Songa Offshore took an impairment charge of $118 million in the second quarter of 2016, reflecting “a continued challenging market” for the company’s legacy fleet.

The whole sum regarding the impairments came from the Songa Dee, Songa Delta, and Songa Trym rigs. It is important to note that in 2Q 2015 the company had no impairment charges.

Providing its take on the future Songa Offshore said:“On the back of the continuous weak oil price, the North Sea drilling market continues to be very challenging with a limited number of tenders in both the NCS and UK markets. As a result, further rigs have come off contract and have been stacked. Visibility is still low and the competition for the few tenders in the market is fierce. Songa Offshore continues to be of the view that 2016 and 2017 will be two challenging years for the industry.”

Offshore Energy Today Staff