Maersk Drilling and Seadrill Talk of Recovery in Troubled Sector

The offshore drilling segment continues to struggle to recover from one of the longest prolonged downturns in the history of the industry. While operators are reporting signs of firming in the market, there are still believes that the sector will need to undergo a fundamental realignment before it can fully recover.

In one piece of positive news, Maersk Drilling announced that it has been awarded a nine-month contract with Harbour Energy expected to commence in December 2021. The contract calls for the reactivation of the Maersk Innovator, a nearly 20-year-old jack-up rig designed for year-round operation in the harsh environment of the North Sea. The vessel will drill three subsea development wells on the UK Continental Shelf. The vessel had been stacked in Denmark since completing its last contract in May 2020.

Maersk Drilling today also issued its first half 2021 interim financial report citing a strong financial performance and continued strategic progress. Counting today’s announcement for the Maersk Innovator they reported a total of 12 contracts during 2021 saying the fleet is well contracted for 2021 and the backlog is building for 2022.

The company reported both an increase in revenues and a return to profitability with a small profit of $73 million EBIT. The revenue improvements came both from the operations in the North Sea and Internationally and lead the company to revise upward its financial guidance for 2021. Maersk Drilling however also detailed the sale of its rig the Maersk Inspirer saying the company would continue strategic divestments to bolster its financial position. Separately the Danish shipping trade Shipping Watch is quoting the CEO of Maersk Drilling Jørn Madsen saying the industry needs to scrap up to 50 rigs to reflect the future market conditions.

Seadrill also issued a financial report for the six months saying that it now has 13 units working with three additional units due to return to service in the second half of 2021. While the company said its backlog now stands at over $2 billion, having added approximately $500 million in the first half of 2021, the reported an operating loss of $252 million for the first half of 2021 and a net loss of $605 million.

“Seadrill has continued to operate effectively and safely throughout H1 2021, despite ongoing disruptions caused by COVID-19 challenging the industry’s logistical capabilities,” commented CEO Stuart Jackson. “We are delighted to have increased our order backlog during the period after signing agreements with a number of customers, and we continue to execute on our plan to positively streamline our operations, taking out assets that will not go back to work and addressing the broader leverage issues through the Chapter 11 process.”

Jackson reported that the company continues to make progress to emerge from bankruptcy while repeating calls to address the leverage of offshore drilling companies and progress on asset rationalization. He believes the industry needs to consolidate before it can fully return to financial strength.

While he reported that Seadrill is continuing to make progress, questions continue to hang over the future of the company. The Norwegian business newspaper Finansavisen is reported that 
Transocean and Dolphin Drilling have entered a bid of $1.7 billion for Seadrill’s fleet. That is believed to be at least the second significant offer places to buy the company’s assets out of the bankruptcy.