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Paragon Offshore delays taking jackup rig at SWS, posts deep Q3 loss

Paragon Offshore delays taking jackup rig at SWS, posts deep Q3 loss
Paragon Offshore has delayed taking delivery of a jackup rig being built at China’s Shanghai Waigaoqiao Shipbuilding (SWS) in view of the sluggish offshore drilling market, and posted a deep third quarter loss.

A wholly-owned subsidiary of Paragon Offshore has agreed with SWS to extend the delivery date of the high-specification Friede and Goldman JU-2000E jackup Prospector 7 to a date 12 months after the subsidiary has technically accepted the unit from the yard. The technical acceptance of the unit will occur before this year is out.

Under the terms of the agreement, no payments are due to the shipyard until the delivery date and upon completion of the delivery protocol.

Utilisation of Paragon Offshore’s jackup rig fleet was 64% in the third quarter and in the second quarter of 2015. Average daily revenues for its jackup fleet during the third quarter dropped by 6% to $116,000 per rig from $124,000 per rig during the second quarter.

Randall D. Stilley, president and ceo of Paragon Offshore, said: “Dayrates and utilization deteriorated for all rig classes in all markets and as a result, our annual assessment of asset values resulted in a required impairment of various rig values.”

In the third quarter ended 30 September 2015, Paragon Offshore posted a loss of $1.08bn due mainly to loss on impairments of $1.15bn. The loss compared to the deficit of $869.16m in the previous corresponding period which also saw a significant loss on impairments of $928.95m.

Revenue for the quarter was recorded at $368.97m, down from $505.22m in the year-ago period.

“There is no indication that conditions in offshore drilling markets will improve in the near future,” Stilley said.

“Current oil prices suggest that our customers’ 2016 capital budgets may be at or below 2015 levels, placing additional pressure on utilisation and dayrates in our industry. We expect oil markets to begin a recovery late in 2016, with drilling activity, particularly in shallow waters, to follow.”