Odfjell Drilling posts smaller profit despite higher revenues

Offshore drilling contractor Odfjell Drilling posted a decrease in quarterly profit despite increase in revenues driven by mobile offshore drilling units segment.

Odfjell Drilling recorded operating revenue of $221 million in 4Q 2019 compared to $168 million in the same period of 2018. This was mainly due to increased revenue in the mobile offshore drilling units (MODU) segment.

Specifically, in the MODU segment, Odfjell’s revenues were $160 million in 4Q 2019 versus revenues of $119 million in 4Q 2018. This an increase of $41 million was mainly due to the new rigs Deepsea Nordkapp and management for Deepsea Yantai.

In the Drilling & Technology segment, Odfjell’s revenues were $38 million, an increase of $1 million compared to 4Q 2018.

The company recorded a net profit of $11 million in 4Q 2019 compared to a profit of $19 million in 4Q 2018.

Net profit FY 2019 was $41 million compared to $27 million in 2018.

The company’s contract backlog is $2.3 billion, where $1.3 billion is firm backlog. The comparable figure at the end of 4Q 2018 was $2.4 billion, where $1.4 billion was firm backlog.

According to the drilling contractor, the drilling and oil service market has developed positively in recent years due to strong focus on cost discipline and more efficient operations, combined with a healthier oil price development. This has led to increased appetite for field development and production spending across the segment, however with some regional differences. The risk of negative development in the global economy has also shed uncertainty into the commodity market with volatile oil prices as a consequence.

Odfjell claims that the expected overall increase in drilling activity has been further delayed, still providing a low utilization of the total available drilling fleet for ultra deep and benign water operations in general. The harsh environment market has however continued its positive trend with significant higher activity now compared to a few years back in time and it is believed that this segment will continue to increase its activity level in the medium to long term horizon.

The modern fleet of harsh environment units is fully utilized and there is limited access to additional units. Increased lead time and high utilization will improve dayrates for modern harsh environment drilling units in the medium to long run. However, the current dayrate level does still not support any newbuild activity based on expected return on capital employed for the next couple of years.

The company also said that the slowdown in the North Sea market had led to a low activity level for development and upgrade projects over the last few years. Drilling & Technology has experienced an increased demand for its services and is well positioned to take part in the current market recovery.

Offshore Energy Today Staff

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