Ensco Takes Drastic Measures: 12 Drilling Rigs Scrapped
As the offshore industry continues to struggle, Ensco has found itself in a difficult spot. In response to continued losses, the company has decided to take action by scrapping 12 drilling rigs, including one drillship. The company opted to scrap the rigs in order to eliminate their overall costs and reduce the global rig supply.
These drastic measures have been taken after the 2015 year resulted in further losses for Ensco—running into the billions according to reports. While previously at an income of $1.16 billion for the fourth quarter in 2014, the company’s losses resulted in a total 29% reduction for 2015, dropping them down to $828.3 million for the last quarter.
Even taking a broad look at the entire year, Ensco’s revenue still dropped by as much as 11% in 2015 compared to 2014—ending at $4.06 billion versus 2014’s $4.56 billion.
Ensco Faces Challenges with Running Offshore Drilling
In an industry that is dealing with the harsh repercussions of dangerously low oil prices, Ensco is not the only offshore drilling industry company to face difficulties. Earlier this year, Hyundai Heavy opted to shut down a rig construction yard by this March due to the lack of demand for new rigs.
Ensco’s efforts to curb their losses will involve an unprecedented move of scrapping 12 offshore drilling rigs, as well as more future action. Ensco CEO, Cark Trowell claims that they have future plans to consider scrapping or retiring five additional jackup rigs and one additional floater.
Scrapping vs. Selling Off Assets
Why isn’t Ensco attempting to sell their assets off instead of simply scrapping them? With the current state of the offshore drilling industry, many other operators find themselves in similar situations. In other words, no one is willing to take on more assets with such an uncertain future. Some believe that it is only a matter of time before more drilling companies follow in the footsteps of Ensco in order to minimize their risk and avoid sitting on unwanted assets.