Profit slumped at Fred Olsen Energy in the second quarter as the Norwegian rig owner warned of a tough drilling market ahead.
Revenues were well down and costs spiralled, but the Oslo-listed player did reveal that it has managed to find a new contract for one unit that was this week dropped by Cairn Energy.
Net profit for the three months to the end of June was $7 million, a far cry from the $96.1 million seen in the comparable period a year earlier.
Revenues sank from $306.7 million to $273.3 million, while operating expenses shot from $146.5 million to $166.7 million – depreciation piling on $27 million.
“Since the second half of 2013 and into 2014 the tendering and fixture activity has been low,” the company said on Friday.
“This has led to reduction in dayrate levels and at the same time the lead-time and contract length have become shorter. The number of units in lay-up has also grown due to low activity.”
Oil companies are reining in spending due to cost-overruns at projects, and this will continue to hit the rig players, Fred Olsen said.
“With reduced exploration and production spending growth and operators re-assessing their worldwide project portfolio, combined with newbuilds entering the markets, the demand and supply imbalance is expected to increase further through 2014 and into 2015,” it said.
“The consequence being pressure on dayrates, shorter contract durations, and increased number of lay-ups, in general affecting all market segments.
“However, the long term view remains positive supported by increasing long-term demand for oil and gas at sustainable price levels.”
UK independent Cairn revealed this week that it had terminated the one-well contract with the semi-submersible Blackford Dolphin to drill the Spanish Point appraisal well in the Porcupine basin off Ireland, due to “extensive delays” in refurbishment work.
Fred Olsen said on Friday, however, that the rig has now been fixed to MPX from 1 July for a one-well contract, after which it will go to Nexen for nine months off the UK. Following the Nexen deal, Chevron will take it for about 19 months for work off the UK, the US supermajor also having an option for a further 300 to 700 days.