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Eurasia Drilling Company's operations in Caspian to continue to under-perform

Oil&Gas Materials 7 July 2020 17:35 (UTC +04:00)
Eurasia Drilling Company's operations in Caspian to continue to under-perform

BAKU, Azerbaijan, July 7

By Leman Zeynalova – Trend:

Offshore operations of Russia’s Eurasia Drilling Company (EDC) in the Caspian Sea will continue to under-perform, Trend reports with reference to Fitch Ratings.

“We assume that EDC's offshore operations in the Caspian Sea, where full-cycle oil production costs are higher versus Russian onshore and where EDC works with both Russian and international clients, will continue to under-perform. EDC has four jack-up rigs in the landlocked Caspian Sea, all of which are currently being deployed; however, only one rig is employed on a long-term basis. We assume EDC's revenue from the offshore segment to average USD150 million in 2020-2023, compared with almost USD190 million in 2019,” said the company.

EDC's revenue and earnings to be only moderately affected by the COVID-19 pandemic, lower oil prices and Russia's OPEC+'s commitments, as Russian oil producers aim to maintain fairly stable drilling volumes, said Fitch Ratings.

“We expect EDC's total revenue to fall around 10 percent yoy, mainly due to lower drilling volumes, but to recover from 2021,” said the company.

In 2019, EDC's onshore meters drilled increased 4 percent yoy, and 4M20 drilling volumes increased a further 11 percent yoy, according to Fitch Ratings.

“While we expect drilling volumes to fall throughout the rest of the year the decline should be moderate as Russian oil producers will aim to at least maintain their production capacity. We also expect weaker profitability in 2020 due to the lower volumes, lack of rate indexation and coronavirus-related measures (such as quarantine arrangements for personnel). We expect profitability to normalise from 2021. We also expect EDC to increase capex to USD150 million-USD200 million over 2020-2023 compared with an average of around USD140 million in 2016-2019 to modernise its rig fleet.”

Eurasia drilling company is the largest land drilling company in Russia. It has a dominant position in the Caspian Sea jack-up rig market.

EDC owns the largest fleet in Eastern Hemisphere. EDC owns 245 land drilling and sidetrack rigs and 392 land workover and well service rigs as of December 31, 2016.

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Follow the author on Twitter: @Lyaman_Zeyn

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