Maersk Drilling reported a profit of USD 28m. The result was impacted negatively by rigs being idle as well as temporary downtime on two rigs during the quarter. Though unsatisfactory, the result is as expected given the current market environment. Maersk Drilling today announces the award of one new contract and two contract extensions adding more than 13 months to the backlog.
Though the offshore drilling market is showing signs of a marginal recovery, the offshore drilling sector continues to hold significant excess capacity. In Q2 Maersk Drilling’s revenue decreased to USD 349m (USD 566m) and the profit decreased to USD 28m (USD 164m). Return on invested capital decreased to 1.7% (8.3%). The result reflects that new contracts are being signed at lower day-rates and that a large number of Maersk Drilling rigs were idle or partly idle during the quarter. The result was also impacted negatively by temporary downtime on two rigs during the quarter.
“The result is not satisfactory, but it is as expected given the current market environment where the oil price is below levels required to support sustainable economic returns for the offshore drilling industry. To increase efficiency, we continue to implement cost reductions and we have now reduced costs by 20% since 2014,” says Jorn Madsen, CEO of Maersk Drilling.
Important wins in a distressed market
By the end of Q2 2017, Maersk Drillings’ forward contract coverage was 61% for 2017, 46% for 2018 and 25% for 2019. The total revenue backlog by the end of Q2 amounted to USD 3.1bn (USD 4.7bn). During the quarter, Maersk Drilling added a total of 236 contract days to the backlog with a combined value of USD 29m.
In addition, the company today announces the award of a contract by Shell for the deepwater semi-submersible rig Mærsk Developer. The contract covers the drilling and completion of three wells, and the suspension of one well offshore Trinidad. The duration of the firm contract is estimated at eight-nine months with options for more than two years of additional work. Further, Maersk Drilling has entered into two contract extensions on existing contracts in the North Sea for Maersk Resolve and Maersk Resolute by Wintershall Noordzee B.V. and Petrogas E&P Netherlands. The total duration of the two extensions is up to 150 days.
“With these three contracts we have added more than 13 months to the backlog. Maersk Drilling’s contract coverage remains one of the strongest in the industry and it is very rewarding to see that we are able to further strengthen our contract coverage and reduce our near term exposure to the market,” Jorn Madsen says.
Strategic alliances to eliminate inefficiencies
In response to the market downturn, Maersk Drilling remains committed to increasing efficiencies for customers. In line with this, Maersk Drilling recently announced the extension of the partnership with GE applying digital solutions across the fleet to enhance drilling productivity and enable predictive maintenance.
“Our strategic ambition is to be the preferred partner in the industry by helping oil companies reduce the total cost per barrel of oil. From technical partnerships on equipment development to digital partnerships focusing on data analytics, strategic alliances will be an increasingly important tool for us in our effort to benefit our customer’s operation,” Jørn Madsen ends.
Facts about the Q2 performance:
− Profit of USD 28m (USD 164m)
− ROIC was 1.7% (8.3%)
− Operational uptime averaged 95% (98%)
For further information, please contact Tine Østergaard Hansen, Head of Corporate Communication and Branding on +45 2217 1300 or email@example.com
About Maersk Drilling
Maersk Drilling’s modern fleet counts 24 drilling rigs including drillships, deepwater semi-submersibles and high-end jack-up rigs. Maersk Drilling employs an international staff of 3,200 people and generated an underlying profit of USD 743m in 2016. For further information, see www.maerskdrilling.com