Sevan Drilling sees profit comeback

Sevan Drilling, an international drilling contractor specializing in the ultra deepwater segment, has seen a profitable third quarter of 2015 as opposed to a net loss posted in the same period last year. In addition, Sevan boosted its revenues for the quarter due to improved rig fleet performance. 

According to its third quarter report on Tuesday, the company had a net profit for 3Q 2015 of $26.4 million, compared to a net loss of $21.1 million in 3Q 2014.

Sevan’s operating revenue for the quarter soared amounting to $98.4 million, compared to $69.8 million in 3Q 2014. The revenue increase is explained by improved operating performance for the fleet compared to 3Q 2014.

Total operating expense was $56.7 million compared to $70.6 million in 3Q 2014. The decrease is the result of costs related to the downtime events in 3Q 2014 on Sevan Louisiana rig operating in the U.S. Gulf of Mexico for LLOG Exploration, offset by reductions in operating expenses realized across the fleet from cost savings initiatives and the impact of the Brazilian Real devaluation in 3Q 2015.

Furthermore, Sevan Drilling reduced its general and administrative costs to $3.3 million compared to $4.7 million in the corresponding period last year.

In the quarter, Sevan Drilling’s rigs achieved technical utilization of 96.5% and economic utilization of 94.6%. At September 30, 2015, the fleet’s backlog revenue was $0.7 billion.

To remind, in October 2015, Sevan Drilling exercised its first option to delay delivery of its newbuild rig, the Sevan Developer, being built at China’s COSCO shipyard.

Challenging market to continue through 2016

During the third quarter oil prices remained mainly in the range of $45 and $55 and the challenging market for oilfield service companies continued. The impact of persistent low prices continues to be seen in oil companies’ budgeting and spending activity with the year on year decline experienced in 2015 expected to continue in 2016, the company said.

Forward visibility continues to be challenged and the timing and extent of the recovery remains uncertain, the offshore driller further added.

In addition, the company says that fixture activity in the ultra deepwater market continues to be muted as oil companies focus their efforts on cutting costs and driving efficiencies through not only revised vendor pricing but also redesign and standardization of planned development programs.

Sevan claims that, in the long run, the ability to undertake developments at significantly lower hurdle rates than were thought just a few years ago will be positive for the industry as a whole. In the current market, most successful tenders continue to see fixtures at or below cash breakeven levels. For the most part, Sevan notes, customer conversations remain focused on extending existing contracted assets or trade-offs between existing assets and newer assets rather than contracting new units for work.

According to the company, utilization and pricing across all market segments remains low and in many cases has drifted lower during the third quarter. Sevan Drilling says it continues to believe that this challenging market will continue through 2016.

Offshore Energy Today Staff