Maersk Drilling delivered a profit of USD 164m (USD 218m) in the second quarter of 2016. The result is positively impacted by a strong operational performance with an average uptime of 98% and savings on operating costs, however partly offset by more idle days. The underlying profit was USD 164m (USD 189m), generating a ROIC of 8.3% (10.6%).
“A high operational performance averaging 98% and further savings on operating costs are both contributing factors to the satisfactory result we deliver in the second quarter. However, Maersk Drilling continues to be affected by the lack of activity and lower dayrates in the market,” says Claus V. Hemmingsen, CEO in Maersk Drilling and member of the Executive Board in the Maersk Group.
At the end of Q2 2016, Maersk Drilling’s forward contract coverage was 73% for the rest of 2016 and 56% for 2017 and 45% for 2018. The total revenue backlog by end Q2 2016 amounted to USD 4.7bn (USD 5.3bn). Since the launch of the cost reduction and efficiency enhancement programme in Q4 2014, Maersk Drilling has reduced cost by more than 15%. In Q2 2016, Maersk Drilling reduced costs by 8% compared to Q2 2015.
“The combination of lower activity levels in the oil industry and deliveries of newbuild rigs continues to drive lower utilisation levels and lower dayrates. The market is still very challenged in the short to medium term, only emphasising the need for a competitive cost level and further scrapping and cold stacking of rigs to resolve the imbalance between demand and supply in the market,” says Claus V. Hemmingsen.
Further, in July, an early termination agreement for the deepwater unit Maersk Valiant was signed with effect from mid-September 2016. The original contract was scheduled to end September 2017. The compensation under the early termination agreement leaves Maersk Drilling financially neutral to the original contract.
Maersk Drilling reiterates the expectation of an underlying result below last year (USD 732m), up from significantly below last year due to the positive effect from termination fees.
Facts about the Q2 2016 performance:
• Profit of USD 164m (USD 218m)
• ROIC was 8.3% (10.6 %)
• Operational uptime averaged 98% (97%)