Maersk Drilling: Annual report 2018 – Strong profitability and cash flow generation
Today, the Board of Directors of Maersk Drilling has approved its 2018 annual report. Despite the challenging market conditions, Maersk Drilling retained strong profitability and cash flow generation.
Financial performance 2018 (2017 performance in brackets)
- Revenue of $1,429 million ($1,439 million)
- EBITDA before special items of $611 million ($683 million)
- EBITDA-margin of 43% (47%)
- Cash flow from operating activities of $593 million ($652 million)
- Cash flow used for investing activities of $136 million ($448 million)
- Net debt of $1,097 million
- Liquidity reserves of $772 million
- Revenue backlog of $2.5 billion ($3.3 billion)
“Maersk Drilling retained strong profitability and cash flow generation in 2018, driven by high contract coverage and a good operational performance. With our strong revenue backlog and robust balance sheet, we have a high degree of financial visibility and flexibility,” Jørn Madsen, CEO of Maersk Drilling, said.
“We are with a modern fleet well positioned in the most attractive market segments of the offshore drilling industry,” Mr Madsen added. “We are making good progress towards our strategic ambition of entering into even closer collaboration and partnerships with our customers to further improve efficiency and generate value for both our customers and Maersk Drilling.”
Financial and operational development
In 2018, revenue declined by 1% to $1,429 million ($1,439 million) due to lower average dayrates across the fleet, partly offset by an increased number of contracted days. The decline in EBITDA before special items to $611 million ($683 million) was mainly a result of increased costs due the increased number of contracted days, as well as increased costs due to the build-up of the organization to operate as a stand-alone company.
The operational performance remained high with a financial uptime of 99.1% (98.5%), and the customer satisfaction increased to an all-time high of 6.6 (6.3) on a 1-7 scale.
With an overall utilization of 69% (66%) of the rig fleet, Maersk Drilling has begun to see the effect of higher activity with an increased number of tenders and projects. During the year, Maersk Drilling secured 12 new contracts and 13 contract extensions adding $503 million to the contract backlog. By the end of the year, the revenue backlog amounted to $2.5 billion ($3.3 billion). Maersk Drilling has a forward contract coverage of 63% for 2019 providing a relatively high degree of visibility into 2019. The jackup segment carries the highest forward contract coverage of 75% compared to 39% in the floater segment.
Maersk Drilling continues to see high demand for its ultra-harsh environment jackup rigs in the Norwegian sector. The market for floaters remains challenged with overcapacity and utilization at a level not yet able to support material pricing improvements.
During 2018, Maersk Drilling continued the effort to support its customers in reducing inefficiencies and waste by entering into new more integrated business models with deeper collaboration and partnerships. The strategic alliance with Aker BP was further advanced with the signing of two drilling contracts for jackup operations offshore Norway.
As of 31 December 2018, Maersk Drilling had a net debt of $1,097 million and liquidity reserves of $772 million.
Separation from A.P. Moller – Maersk
Since the announcement on 17 August 2018 of the intention to separate Maersk Drilling from A.P. Moller – Maersk by way of a demerger and listing in 2019, Maersk Drilling has made the planned organizational progress with all key management positions relevant for the demerger preparation being filled or confirmed. Further, as part of the preparation for the separation, debt financing of $1.5 billion and a revolving credit facility of $400 million was secured in December 2018, from among others a consortium of international banks.
The process to establish a separate board of directors for Maersk Drilling, as well as an independent governance structure, was further progressed in January 2019 with the announcement of Kathleen McAllister, Robert Routs, and Robert M. Uggla as new board members joining Chairman Claus V. Hemmingsen, Martin N. Larsen and Mads Winther.
Download the full annual report here: http://maersk-drilling-cms.prod.umw.dk/media/1730/md-annualreport-2018.pdf