Seadrill Warns of Further Cost-Cutting in 2016
Seadrill revealed that it will be cutting costs by approximately $340 million this year, warning that the offshore drilling market “remains challenging”.
During the first quarter of 2016, vessel and rig operating costs for the group declined by $79 million, resulting in a sequential increase of approximately 6 percent to the company’s operating margin. The improvements came from reduced stacking costs and improved operating costs on Seadrill’s working fleet. The company stated that $305 million of its $340 million planned saving for 2016 will come through “sustainable cost savings” and $35 million will be from deferred spend.
“The offshore drilling market remains challenging. Despite the increase in oil prices from the 12 year low of $27 per barrel during the first quarter, prices remain 60 percent below their 2014 highs,” Seadrill said in its 1Q results statement.
“Short term supply disruptions have had effects on the oil price, indicating the market is closer to a supply demand balance than it has been for some time. Focus from our customers’ remains on balancing the books in 2016 and 2017 with respect to revenue and planned expenditures. Major oil companies continue to cut activity levels for 2016 and 2017 and appear to have more rig capacity already under contract than they require, severely affecting new demand and leading to contract renegotiations and terminations. New fixtures continue to be primarily extensions, often blend and extend agreements. A more sustained period of recovery and price stability is needed before we expect to see increased demand from oil companies,” Seadrill went on to state.
Seadrill’s operating income dipped 53 percent year on year to $328 million in the first quarter of 2016, amid a revenue decrease of 28 percent to $891 million.
“During the first quarter we achieved record operational uptime and we continue to see the benefits of our cost reduction program coming through. Our key priorities for the year are cost reduction, managing newbuild deferments and concluding our financing plans, while ensuring that we continue to maintain safe and efficient operations. I am pleased to say we have made good progress in all three areas during the first quarter,” said Seadrill Management Ltd CEO and President, Per Wullf, in a company statement.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Gunvor CEO Sees Russian Refining Capacity Taking Hit from Drone Strikes
- Sinopec Engineering Posts Higher Annual Petrochemicals Revenue
- Subsea7 Secures Contract to Service Woodside's Trion
- These Factors Helped Brent Oil Price Break Above $85
- Imperial Pipeline in Winnipeg Goes Offline for Three Months
- Adnoc Inks Supply Deal for Ruwais LNG Project with Germany's SEFE
- Gaz System to Acquire Gas Storage Poland
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Rystad Looks at the Buzz Around White Hydrogen
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension