North Atlantic Drilling Limited (NADL) has said it could take up to 18 months after the ‘bottom of the cycle’ for rig rates to improve.
The company made the assessment as it revealed its second quarter results for the year.
NADL said there was a “sense of optimism” within the industry as oil prices appeared to be stabilising.
In a statement the company said: “Decline curves continue to accelerate and oil companies are beginning to see the impacts of spending cuts over the last two years.
“There is a growing realisation that this level of investment is not sustainable and capital will be required to slow decline curves and grow production at some point.
“In spite of an apparent shift in market sentiment, offshore drilling lags behind the cycle and remains challenging.
“The North Sea offshore tendering activity has improved, however there continues to be multiple rigs bid for opportunities and a significant supply overhang driving rates to near operating
breakeven levels.
“Although scrapping and stacking activity is addressing some of this overhang, it will likely take 12-18months after the bottom of the cycle for rates to improve materially.”
NADL went on to say that while major oil companies in the Norwegian Continental Shelf have cancelled or delayed large multi-year field development programs to 2018 through to 2020, mid-sized
companies are showing “increased requirements for new development work” in the coming year.
It was found in the UK there continues to be an increase in plug and abandonment programs which “do not require higher specification or newer units”.
The statement added: “On the onset this is positive to keep aging rigs working, however these programs are further prolonging the decision for rig owners to stack or scrap the older units which predominantly make up the market.”
NADL said revenues for the second quarter of the year were up to $161.6million from $151.6million for the first quarter of 2016.
The company said the primary reason for the increase in profits was the return of the West Phoenix to drilling operation in March after it had sat idle over the winter months.
Operating income for the second quarter was $54million, an increase of $21million compared to the first quarter of 2016.