Maersk Positions Self for 'New Oil Reality' as Profit Fall
Denmark-based Maersk Drilling is positioning itself for a “new oil reality” of reduced tendering activity for offshore rigs and lower dayrates across all rig market segments by introducing cost-cutting and efficiency enhancement programs to boost its competitiveness in the current market.
The global drilling market has deteriorated as the downturn in global oil prices has spurred operators to scale back exploration and development budgets. Drilling contractors such as Maersk, Transocean Ltd., Hercules Offshore Inc., Diamond Offshore Drilling Inc., Noble Corp. and ENSCO plc have been faced with deciding whether to continue to market rigs or coldstack active rigs, as well as retiring older or long-idled rigs.
Maersk expects competition to intensify among rig contractors this year across all floater segments, the company said in its Feb. 26 earnings presentation. The combination of reduced exploration spending, along with the large number of newbuild rigs being delivered, have significantly changed the global supply/demand picture.
Despite the near-term cost cutting and other steps Maersk is taking, the company anticipates its underlying 2015 profit to be higher than the level seen in 2014, and also remains positive on the long-term market outlook.
The company is maintaining its long-term financial aspiration, “but the required additional units to reach the target will only be added against solid, long-term contracts,” said Claus V. Hemmingsen, CEO of Maersk Drilling and member of the Executive Board in the Maersk Group, in a Feb. 26 press statement.
Planned yard stays for maintenance, the start-up of newbuild rigs and impairments offset Maersk Drilling’s high operational uptime and divestment of Venezuela assets in 2014.
Maersk saw its revenue increase to $2.1 million in 2014 from $1.9 billion in 2013, while net operating profit after tax declined to $478 million from $528 million in 2013, Maersk reported Thursday.
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