Ensco has swallowed a bitter pill with confirmation it has taken fourth-quarter 2014 non-cash goodwill and asset impairments totalling US $3.9 billion, as the offshore driller continues to trim its sails along with every other rig contractor during the current industry slowdown.
But the company also went firmly onto the front foot in terms of outlining its ongoing plans for its deepwater floater fleet, and highlighting the issues being experienced by several of its peers.
In its results presentation Ensco pointed out a number of newbuild deferrals and cancellations being made elsewhere, including:
- Atwood – delivery dates for two drillships with expected delivery dates in 2015 being delayed by six months each
- Transocean – delivery dates for five jackups with 2016 and 2017 expected delivery dates delayed by an average of 10 months
- Others – flagged up reports suggesting up to 12 floaters under construction for SETE Brasil in its build program for Petrobras may be cancelled.
- 6 jackups ordered by non-established drillers were cancelled in second-half 2014.
On the high-grading of its own fleet, Ensco pointed out that it has seven newbuild rigs with differentiated designs under construction, and that mooring capability is also to be added to several of its ENSCO 8500 Series rigs. It also has seven "held-for-sale" rigs as of fourth-quarter 2014, with 19 rigs already sold since the start of 2010.
Ensco added that that its 2015 results would benefit from these newbuilds and prior upgrades to other units.
CEO Carl Trowell said that, given “the severe downturn in the offshore drilling markets”, it was reducing its quarterly dividend (to $0.15 per share), cutting its offshore employee base as it cold stacks rigs, reducing offshore discretionary compensation and onshore support costs, and negotiating with vendors and suppliers to lower costs.
Striking a more optimistic note, however, he continued: “In spite of challenging market conditions during 2014, we further improved rig uptime performance and had our best ever total recordable incident rate.”
Fourth-quarter revenues grew 2% to $1.160 billion, up from $1.138 billion a year earlier, mostly due to the addition of three ENSCO 120 Series jackups to the active fleet and a full quarter of operations for the ENSCO DS-7 drillship in the quarter. The average day rate for the fleet increased to $243,000 from $235,000 a year ago.
Specifically on the floater segment, revenues declined 5% to $663 million in fourth-quarter 2014 as lower reported utilisation and average dayrates more than offset a full quarter of operations for the ENSCO DS-7 and the return of the ENSCO 5004 and ENSCO 5005 to the active fleet.
The average day rate decreased 6% to $429,000 in the quarter, while reported utilisation dropped slightly to 81% from 82% a year earlier.
The fourth-quarter 2014 floater results included the $2.998 billion goodwill impairment.
The year is shaping up to be a solid one of transition for the offshore sector.
The rapid pace of technology development in the oil and gas industry ensures that all players in it are in constant pursuit of the next innovation that will deliver the next barrel and the next dollar safely and efficiently.
Vantage Drilling Co. reports that the terms of the Cobalt Explorer construction contract have been amended to defer the second progress payment on the newbuild ultra-deepwater drillship until July 2015.