Drilling services player Archer narrowed its net loss significantly in the first quarter on higher revenue as asset disposals and cost-cutting had a positive impact on the bottom line.
The Oslo-listed company, backed by billionaire shipping and offshore magnate John Fredriksen’s Seadrill, reported a net loss of $8.5 million versus a negative $37 million a year ago with revenue up 4% year on year at $505 million.
Archer has been selling assets as part of a financial restructuring to cut costs and debt after being earlier hit with heavy losses due to a downturn in gas drilling activity in North America.
Asset disposals last year - including its rental, tubular and underbalanced drilling businesses in North America - appear to have paid off, giving the company a positive quarterly operating profit of $2.5 million compared with a loss of $11.5 million a year earlier despite seeing costs rise slightly to $502 million.
However, net debt increased to $745.4 million at the end of the quarter, from $715.3 million at the end of last year, mainly due to expenditure on new rigs following recent contract awards in Argentina and the UK North Sea.
The company sees increasing activity going forward in the North America onshore rig market as well as in land drilling in Argentina, driven by a recent five-rig contract worth $400 million with the latter’s state-owned YPF for work in the Neuquen basin.
Archer stated both that deal and the recent $96 million award of a new modular rig with Talisman Sinopec Energy for the UK’s Montrose field “will positively impact late third-quarter and fourth-quarter performance”.
The company expects to generate annual savings of between $15 million and $20 million from its restructuring plan that will also boost profit margins.
Despite a further 23% reduction in the US gas rig count in the last quarter, the company expects to see a 10% to 15% improvement in its revenue from North America in the second quarter compared with the first three months.
Revenue from Latin America is expected to rise about 10% in the second quarter on the latest period, although North Sea turnover is anticipated to drop by 10% in the next quarter.