August 20, 2019 / 5:50 AM / in 6 months

Seadrill beats profit guidance as rig demand picks up

OSLO (Reuters) - Seadrill SDRL.OL 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.

FILE PHOTO: Norwegian-born shipping tycoon John Fredriksen speaks in Oslo, Norway, June 1, 2017. REUTERS/Ints Kalnins/File Photo

The Oslo and New York-listed firm emerged from U.S. 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 $69 million in quarterly adjusted earnings before interest, tax, depreciation and amortization (EBITDA), above the $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 favorable 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 $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 $70-75 million, it forecast.

The company, which owns 35 drilling rigs and operates a further 20, had an order backlog of $1.9 billion at the end of the quarter, down from $2.0 billion at the end of March.

Operations are still loss-making when depreciation and amortization costs are included. In the second quarter, the operating loss stood at $73 million, smaller than the company’s guidance of $93 million, and in the third quarter the loss is expected to be $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 $656 million from 2020 to 2024, with options for a further $700 million after that.

Editing by Gwladys Fouche and Mark Potter

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