Maersk: Drilling Industry Dip Could Last Into 2016

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The global offshore oil rig market's downturn could last into 2016, longer than seen a few months ago as a fall in oil prices exacerbates the dip, the chief executive of Maersk Drilling says.

Reuters

STAVANGER, Norway, Oct 28 (Reuters) - The global offshore oil rig market's downturn could last into 2016, longer than seen a few months ago as a fall in oil prices exacerbates the dip, the chief executive of Maersk Drilling said on Tuesday.

Rig rates have fallen sharply over the past year as energy firms cut exploration spending. Rates for the most advanced ultra-deepwater vessels dropped below $400,000 per day this year from a peak of $650,000 per day last year.

"We see a slowdown that will last at least going into 2015 and 2016, but we have confidence in the medium to long term," said Claus Hemmingsen, head of Maersk Drilling, a unit of Denmark's A.P. Moller-Maersk.

Maersk said on Monday that its new drillship, the Maersk Venturer, had secured a 45-day contract in Malaysia earning around $378,000 a day..

"Definitely the day rates have taken a drop," Hemmingsen told Reuters on Maersk's new jack-up rig for use in ultra-harsh environments.

The rig is about to start work on the Ivar Aasen field under a $700 million contract with Norwegian oil company Det norske .

Rig firms have been among the hardest-hit oil service stocks this year, suffering from overcapacity as vessels ordered during the boom times hit the waters. Shares of Seadrill are down 38 percent this year, Nobel is down 36 percent and Transocean is off 41 percent.

Hemmingsen said the drop in oil prices would also lower demand but the market's medium- to long-term outlook remained solid.

"The projects that were valid before are still valid at the current oil price, so we think it's more a delay than a cancellation," Hemmingsen said.

Although the firm targets a net operating profit of $1 billion after tax in 2018, analysts say that goal will be hard to reach.

"Until six to 12 months ago, the prospect of Maersk Drilling reaching its target of $1 billion looked ambitious but realistic," Sydbank analyst Jacob Pedersen said.

He added that given the market downturn, the target now looked "very ambitious".

(Reporting by Stine Jacobsen; Editing by Dale Hudson)

Copyright 2017 Thomson Reuters. Click for Restrictions.

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