Odfjell Deepsea Nordkapp; Source: Odfjell

Odfjell Drilling profit up despite oil price turmoil and COVID-19

Due to the limited impact of the COVID-19 outbreak during the first quarter of 2020, offshore drilling contractor Odfjell Drilling was able to book a higher profit from the one made in the same period last year.

Odfjell Deepsea Nordkapp; Source: Odfjell

Odfjell Drilling said on Wednesday it had recorded a profit of $23 million in the quarter, an increase when compared to the $10 million profit in the 1Q 2019.

The company’s operating revenues decreased slightly to $197 million, only $4.4 million less than in the corresponding period of 2019.

The company said in its financial report that the decrease in revenues was mainly due to increased revenue in the MODU segment, offset by decreased revenue in the Well Services segment.

Odfjell’s contract backlog stands at $2.2 billion, $1.2 billion of which is firm backlog. The comparable figure at the end of 1Q 2019 was $2.3 billion, $1.3 billion was firm backlog.

As for Odfjell Well Services (OWS), it is still facing fierce competition for its services globally.

Even though the company observed an increase in operational activity in the European and Middle East markets recently, the current market turbulence is expected to impact the demand for OWS’ activities in the short to medium term.

COVID-19 and negative shift in oil price

Odfjell stated that the COVID-19 outbreak and negative shift in oil price, which both occurred during 1Q 2020, have affected and will continue to affect the global economy negatively going forward.

According to the company, the impact of the COVID-19 on its operations has been limited during 1Q 2020 as the company was able to implement required routines to limit the contagion of the virus early on.

In doing so, Odfjell’s operations have only been marginally affected within the Drilling & Technology segment.

The driller added that the negative shift in oil price would have limited effect on Odfjell Drilling in the short to medium term as it has a firm contract backlog for its 6th generation harsh environment fleet to 2021/2022.

‘Rig utilization to remain at high levels’

It is worth noting that all of the company’s rigs had high utilization rates, four of which above 90 per cent – some even very close to 100 per cent.

The only rig below a 90 per cent utilization rate was the Deepsea Aberdeen which had a 74.8 per cent utilization rate in the quarter.

The reason for the lower utilization of the rig is a period of 21 days in February when the rig was off rate during a special periodical survey.

Odfjell Drilling expects the overall utilization of the total available drilling fleet to remain at low levels, in particular for ultra-deep and benign water operations.

The modern harsh environment drilling fleet is currently fully utilized and the company believes utilization will remain at high levels also going forward, however, some reduction in overall demand and prices should be expected.

The company also noted it expects that the market weakness will trigger more scrapping and further eliminate any new supply in the short to medium term.