OSLO (Aug 20): Seadrill beat its second-quarter core earnings guidance and forecast a further improvement in the third quarter as a pick up in offshore oil drilling boosts the rig operator's recovery from the brink of bankruptcy.
The Oslo and New York-listed firm emerged from US Chapter 11 bankruptcy proceedings in July 2018 after being hit by a plunge in spending by energy firms during an oil price slump.
Seadrill, controlled by Norwegian-born billionaire John Fredriksen, said on Tuesday it made US$69 million in quarterly adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), above the US$55 million it forecast in May.
The company's shares rose as much as 7% to 26.84 Norwegian crowns in early trade, but retreated to stand up 2.5% at 0712 GMT.
"From a market perspective we continue to see increased tendering activity and a favourable shift in contract terms," Chief Executive Anton Dibowitz said in a statement.
With as many as 21 of the 55 rigs in its fleet still mothballed amid overcapacity, Seadrill is depending on a further market recovery as it prepares to start paying interest and paying back loans from 2021 and 2022 onwards, analysts say.
As part of its emergence from bankruptcy proceedings, Seadrill agreed with creditors to raise fresh capital, convert unsecured bonds to equity and extend maturities on US$5.7 billion of bank loans.
The company's shares are down 72% so far this year.
"While the spot market for short term work remains competitive, rates for longer term work are improving and there are pockets of strength in the harsh environment, high-end ultra deepwater and premium jack-up markets," Dibowitz said.
Seadrill's third-quarter adjusted EBITDA will likely hit US$70-75 million, it forecast.
The company, which owns 35 drilling rigs and operates a further 20, had an order backlog of US$1.9 billion at the end of the quarter, down from US$2.0 billion at the end of March.
Operations are still loss-making when depreciation and amortisation costs are included. In the second quarter, the operating loss stood at US$73 million, smaller than the company's guidance of US$93 million, and in the third quarter the loss is expected to be US$70-75 million.
Seadrill last week announced the formation of a joint venture in Qatar that will employ five rigs and see revenue of at least US$656 million from 2020 to 2024, with options for a further US$700 million after that.