Pacific Drilling posts sharp decline in profit, revenues

Offshore driller Pacific Drilling on Monday posted a sharp decline in profit and revenues due to a lower dayrate for one of its drillship. 

The company’s net income for the third-quarter of 2016 was $0.2 million, compared to net income of $41 million for third-quarter 2015.

Further, Pacific Drilling’s contract drilling revenues for the third quarter 2016 were $182.4 million, which included $12.3 million of deferred revenue amortization, compared to $260.2 million in the prior-year quarter.

The company’s second quarter 2016 contract drilling revenues were $203.7 million, which included $12.7 million of deferred revenue amortization. Contract drilling revenue decreased in the third-quarter primarily as a result of the Pacific Bora drillship operating at a lower dayrate to finish its well in progress after completion of the primary contract term.

The drillship recently got a letter of award from Hyperdynamics Corporation for a drilling campaign offshore the Republic of Guinea to be done in the second quarter of 2017.

CEO Chris Beckett said, “We do not anticipate recovery of the dayrate environment for several years, but remain convinced of the long-term potential of the platform and asset base we have built.”

During the three months ended September 30, 2016, the company’s operating fleet achieved average revenue efficiency of 97%. Operating expenses for third-quarter 2016 were $68.5 million, compared to $76 million for second-quarter 2016. The reduction in operating expenses was primarily the result of decreased costs across most of the rigs in the fleet and shore-based and other support costs.

Operating expenses for third-quarter 2016 included $3.8 million in reimbursable costs, $6.6 million in shore-based and other support costs, and $3.8 million in amortization of deferred costs.

According to the offshore driller, market conditions continue to be challenging, which will impact its financial results in the near future therefore the company is seeking amendments or waivers of the leverage ratio financial covenants in the company’s revolving credit facility and the senior secured credit facility, as it is likely the company will be in violation of such covenants within the next twelve months.

The company added: “We are also engaged in discussions with certain of our lenders and noteholders regarding other modifications to the terms of our long-term debt. We believe we can continue to meet our existing obligations as they come due through 2017. However, absent a significant improvement in market conditions in the near term, we will likely need our lenders and noteholders to agree to modifications to the terms of our long-term debt for our capital structure to be sustainable in the longer term.”

Offshore Energy Today Staff