Odfjell Drilling Ltd, based out of Bergen, Norway, is thriving in the face of the worst oil-market crash in decades.
Other off shore rig operators have struggled to stay afloat since the price of oil collapsed in 2014, but Odfjell stock has risen nearly 300% in the last 12 months and is trading at a three-year high. Compared to some of their rivals like Transocean, the biggest offshore driller by market value in the world, whose stock recently dropped to its lowest price in two decades.
What separates Odfjell from the rest of the industry are two factors; one is the refinancing of their debt last year to the tune of a $525 million-dollar loan. A loan in which the key aspect was that they did not have to sell any equity. The second factor is their unparalleled ability to win contracts and willingness to accept lower rates. They own four high-end rigs which concentrates on drilling in incredibly harsh environments, a specialization that shields them from much of the danger in market volatility.
In 2015 Odfjell accepted a three-year contract with Norway’s Statoil to drill on the Johan Sverdrup field, one of the largest oil fields on the Norwegian continental shelf. At the time, the $300,000 daily rate seemed like bargain being half the rig’s previous fee but in the interim comparable rates have dropped below $200,000.
Right now, all four of Odfjell’s rigs have contracts through 2022 and an order backlog of nearly 1.2 billion dollars. All that success isn’t being ignored either, analysts have named them as a likely acquisition target in the near future. They have already been contacted by some potential buyers, and though they’ve declined to explicitly name them, the likely candidates are Diamond Offshore Drilling, Ensco PLC, and Transocean. However, so far none have led to any advanced talks.
CEO Simen Lieungh commented “The day an opportunity comes that’s attractive enough, of course we’re able to do something.” In the meantime, Odfjell shares continue to rise.
Article written by HEI contributor Kevin Abbott.