Photo: Seadrill's West Leo rig; Author: SP Mac

Seadrill expects continued offshore drilling market recovery over rest of the year

Offshore drilling contractor Seadrill has seen an improvement in the offshore drilling market throughout 2019. Although the pace of the recovery has slowed down at the beginning of 2020, Seadrill expects continued market recovery over the remainder of the year.

Seadrill's West Leo rig
Seadrill’s West Leo rig; Author: SP Mac

According to its report on Thursday, Seadrill’s revenues in the fourth quarter of 2019 were $398 million, an 8% increase compared to the prior quarter and revenues of $367 million and also an increase when compared to 4Q 2018 and revenues of $292 million.

The sequential increase was primarily due to higher reimbursable and other revenues relating to rigs managed on behalf of Northern Drilling and Sonadrill. These were partially offset by lower contract revenues due to a full quarter of idle time for the West Saturn and West Carina, idle time for the West Gemini prior to starting its contract in Angola, the West Jupiter completing its contract and the West Tellus starting a new contract at a lower dayrate. Additionally, the Libongos rig in Angola started working and consequently Seadrill has started to recognize revenue from its management services agreement with Sonadrill.

Seadrill’s net loss in 4Q 2019 was $199 million compared to a loss of $521 million in 3Q 2019 and a loss of $360 million in 4Q 2018.

The company’s order intake of $1 billion resulted in total backlog of $2.5 billion at year-end of which approximately $720 million is expected to be consumed in 2020.

Anton Dibowitz, CEO, commented: “We have seen a broad-based market recovery through 2019, led by the harsh environment segment, followed by the high specification jack-up and the benign environment ultra-deepwater segments. The pace of the recovery has slowed as we enter 2020, however we expect to see continued improvement as the year progresses.

“Our first bank maturities do not fall due until Q2 2022, however we took the initiative to engage in a dialogue with our banks at an early stage to address capital structure challenges relative to current trading conditions. We have been engaged in a productive dialogue with the lead banks throughout the fourth quarter and into 2020 and we expect to provide a fuller update at the appropriate time.”

At the end of the quarter, Seadrill had six floaters operating and one contracted in the future.

Seadrill said that, while there are limited opportunities to reactivate idle floaters, the company expects to see some opportunities for reactivations in the high specification jack-up market later in 2020.

Seadrill said in the report: “Throughout 2019 we have seen an improvement in market fundamentals with increased tendering activity, utilization and dayrates which we expect to continue over the long-term. Although the pace has slowed as we enter 2020 we expect continued market recovery over the remainder of the year.

Seadrill added: “While we have seen improvements across all three segments they continue to recover at varying rates. The harsh environment remains the tightest market, particularly in Norway where we continue to see strong dayrates and marketed utilization trending towards 90%. In the benign environment market we may see some near term pressure on dayrates whilst an oversupply from contract conclusions sees customers seeking to lock in low rates for longer-term work. However, in the jack-up market we continue to see high utilization and strong fixtures particularly in South East Asia and the Middle East. Astrong demand outlook for high specification jack-up assets may present the opportunity to add supply for which we are well positioned.”

Offshore Energy Today Staff

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