Transocean: 2019 Marked Beginning of Offshore Sector's Recovery
Valaris, the offshore drilling company formed by the merger of Ensco and Rowan, reported Thursday that it recorded a loss of $215 million in the fourth quarter of 2019 - about the same as the loss it posted in the same period the year before.
Valaris' revenue declined in the fourth quarter to about $500 million, and its continued losses are leaving it shorter on cash, with less than $100 million in cash on hand at the end of the year. Losses appear likely to continue this year, said CEO and president Tom Burke. "While our diverse, high-quality modern rig fleet and technical expertise
position us well to continue adding future backlog, we expect to report losses and have negative cash flows during 2020 despite gradual improvement in utilization and average day rates for Valaris' fleet," he said in a statement.
Despite the continued losses, Valaris is winning more work: it has contracted for an additional $1.8 billion in backlog, a sign that there may be more demand ahead.
Competitor Transocean, the world's largest offshore drilling company, also lost millions in the fourth quarter - and it also boosted its contract backlog, which now exceeds $10 billion. Better utilization, reactivations and improved dayrates characterized 2019, Transocean reported in a statement.
“As utilization across our floating fleet improved for the first time in over five years, and dayrates for high?specification ultra?deepwater assets increased 75 percent over the course of the year, we believe that 2019 marked the beginning of the much-anticipated recovery in the offshore drilling industry," said Transocean president and CEO Jeremy Thigpen. “Looking forward, we are mindful of the risks COVID-19 presents to near-term oil demand, but believe that improving longer-term market fundamentals, along with an increasing list of opportunities, bodes well for a year-over-year increase in contracting activity, utilization and dayrates.”
Both companies posted full-year losses, with Valaris losing $190 million and Transocean about $1.3 billion, including $600 million in impairments on rigs slated for retirement.