Prosafe: Weaker demand for flotels in North Sea

  • Exploration & Production

Prosafe, the world’s largest owner of offshore accommodation rigs, known as flotels, has today reported its net profit for the fourth quarter of 2014 was $51 million. The profit was lower when compared to $59.7 million earned in the same period of 2013.

Explaining the drop in profit, the company has said that the result is affected by the fact that its Safe Bristolia flotel sustained damages to lifeboats after experiencing extreme weather conditions in early October. Operations were suspended, and the vessel was brought to a shipyard in Norway to carry out repair work. A provision of $7.5 million has been made in the fourth quarter accounts to cover extra-ordinary expenses related to the Safe Bristolia incident.

Oil giants reducing costs

The company has noted that the oil companies are reducing capital expenditure amid low oil prices leading to cut in demand for oilfield services. Prosafe has said that the reduction in demand for offshore accommodation services has been especially noticeable in the North Sea sector.

In its presentation for the North Sea sector, Prosafe said that the area is facing de-scoping, postponement and cancellation of projects, and longer decision processes.

Prosafe is, however, optimistic, despite the weakened outlook. The company has said that opportunities still exist which could lead to new contracts being awarded over the coming year in the area.

It also added that long-term demand drivers such as aging infrastructure; large new fields to come on stream in coming years; high interest in recent licensing rounds and; significant potential for work related to decommissioning in due course, remain intact.

Mexico & Brazil 

In its quarterly report, Prosafe has said that in Mexico long-term demand outlook continues to look promising, although the recent drop in oil price has caused some near-term uncertainty.

The cost of shallow water production in Mexico is relatively low, and the recent drop in the price of oil is not expected to affect production volumes negatively. As such, demand for services to support the oil recovery rate, including accommodation support, is expected to continue, Prosafe has said.

Prosafe sees interesting potential also in other shallow water areas in Mexico besides Cantarell, adding that energy reform should lead to more deepwater exploration.

In Brazil, accommodation support vessels are mostly used for safety and maintenance purposes on producing fields. All the vessels servicing the Brazilian market currently operate in the Campos basin. Prosafe has said that in the longer term it is likely that there will also be demand from other areas. Accordingly, the outlook for further growth in Brazil remains positive, despite higher, near-term uncertainty resulting from recent developments in the global oil market, the company added.

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