North Atlantic Drilling (NADL), the harsh environment drilling rig operator, says that trading conditions remain challenging, but that large numbers of old units in the global fleet are candidates for scrapping.
The company reported net profit of USD44.2 million in the second quarter of 2015 (2Q15), which was a reduction from USD59.7 million in the same period last year. Revenues fell to USD210.7 million from USD342.6 million.
In 1H15, the company booked a profit of USD32.9 million, down from USD79.9 million a year before. Revenues also fell significantly, to USD402.7 million from USD616.3 million.
“The Harsh Environment sector has seen limited fixtures at substantially reduced day rates, with the Johan Sverdrup award being a recent data point. With the exception of some contract rollovers, we do not expect to see new tender awards for work commencing in 2015,” the company said in a statement.
“The few tenders that are active have commencement dates after the next winter season and into 2H16 and beyond. Customer conversations continue to be focused on the renegotiation of existing contracts, often in exchange for extended term,” NADL said.
Capacity utilisation in Norway and the UK is currently at about 71%, down from 93%. “It is likely that this downward trend will continue for the remainder of the year as more units roll off contract and become stacked,” NADL said.
Looking ahead, the company forecast that, based on the level of current activity seen in the global market, stacking and scrapping activity will continue through 2H15 and well into 2016.
“Scrapping activity has continued in the second quarter with an incremental 14 floaters designated for retirement and currently 28 cold stacked units. While the premium jack-up market has yet to see the same levels of stacking and scrapping, there are approximately 50 idle units out of a total marketed fleet of 480 that are older than 30 years,” NADL said.
“Additionally there are 100 units that are rolling off contracts by the end of 2016, which are also older than 30 years. Together, these 150 rigs, or 30% of the total fleet, represent prime candidates for retirement,” said NADL, which operates eight rigs.
“North Atlantic is actively marketing the fleet and continues to focus on safe and efficient operations, cost management and being proactive with all counterparties in this challenging market. Operating performance has improved in the quarter and we continue to realise benefits from our cost savings initiatives. We have driven additional efficiencies on idle units by planning early and executing with best in class form to achieve low stacking costs and maintaining the quality of the units and crews,” the company concluded.
NADL was spun off last year from Seadrill, the London-based drillship and rig operator in John Fredriksen’s business empire and listed in the US. Seadrill continues to control most of the shares in the company.