Sevan Drilling narrowed its loss in the first quarter on higher operating revenue and lower costs but is still struggling to line up a contract for a fourth newbuild as the clock ticks towards delivery later this year.
The company has also indicated its management and operational activities will be more closely integrated with dominant owner Seadrill in the future.
The Oslo-listed rig contractor is due to take delivery of the cylindrical ultra-deepwater rig Sevan Developer from China’s Cosco Shipyard in the third quarter but marketing efforts by Seadrill over the past nine months have so far failed to find any takers for the unit.
The company said in its quarterly results statement “the market is currently characterised by a very limited number of opportunities in the ultra-deepwater segment” due to spending cutbacks by major oil companies.
“While the company believes the market will improve in the medium to long term, it is clear that the short term is very challenging,” it stated.
Sevan has previously flagged it has an option not to take delivery of the vessel that it is now considering, as well as the possibility of delaying delivery that could require a further cash injection by Seadrill to cover additional financing needs.
In the event the company decides to abort delivery, this would lead to a default on the newbuild contract that would result in the loss of around $134.7 million spent to date on the rig, originally ordered at a cost of $525 million.
The company also revealed its board is looking at migrating Sevan Drilling to Bermuda where Seadrill, which has taken over management and marketing responsibility for Sevan’s rig fleet, is already registered.
Seadrill, which currently owns a 50.1% stake in Sevan, failed last year to carry out a full takeover of the deep-water peer player after it was stonewalled by the latter’s former management.
Sevan reported a first-quarter net loss of $10.4 million, versus a negative $24.2 million a year earlier, as operating revenue rose 8% year on year to $60.1 million due to higher utilisation for its rig Sevan Driller, despite downtime for the Sevan Brasil, with both units currently working off Brazil for Petrobras.
Operating costs were slightly lower at $59.3 million, with the company saying it had benefited from operational efficiencies resulting from the transfer of rig management to Seadrill.
Sevan expects higher revenue going forward after its third newbuild rig, Sevan Louisana, starts work for LLOG Bluewater Holdings in the Gulf of Mexico at the end of this month.
The company further stated it “expects further improvements in its results in the short term as a consequence of the completion of the transfer of management functions to Seadrill and the full integration of its operating rig fleet into that of Seadrill”.