Odfjell Drilling returns to profit, sees higher demand in harsh environments

Offshore drilling contractor Odfjell Drilling booked a profit in the first quarter of the year on the back of higher revenues. Odfjell Drilling has seen an increased utilization of the harsh environment fleet driven by higher demand.

Odfjell Drilling recorded a profit of $10 million in the first quarter of 2019 compared to a loss of $7 million in the same period of 2018.

The company’s operating revenues increased to $201.4 million in 1Q 2019 from $175 million in the corresponding period of 2018. This was mainly due to increased revenue in the MODU segment, offset by decreased revenue in the Well Services segment.

The group’s contract backlog is $2.3 billion, whereof $1.3 billion is firm backlog. The comparable figure at the end of 1Q 2018 was $2.7 billion, whereof $1.7 billion was firm backlog.

The drilling contractor noticed that – following the drop in oil prices in 2014 when the drilling and oil services market suffered a severe decrease in activity level – the global drilling and oil service market is now growing at a steady pace; however, with some regional differences.

In harsh environments, Odfjell Drilling has observed a higher demand combined with a substantial number of mature units permanently withdrawn from the market. This has led to an increased utilization of the harsh environment fleet.

“Based on the preference of new and more efficient units combined with a high reactivation cost, we believe that scrapping of older midwater and harsh environment drilling units will continue over the next few years. In combination with a more healthy market environment, we believe this trend will bring the harsh environment market back into balance with improved day rates,” the company said.

Odfjell Drilling believes it is well positioned in this market as its fleet consists mainly of 6th generation semi-submersibles tailored for operations in harsh environments.

Fierce competition in well services

On the other hand, Odfjell Well Services (OWS) is still facing fierce competition for its services globally.

“We currently observe increased tender activity in the European and Middle East markets; however, the over-supply of equipment continues to keep pressure on prices.

“The slowdown in the North Sea market has led to a low activity level for development and upgrade projects over the last few years,” the drilling contractor said.

Finally, according to Odfjell Drilling, the Drilling & Technology sector has experienced an increased demand for its services and is well positioned to take part in the market recovery.