Seadrill Profit Drops as Rig Rates Remain Weak

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 [e-mail]

(END) Dow Jones Newswires

August 25, 2016 02:51 ET (06:51 GMT)

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