“Maersk Drilling continues to focus on delivering excellent drilling services to our customers. Meanwhile, we maintain a strong cost focus, which again pays off in this quarter, where we deliver a fine result. However, the adverse market conditions are very dominant, and despite our good operational performance, Maersk Drilling is also affected by the lack of activity and lower dayrates in the market and will be all through 2016,” says Claus V. Hemmingsen, CEO in Maersk Drilling and member of the Executive Board in the Maersk Group.
Maersk Drilling saw two contract terminations in the first quarter of 2016. The contract for the harsh environment jack-up Mærsk Gallant was cancelled, but concurrently Maersk Drilling signed a new contract in direct continuation of the cancelled contract. Furthermore, Maersk Drilling received a notice of early contract termination for the ultra-deepwater semi-submersible Mærsk Deliverer. The cancellation is expected to be neutral for the full year financials. Maersk Drilling had four rigs, who were idle or partly idle in the first quarter.
“The market is still very challenged in the short to medium term, emphasising the need for further scrapping and cold stacking of rigs to resolve the imbalance between demand and supply in the market. However, we remain confident in the long term, as clients will demand high-tech and younger rigs, which through efficient and safe operations can lower the total well cost,” says Claus V. Hemmingsen.
At the end of Q1 2016, Maersk Drilling’s forward contract coverage was 72% for the rest of 2016 and 54% for 2017 and 43% for 2018. The total revenue backlog by end Q1 2016 amounted to USD 4.7bn (USD 5.9bn). Maersk Drilling has since the launch of the cost programme in Q4 2014 reduced costs by 12%.
Maersk Drilling reiterates the expectation of an underlying result significantly below last year (USD 723m) mainly due to lower day rates on new contracts and more idle days.
Download the first quarter presentation here.
Facts about the Q1 2016 performance:
- Profit of USD 222m (USD 168m)
- ROIC was 11.2% (8.5 %)
- Operational uptime averaged 97% (97%)
About Maersk Drilling
Maersk Drilling’s modern fleet counts 22 drilling rigs including drillships, deepwater semi-submersibles and high- end jack-up rigs. Further, Maersk Drilling has one ultra-harsh environment jack-up rig under construction. Maersk Drilling employs an international staff of 4,000 people and generated a profit (NOPAT) of USD 751m in 2015.