Oslo-listed offshore drilling contractor Awilco Drilling did not generate revenue during the first quarter of 2020, and it on Wednesday reported a net loss of $9,4 million. However, the company is optimistic about the future, that is, when its high-end rigs, currently under construction, get delivered.
The company currently owns two older-generation offshore drilling rigs of which only one is in an operational state. Namely, its 3rd-Generation WillHunter offshore drilling rig has been cold stacked for a while now, with little hope it will be reactivated soon, if ever.
Its second unit, the WilPhoenix semi-submersible drilling rig, did not work during the quarter after ending its Shell contract in the UK North Sea in December 2019.
However, the WilPhoenix was just yesterday awarded a 70-day contract with Serica with a start-up in September.
Before this, the rig is expected to go on a P&A program with Petrofac later this month. The WilPhoenix is expected to stay with Petrofac for about a hundred days. At the end of March, WilPhoenix had a total remaining contract backlog of approximately USD 13.8 million.
Awilco said Wednesday that visibility of 2021 demand in the UK was limited due to oil price collapse and Covid-19, “however some attractive opportunities remain.”
$31.9 million due to Keppel in June
Worth noting, the company in 2018 caught the offshore drilling world by surprise when it ordered a harsh environment semi-submersible drilling rig from Singapore's Keppel. This was followed by another newbuild order of the same type and with the same company in 2019.
These were first such orders after the previous oil price collapse, and Awilco is betting its rigs will be the most advanced units available when they come out.
Also, the company whose two rigs, WilPhoenix and WilHunter, have spent most of their life operating in the UK, is targeting Norway for its harsh environment newbuilds.
The first rig is expected to be delivered in April 2021, with the second one scheduled delivery in March 2022. Remaining capital commitments at the end of the first quarter in respect of the two new-build rigs total $757.6 million.
The company's Awilco Rig 1 subsidiary is due to pay $31.9 million to Keppel in June as part of the balance of the second installment for the first newbuild rig.
Awilco said Wednesday it would require additional funding to support this payment and ongoing project-related costs, and also said it was in dialogue with Keppel the second installment.
"It is recognized that the construction contracts with the shipyard are structured such that there is no recourse to the rest of the Group in the event of default by the contracting subsidiaries," Awilco said.
Caption: Artist's impression of one of Awilco Drilling's new drilling rigs - Credit: Awilco Drilling
Deferral for 2nd rig?
Also, the next payment to the yard of around $42 million is scheduled for March 2021 in respect of the second installment payable by Awilco Rig 2 Pte. Ltd for the second offshore drilling rig being built by Keppel. Payment in respect of the 80% final installment for the first rig will be due in April 2021.
"Funding for this and the earlier payments will be required, by a combination of additional equity and debt. There is also the option to defer the delivery of the rig, and the related payment, by up to one year. This decision will be taken at a later date," Awilco Drilling said.
Providing its take on the offshore drilling outlook, the company said: "The combined impact of the drop in oil price and the COVID-19 pandemic have immediately impacted operator’s plans for 2021 with budgets reduced and a number of programs deferred pending increased confidence in the medium-term outlook. Underlying market fundamentals remain positive towards both Tier 1 development demand in Norway and in the UK P & A market as the supply of suitable rigs is reduced through an increased rate of attrition."
In its quarterly presentation, Awilco said it was "undoubtedly well-positioned for future long term drilling programs."
It said it was currently discussing opportunities for its newbuilds straight from delivery, adding that it is only considering long-term opportunities, either as one program or a combination of several programs.