Maersk Drilling boasts largest quarterly backlog addition since 2017

Offshore drilling contractor Maersk Drilling has added hundreds of millions to its contract backlog, its largest quarterly backlog addition since 2017, as the company is seeing signs of improvement in the market, particularly in the floater segment.

In its quarterly report on Thursday Maersk Drilling said that, at the end of March 2021, its revenue backlog amounted to $1.8 billion, compared to $1.3 billion at the end of December 2020.

During 1Q 2021, a total of $730 million was added to the revenue backlog from 13 new contracts and extensions.

Subsequent to 31 March 2021, Maersk Drilling has been awarded five additional contracts bringing the total year to date additions to the revenue backlog to more than $800 million.

Forward contract coverage for the remainder of 2021 is 64 per cent and 24 per cent for 2022.

Maersk Drilling CEO, Jorn Madsen, said: “We added $730m to our backlog which is an industry-leading commercial performance and our largest quarterly backlog addition since 2017.

“The market is still recovering from the 2020 downturn but we are seeing signs of improvement, particularly in the floater segment where fleet rationalisation has led to a healthier business environment for offshore drillers”.

Maersk Drilling’s revenues decreased during the period both sequentially and year-over-year.

The company’s revenues were $264 million in 1Q 2021 compared to $286 million in 4Q 2020 and compared to $279 million in 1Q 2020.

According to Maersk, revenues for 1Q 2021 were overall negatively impacted by a lower financial uptime but this was almost entirely offset by Maersk Inspirer starting on contract and several international floaters mobilising and starting contracts within the quarter.

The financial uptime of 92.9 per cent (98.9 per cent in 4Q 2020) was negatively impacted by six weeks off-rate for Maersk Deliverer in the International floater segment due to equipment failure. The rig resumed operations in March.

The total number of contracted days amounted to 1,199 days in 1Q 2021 (1,204 days) leading to utilisation of 61 per cent for the quarter (59 per cent).

The average day rate was $220k in 1Q 2021 ($238k in 4Q 2020) which was negatively impacted by several rig mobilisations towards the end of the quarter as well as the lower financial uptime. 

The average day rate was positively impacted by COVID-19 related costs being passed on to customers. 

Maersk Drilling said that, in 1Q 2021, utilisation levels trended higher due to a combination of increased demand and further supply-side rationalisations.

The North Sea jack-up market had an increase in activity with average demand growing to 23 units (4Q 2020: 20 units), while the average marketed supply remained unchanged at 37 units (4Q 2020: 37 units), driving an increase in the average marketed utilisation to 62 per cent (4Q 2020: 55 per cent).

At the end of 1Q 2021, the one-year forward contract coverage for North Sea jack-ups increased to 43 per cent (end 4Q 2020: 34 per cent) reflecting that an increasing share of the available jack-up rig capacity in the North Sea is contracted for the coming 12 months.

In addition, several requirements for North Sea-capable jack-up rigs were issued in 1Q 2021, and the demand for North Sea jack-ups is expected to moderately increase during the rest of 2021.

In the Norwegian sub-segment, demand is expected to remain relatively flat in 2021. Currently, there are few tendered opportunities with commencement in 2022, and the demand is expected to be slightly subdued in 2022.

The long-term outlook for the Norwegian jack-up market remains stable given the significant pipeline of economically viable subsea development projects in shallow waters.

Maersk further said that the global floater market showed a small uptick in activity with average demand increasing to 105 units (4Q 2020: 104 units), while the average marketed supply decreased to 166 units (4Q 2020: 168 units), driving an increase in the average marketed utilisation to 63 per cent (4Q 2020: 62 per cent).

At the end of 1Q 2021, the one-year forward contract coverage for the global floater market was 39 per cent (end 4Q 2020: 37 per cent). Given current requirements, the demand for floaters is expected to increase further towards 2022, but the global floater market will continue to be characterised by excess capacity restraining the pace of the recovery.

Additional floaters were scrapped in 1Q 2021, but further supply-side rationalisations are needed to establish a more favourable market balance.