Oilfield services group Archer reported a strong final quarter of 2021, but will scrap 15 rigs in Argentina amid an ongoing ‘challenging’ environment.
In a February 2 trading update, Archer reported a minor uptick in from Q3 to Q4, to $248 million (£18m), taking the total for 2021 to $932m (£686m) – a 13% increase on 2020.
EBITDA also saw a minor increase to $22.3m (£16.4m) for the quarter, reaching $85m (£62.6m) for full-year 2021.
However, the Norway-headquartered group, which has a UK base in Blackburn, Aberdeenshire, said it faces ongoing challenges in the land drilling segment, specifically in Argentina where the country is battling with inflation and renegotiations of international debt repayments.
Commenting on the most recent quarter, Archer chief executive Dag Skindlo said: “Archer had a strong fourth quarter with growth in both revenue and EBITDA. I am pleased that the topline growth and improved operational result were combined with a healthy cash flow generation – reducing net interest-bearing debt by $18 million [£13.2m] over the quarter.”
Reflecting on improvements seen in 2021, Mr Skindlo added: “Archer delivered on the financial commitments we outlined early 2021 and reports an annual growth of roughly 13% in both revenue and EBITDA. We have strengthened our Well Services division and secured substantial backlog through the award of the Equinor and ConocoPhillips wireline contracts as well as the acquisition of DeepWell.”
Rig write-down
On February 1 Archer said it had secured a roughly $400m (£295m) contract extension with Pan American Energy, covering two drilling rigs, 13 workover units and 13 pulling units working at Pan American’s Cerro Dragon field in the Golfo San Jorge basin in southern Argentina.
The contract now runs until Q2 2025, and Pan American has the flexibility to adjust the level of activity up or down during the contract term.
However, headwinds in the market are still proving strong. Added Mr Skindlo: “Despite the improvement in Q4 for our land drilling operations and the improved outlook following the recent contract award from Pan American Energy, the situation in Argentina remains challenging.
“The macro fundamentals in Argentina following their sovereign debt default constraints the country’s ability to further develop their vast oil and gas resources in the short term. In this context, we have concluded to write down 15 old rigs, pulling units, and workover units that are unlikely to return to operation, and recorded an impairment of $14 million [£10.3m] in the quarter.”
Meanwhile, the company also unveiled plans to reach net zero by 2050, with rapid pace expected in developed markets.
Mr Skindlo said the company expects to be carbon neutral within 2022 in almost all its operating countries this year – including its main operations in Norway, UK and US – with the exception of Argentina and Bolivia.
It also intends to capitalise on other energy transition opportunities, particularly in geothermal drilling and carbon storage, where it has identified competitive advantages to build on.
Through 2022 Archer expects its platform drilling business to see “a moderate slow-down” following two large P&A projects completed last year, but says it expects higher global activity in well services.
It said its outlook for land drilling would remain “cautious”, though added that its extension with Pan American and encouraging signs from Argentina’s negotiation with the IMF, provided some confidence.
It expects revenues to increase “moderately” from 2021, and a 5-8% increase in EBITDA.
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