Earnings dip for KCA Deutag amid ‘very competitive’ markets

KCA Deutag has reported contract wins in Oman, Nigeria, Algeria and Russia
KCA Deutag

Aberdeen-based drilling contractor KCA Deutag has reported a dip in earnings amid heavy competition in the land drilling and offshore markets.

KCAD reported a pre-tax loss of £33.2m for the first quarter, compared to a £12.8m loss in the same period in 2018.

Meanwhile, the firm pointed to its earnings before interest, tax, depreciation and amortisation (EBITDA) which was £53.5, down from £54.5m in Q1 2018.

Depreciation and amortisation costs totalled £42m.

KCAD said pricing has remained “competitive” for land drilling despite a series of new contracts. It was also hit with an exceptional charge of £4.8m as part of a dispute with a major subcontractor in Ukraine.

Offshore Services remained “robust”, with the firm winning a contract extension in the UK North Sea with Cnooc at its Scott platform.

In April KCAD also announced a £382.2m contract award with BP in the Caspian, to be carried out through its Turan Drilling joint venture in Azerbaijan.

Activity remained at “relatively low levels” for its RDS rig design subsidiary, which is primarily focussed in the UK, with new tendering opportunities “progressing slowly” towards the contract award stage.

KCAD said this is the result of continued caution in the market.

Chief executive Norrie McKay said: “During the first quarter we saw some improvement in the Brent oil price, moving toward 70 dollars per barrel, and slightly less volatility overall than the previous quarter.

“Tenderingactivity continues to be strong but the market remains very competitive.

“In order for there to be any meaningful impact on pricing, particularly in the Land business, the market needs stability at higher oil prices to continue for an extended period. In other areas of our business such as RDS, a more tangible improvement can only be expected when the industry beginsto reinvest at a more substantial level.”

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