SHELF DRILLING – INCREASE IN REVENUE DRIVEN BY THE START OF SEVEN CONTRACTS
Dubai-based offshore drilling contractor Shelf Drilling revenue was $181.4 million in Q1 2020 compared to $159.8 million in Q4 2019. The $21.6 million (13.5%) sequential increase in revenue was largely due to the full quarter of operations of seven new contracts which started during Q4 2019 in India, Nigeria, Saudi Arabia and Thailand. Effective utilization increased to 92% in Q1 2020 from 80% in Q4 2019. Total operating and maintenance expenses increased by $8.9 million (9.6%) in Q1 2020 to $101.0 million compared to $92.1 million in Q4 2019. The sequential increase was essentially due to the contract commencements of the Shelf Drilling Scepter in Thailand and the Shelf Drilling Achiever in Saudi Arabia in December 2019, an increase in contract preparation expenses for one rig in India which started a new contract at end of Q1 2020 and planned out of service expenses on two rigs in Saudi Arabia.
The Company performed impairment testing on all rigs in the Company’s fleet at the end of Q1 2020. As a result, a $188.0 million loss on impairment of long-lived assets was recorded in March 2020. Nineteen of the Company’s rigs were impaired, of which four rigs are stacked and held for sale.
David Mullen, Chief Executive Officer, commented: “Despite the challenges imposed by the escalation of COVID-19 pandemic, the Company delivered outstanding financial and operating results for the first quarter of 2020, at the upper end of the guidance issued in early March. The start-up of seven new contracts towards the end of 2019 drove the 13.5% sequential increase in revenue and EBITDA margin of 37% in Q1 2020.”
Mullen added: “The COVID-19 pandemic has significantly affected global economic activity creating unprecedented uncertainties with near and medium term oil and gas demand. Many operators are considering to either terminate, suspend or renegotiate contracts or delay planned activities, all of which will impact our future activity. In response to this situation, we have taken actions to protect our employees, ensure continuity of our operations, reduce costs and preserve liquidity. This includes significant measures in our headquarters involving headcount reductions, compensation reductions at the executive and board level and targeted savings across all other cost categories. In addition to these actions, our proven track record of delivering best-in-class operating performance and backlog strengthen our resilience in limiting the impact of the current crisis. We believe the quality and commitment of our people, combined with our efficient operating platform, versatile fleet and geographic footprint will differentiate us through this challenging period.”
(Source: Shelf Drilling – Image: Adriatic 1 jackup on tow offshore Nigeria/alp)