Rig Firm Seadrill Turns Gloomy As Oil Firms Cut Spending

Article title
Seadrill turns gloomy about prospects for the global drilling market and expects falling charter rates as oil firms cut capital spending to protect margins.

Reuters

OSLO, May 28 (Reuters) - Seadrill, the world's biggest offshore rig firm by market capitalisation, has turned gloomy about prospects for the global drilling market and expects falling charter rates as oil firms cut capital spending to protect margins.

Oil firms have for several months been cutting costs following a decade-long surge in investments.

But Seadrill, the crown jewel in shipping tycoon John Fredriksen's business empire, had been more upbeat than peers due to its modern fleet and its specialisation in high-demand segments, such as drilling in deep and ultra-deepwater.

"It was not expected that activity would come to a virtual halt while oil companies worked through their forward budgeting process," Seadrill said in a statement on Wednesday.

It expects rates for new-generation vessels to fall to $425,000-$475,000 per day, well below their peak around $650,000 per day last year.

This may hit the company hard, despite the major contract Seadrill subsidiary North Atlantic Drilling signed with Russia's Rosneft at the weekend, as it has five rigs without contracts from this year and seven new-builds without contracts in 2014 and 2015.

Until the situation improved, Seadrill said it would not order any more new rigs from yards on top of 19 rigs it already has on order.


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