Lower rig utilization drives Prosafe revenues down while profit goes up

Prosafe, an owner and operator of semi-submersible accommodation rigs also known as flotels, saw its revenues drop during the third quarter 2016 due to lower rig utilization while its profit grew over the period. 

The company’s third quarter net profit increased to $201.9 million when compared to the last year’s third quarter and net profit of $53.2 million.

Prosafe’s rig utilization dropped to 52% during the third quarter of 2016, compared to 81% in the same period last year.

Revenues for the third quarter of 2016 were $129.8 million, as opposed to revenues of $154.1 million in the corresponding period last year. The company explained that this decline is due to the lower rig utilization. This effect has been partly compensated by a higher average day rate, which reflects that units which generate a relatively high day rate have been on contract during the third quarter this year as opposed to last year when several of the rigs were on bareboat contracts in the Gulf of Mexico.

Up to 40 pct headcount reduction

In its third quarter 2016 report, the company said that its phase 1 of re-organization and cuts in cost and capex will be ongoing until the end of 2016 with phase 2 being planned. Regarding re-organization, the company expects to advance from matrix to simple line organization with fewer departments and slimmer management team.

Prosafe’s phase 1 of re-organization, expected to be completed at the beginning of 2017, will include total headcount reduction between 35-40%, i.e. from ca 800 to ca 500 jobs, of which ca 115 will be onshore.

When it comes to cuts in cost and capex, the company is targeting 2017 savings of 20% or $30-40m in offshore capex and 30% or $12m in onshore capex. Further, Prosafe’s annual fleet capex, excluding new-builds and conversions, will be cut by 70% or $40-45m.

Next year still at low point

Looking ahead, Prosafe said that the market outlook remains uncertain in the near term, and although there are a number of prospects in the years ahead, 2017 is still expected to be the low point in activity level.

The company added that, in general, the market activity is expected to normalize in the years ahead through a combination of maintenance and modification, hook-up and decommissioning.

Further cost reductions in the E&P sector are expected to contribute to more projects becoming economically viable. Combined with continued focus on enhanced recovery, life extensions and safe and efficient operations, the company said it expects a gradual market recovery from 2018 onward.

Offshore Energy Today Staff