Exclusive: Strong fourth quarter for KCA Deutag improves 2017 performance

A KCA Deutag worker
KCA Deutag

A strong fourth quarter helped KCA Deutag (KCAD) beat its earnings forecasts last year as the market showed signs of picking up.

The Aberdeen-based drilling and engineering contractor said tendering activity had improved in several regions and that a “degree of optimism” had returned.

KCAD reported earnings before interest, taxes, depreciation and amortisation (ebitda) of £47.7million for the final three months of 2017, up 10% year-on-year, as oil prices continued to strengthen.

Despite a stronger fourth quarter, 2017 was still a tough year for KCAD.

Full-year ebitda dropped 15% to £160million, though KCAD said the total was “slightly higher” than expected at the start of 2017.

KCAD chalked up revenues of £846million in 2017, down 7% on the previous year, while pre-tax losses widened to £98million from £45million.

The company said the decline in revenues was caused by “on-going market conditions” and “continued pressure on day rates”.

KCAD’s biggest business unit, land drilling, suffered from a drop off in utilisation in Algeria and the completion of a contract in Algeria.

The firm’s offshore services division performed well in Norway, but was dented by a contract loss in the UK.

Odfjell Drilling took over from KCAD as the provider of drilling and maintenance services on five of Taqa’s North Sea platforms last year.

Bentec, KCAD’s drilling rig and oilfield equipment making division, experienced “a major success a very competitive market”, however.

It was awarded a contract for five new drilling rigs by a client in Ukraine, with delivery in 2018 and 2019.

The average number of people employed by KCAD last year was 6,117, a reduction of 415 compared to 2016 levels.

Chief executive Norrie McKay said he was confident 2018 would be a better year if energy prices remain stable.

Mr McKay said: “The fundamentals of our business are robust with an improving market, a strong liquidity position and excellent operational and safety performance.

“We are well positioned as a business to benefit from any further improvement in market conditions as we move through 2018.”

Earlier this week, the company struck a deal to acquire the Omani and Saudi businesses of rival drilling contractor Dalma Energy for £480million.