Norway’s Fred. Olsen Energy said the global rig market would struggle with lower demand and oversupply as it reported third-quarter profits below expectations on Tuesday. Rates in the offshore rig market have fallen from a 2013 high as oil companies cut spending and as newly built rigs enter the market, creating overcapacity.
“(There is) continued low contracting activity in all market segments,” the firm said in presentation material. “An increase in number of idle rigs is seen, predominantly in international mid water and deepwater markets … As a result, dayrates have decreased in all market segments.” Rival Maersk Drilling, a unit of Danish conglomerate A.P. Moller Maersk, said on Monday one of its brand new drillships would only charge a day rate of some $377,000.
Day rates for the most advanced ultra-deepwater rigs peaked around $650,000 last year. Fred. Olsen Energy’s third-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA) fell 3 percent to $151 million, missing expectations for $164 million in a Reuters poll. Operating profit plunged more than 80 percent to $15.4 million, missing forecasts of $88.4 million as the firm took an impairment charge on a rig that has been idled and cold stacked.
Shares in Fred. Olsen Energy were down 3.41 percent at 94.85 Norwegian crowns as of 0806 GMT. The shares are down by 65 percent over the past year, lagging an Oslo benchmark index up 7.4 percent over the same period.