Seadrill’s chief executive said while he doesn’t expect day rates to increase, the slowdown in scrapping has left him feeling optimistic.
Speaking after the firm revealed its fourth quarter results, he said: “We continue to see an improvement in the level of bidding activity following the increase and stabilization of oil prices. Improving dayrates will not be a feature of 2017, however, based on the expected level of scrapping and cold stacking activity we believe there is room for some optimism.
“Our scale and young fleet position us well for the eventual recovery in the industry. Our key stakeholders have demonstrated a desire to be part of a solution to our restructuring requirements with the right structure and terms.”
The firm recorded $667million of revenue in the fourth quarter of the year – the figure is 30% down on the previous year. The firm said 10% of that decline could attributed to the West Hercules, West Orion, West Phoenix, West Alpha, West Pegasus and Sevan Driller having a full quarter of idle time. The West Epsilon and West Vigilant also became idle during that time and the West Saturn earned a lower day rate in December.
The firm was also forced to cut 1,724 jobs – 1,393 offshore and 331 onshore. The firm said based on commercial activity it had reached “the minimum number of employees required to run our business safely and efficiently”.
Seadrill said it had seen an uptake, especially in the North Sea; however, it stressed it was battling a “fiercely competitive” market with drilling contractors bidding below the break-even point.
Its report read: “The short to medium term outlook for chartering market continues to be extremely challenging. While tendering activity has continued at increased levels over the past few months, especially in the North Sea, near term drilling programs continue to be largely based on opportunistic spot market activity and a number of oil companies continue to have excess rig capacity on contract. Available work is fiercely competitive with drilling contractors bidding below cash breakeven in some instances in order to keep rigs active.
“On the positive side, the longer term leading indicators appear to be heading in the right direction. While the level of exploration and production capital expenditures are expected to be down again in 2017, more recent surveys of oil companies are reflecting less reduction than was previously anticipated and expenditure increases are still expected for each successive year during the period 2018-2020. Break-even costs for offshore fields have fallen significantly and many more are now at or below current oil prices, which have remained above $50/bbl since the OPEC agreement in early December 2016.”
Seadrill’s cash and cash equivalents total $1.4billion and it has an order backlog of $2.5billion.
The firm’s net bearing debt totals $8.5billion.
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