Odfjell Drilling expects softer market

Odfjell Drilling Ltd. has released its financial report for the first quarter of 2014. Net profit has slightly increased compared to the same quarter last year, while the operating revenue recorded a drop.

Operating revenue for Q1 2014 was USD 274 million (USD 296 million), a decrease of USD 22 million, or 8 %. Operating revenue decreased due to lower a financial utilisation in the Mobile Offshore Drilling Units (MODU) segment, reduced engineering activity in Drilling & Technology and the sale of the Mooring business line in Well Services.

EBITDA in Q1 2014 was USD 75 million (USD 89 million), a decrease of USD 14 million, or 16 %. EBITDA margin for Q1 2014 was 27 % compared to 30 % in Q1 2013. The decrease in EBITDA and EBITDA margin was attributable to the same reasons as the change in operating revenue.

EBIT in Q1 2014 was USD 37 million (USD 51 million), a decrease of USD 14 million, or 28 %.

Net financial items in Q1 2014 were negative with USD 10 million (negative of USD 23 million). The decrease is mainly due to less unrealised currency loss and borrowing expenses in Q1 2014 compared to Q1 2013.

Net profit in Q1 2014 was USD 23 million (USD 22 million), an increase of USD 1.4 million.

Odfjell Drilling says that the demand for the Group’s services is satisfactory in all the markets, but market conditions are expected to be softer in the near term.

“In the medium to long-term, the company is of the opinion that the oil industry’s demand for drilling services will continue to be supported by the need for reserves replacement and by continued spending on exploration and field-development in the main offshore regions,” the company said in its quarterly report.

For the MODU segment Odfjell Drilling says it sees a softer near term deep- and ultra deepwater market evidenced by shorter lead times and decreased number of contract awards. This is caused by a slowdown of oil companies’ growth in E&P spending and the increase in UDW rig supply, putting pressure on near term day rates for drilling units.

Odfjell Drilling has a UDW fleet of high spec 6th generation units, and as such should be less impacted by the market fluctuations. The harsh environment market, especially in the North Sea, will remain in better balance than the UDW market near term.

The Well Services segment is expected to continue its long-term growth in its selected market regions.

The slowdown in oil companies’ E&P growth has led to a more volatile market for the Group’s engineering services near to medium term due to the postponement of development, and upgrade projects.