Lower dayrates and fewer revenue-earning days saw profits drop by more than 90% at Diamond Offshore’s UK business.
Diamond Offshore Drilling (UK) Limited is a dedicated subsidiary of the US-headquartered rig operator, focussed on the North Sea.
The firm, which is registered in London but with an operational base in Aberdeen, saw pre-tax profits drop from £37.6m in 2017 to £3.2m last year in accounts posted to Companies House.
Diamond said day rates – the cost of hiring a rig – have been negotiated at “break-even or below-cost levels” in the industry in order to recover a portion of operating costs for vessels which would have otherwise sat idle.
The company said the market remains intense due to the current oversupply of offshore rigs.
Turnover, which comes entirely from the UK North Sea, was more than halved from £106.2m in 2017 to £41.7m last year.
The dip in revenue was attributed to lower dayrates for the Ocean Patriot rig for two new contracts it started in the second quarter of 2018 as well as there being fewer revenue earning days due to upgrades on the rig.
Diamond’s other rig, Ocean Guardian, saw 110 more revenue earning days in 2018 than the year before, which partially offset the results, although the rig was sold to Well-Safe Solutions in April of this year for £11.2m.
Two other vessels in the North Sea – the Ocean GreatWhite and Ocean Endeavour – are chartered out by Diamond Offshore Drilling (UK) but are owned by other group companies.
Looking ahead, the firm said overall demand and utilisation has “increased marginally” by the end of the third quarter in 2019, with a “slight improvement in average day rates” but they remain low compared to previous periods.
However director George Henderson said there “is some optimism within the industry, and among analysts, that the offshore contract drilling market will continue to recover over the next two years”.
The firm had an average of 51 employees throughout the 2018 financial year.