February 9, 2018 / 3:28 PM / 6 months ago

UPDATE 1-Market positive as Fred. Olsen Energy's loss beats expectations

(Adds detail, analyst)

OSLO, Feb 9 (Reuters) - Oil rig company Fred. Olsen Energy on Friday reported a smaller than expected operating loss in the fourth quarter, and said it hoped to win new contracts as oil sector activity picked up after years of cutbacks.

The company said its fourth-quarter loss before interest and taxes was $45 million, below the $49 million loss expected in a Reuters poll but deeper than the $30 million loss posted at the same time a year ago.

Oil services companies like Fred. Olsen have borne the brunt of the downturn in the energy sector where oil companies had to cut spending to cope with a fall in oil prices. An oversupply of oil rigs added to their pain by lowering day rates for rig hire.

Seadrill, one of the world’s largest offshore drilling rig operators, filed for bankruptcy in September as oil companies slashed investment in exploration.

Oil prices have rebounded from lows and Fred. Olsen said it hoped to win contracts in the coming quarters, though the exact timing was uncertain.

“There is a recovery and especially the North Sea market has shown an improvement,” Chief Executive Ivar Brandvold said during a presentation on the company’s earnings.

Fred. Olsen said it was in discussions with its creditors over the conditions of some of its financial commitments related to a loan of $760 million by 17 banks, including DNB and Nordea. But Chief Financial Officer Hjalmar Krogseth Moe said there was no liquidity crisis at the firm.

The loan waiver on some of the terms, negotiated in December 2016, expires on June 30 and the company hopes to renegotiate them. Fred. Olsen said its available cash stood at $435 million at year-end 2017.

Fred. Olsen shares were up 1.10 percent at 1319 GMT, outperforming an Oslo benchmark index which was down 1.88 percent, as the market focused on the sector’s improved prospects and the narrower loss.

Fred. Olsen Energy has currently none of its seven rigs in operation but announced on Thursday a short-term contract for its Blackford Dolphin rig in the North Sea.

Carnegie analyst Frederik Lunde said the key was whether the company could win new contracts.

“If they get contracts in place, the financing will sort itself out,” he said. “They are very optimistic about the market. They seem to suggest it is likely they will win new ones.” (Reporting by Ole Petter Skonnord, writing by Gwladys Fouche; Editing by Jon Boyle)

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