May 4, 2018 / 1:01 PM / 7 months ago

Oslo-listed Prosafe eyes scrapping, consolidation while awaiting market upturn

OSLO, May 4 (Reuters) - Accommodation rig firm Prosafe will continue to scrap old rigs and take part in consolidation if opportunities arise while it awaits better market conditions, it said on Friday, after posting a low utilisation rate in the first quarter.

Prosafe provides rigs where oil firms can house staff working offshore. That market has declined since 2014, when the price of crude slumped, and has yet to significantly recover despite oil firms posting booming profits.

Prosafe said on Friday it had saw more tendering activity and expects a gradual market pick-up from next year.

“We are in a good position but we have to use the time wisely until the market recovers,” Chief Financial Officer Stig Christiansen told an earnings presentation on Friday.

“Consolidation is on the agenda and you have to assume consolidation is on everybody’s agenda but is not easy to get it to happen. We have an intention to play an active role in consolidation as we have done before.”

On Thursday, Prosafe said its first-quarter net result rose to $15.9 million from a loss of $19.1 million in the same quarter last year, mostly due to cost-cutting.

Christiansen said he expected Prosafe to scrap another two or three old rigs to improve the balance in the market, out of the fleet of ten rigs its currently has. Prosafe previously scrapped five rigs.

Christiansen said another four-five units have to be to be scrapped from other players to improve the balance in the market.

A key date for Prosafe is May 20 when an agreement with Chinese yard Cosco to temporarily stop the delivery of three rigs it ordered before the downturn is running out.

“I think overall it’s not an easy situation. The market has changed significantly since we made the order. On the other hand, Prosafe is in a prime position to take the units in to the market,” Christiansen said.

Prosafe has the right to cancel two of the rigs and claim a refund of instalments, plus interest, equal to approximately $60 million, secured by Bank of China.

But that is not the firm’s preferred option. Instead, Christiansen said he hoped Prosafe could strike a deal with Cosco to ensure the delivery of the rigs when Prosafe wins new contracts from oil firms.

He said one option could be the Brazilian market he expected new tenders during the coming months, though the timing of awards and start-up time is uncertain. (Editing by Gwladys Fouche)

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