Seadrill Profit Drops as Rig Rates Remain Weak
August 25 2016 - 3:06AM
Dow Jones News
By Kjetil Malkenes Hovland
OSLO--Seadrill Ltd. (SDRL) said Thursday it would again step up
cost-cutting to counter difficult market conditions, as the
Oslo-listed offshore drilling company's net profit dropped 31% on
the year amid lower rig rates and as several rig contracts
ended.
Net profit fell to $260 million in the three months to the end
of June from $379 million in the same period a year earlier.
Revenue dropped to $868 million from $1.15 billion in the same
period a year earlier, mainly due to the expiration of its West
Castor and West Prospero contracts and lower rates paid for some of
its drilling rigs.
The company said it would increase its cost-cutting target by
$50 million to $390 million in 2016. It said it had reduced costs
by $285 million so far.
Seadrill has cut 8% of its staff to 6,500 since the end of last
year. Operating costs in its operating fleet of floating rigs were
down 17% compared with last year and the similar costs for its
jack-up rigs were down 28%, it said.
"There is a growing belief that we are at or near the bottom of
this down cycle," Seadrill said. "There is a growing realization
[among oil companies] that the current level of investment is not
sustainable and increased capital expenditure will be required to
slow decline curves and grow production at some point."
The company said it expected earnings before interest, taxes,
depreciation and amortization to drop to $380 million in the third
quarter from $557 million in the second quarter, as eight of its
rigs are coming off contracts or will be idle for a longer period
than in the previous quarter, and three of its rigs will be paid
lower rates.
The company said it had extended some loans during the quarter
as part of a broader plan to refinance its business by the end of
the year.
-Write to Kjetil Malkenes Hovland at
kjetilmalkenes.hovland@wsj.com
(END) Dow Jones Newswires
August 25, 2016 02:51 ET (06:51 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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