Deepwater slowdown warnings

February 28, 2014

Denmark’s Maersk Drilling has posted a 52% jump in profits for 2013, at US$528 million, but warned that there will be challenges in 2014 as it sees a drop in deepwater demand and a major overhaul of its fleet.  

Claus V. Hemmingsen, CEO of Maersk Drilling, said the industry was seeing a slowdown in the deepwater market, due to oil companies postponing several drilling programs.  

Image: The Maersk Viking drillship, launched this year.

Maersk's comments follow a drop in profits at deepwater rig operator Transocean, announced yesterday. 

Transocean, which operates the world's largest offshore drilling fleet, said it could take up to 18 to 24 months for demand to recover as customers delay drilling programs.

Demand for offshore rigs is tapering as major oil companies trim exploration and production budgets in the face of investor demands for higher returns, reported Reuters. Read more: http://www.oedigital.com/component/k2/item/5008-oilfield-spending-conundrum

Transocean, whose deepwater fleet is relatively older than that of its competitors, said about 19 of its deepwater and ultra deepwater rigs will be up for contracts in 2014.

Despite the short term challenges, we maintain our positive long term view on the deepwater market,” Maersk’s Hemmingsen said.

Maersk Drilling is due to take delivery of six new rigs in 2014, as well as taking a further six rigs in for yard stays. 

“In industry terms, these are extraordinary challenges, which will affect our financial performance negatively compared to 2013,” says Hemmingsen. 

Maersk currently has eight rigs under construction, with long-term contracts secured for all four jackup rigs and the first two drillships. 

For the remaining two drillships, Maersk Drilling is in discussions with oil companies for employment on both short and longer term contracts. Maersk Drilling’s forward contract coverage is 94% for 2014, 70% for 2015 and 53% for 2016.

The company said: “As a consequence of the significant growth and taking many new rigs into operation, Maersk Drilling expects additional costs associated with training and start-up of operations, to the tune of $20-30 million per rig, which will negatively impact the result in 2014 and 2015. Furthermore, two yard stays planned for 2013 were postponed and will not be completed until beginning of 2014. For 2014, Maersk Drilling has an extensive yard stay program, where further six rigs will have survey and upgrades.”

Maersk Drilling is part of the A.P. Moller - Maersk Group. In addition to the three drillships and four jackp rigs in order, the firm’s fleet has 17 drilling rigs, including deepwater semisubmersibles and high-end jackup rigs. Maersk Drilling employs about 4000 people internationally. 



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