West Navion keeps busting its budget

Nov 04, 1999 01:00 AM

Budget busts continue to haunt the "West Navion" project. Smedvig ASA has now increased the budget by another NOK 400 mm. Despite this, however, Smedvig's operating income has reached a record high. Work on the "West Navion" drill ship is due to finish in December.
This is an illusion. The drill package for the ship has been delayed yet again pushing the completion date to January at the earliest. The bill for the ship is now at a staggering NOK 5,1 bn ($ 650 mm), almost NOK 3 bn over the original estimates.
At the naming ceremony for the "West Navion", Smedvig director Kjetil Lenning referred to the fact that the project timetable has been suffering due to a series of delays in the implementation of the Ramrig drill package, delivered by Aker Maritime. Smedvig financial director Ole Gladhaug, restated the Smedvig accusations against Aker Maritime, blaming them for the latest budget shortfall.
The Ramrig has also been chosen for the ultra modern drilling rig "West Venture", which is said to be "99 % finished". Again, problems with the drilling gear are said to be responsible for the remaining 1 %, or so Smedvig maintain. The Smedvig investment in the "West Venture" project has been upped from $ 315 mm to $ 330 mm. The rig is currently crossing the Mediterranean, bound for Norway. It will arrive in late November - over a year behind schedule.

Amidst all this bad news, the Smedvig management find consolation in the fact that the operating income is at a record high. Third quarter results show an operating profit of NOK 186 mm from a turnover of NOK 740 mm. During the first nine months, Smedvig's operating profit rose to NOK 542 mm, 31 mm over the 1998's result. Turnover so far in 1999 is NOK 2,3 bn.
The main reason for the improvement is the utilisation of the Smedvig rigs. The company has raked in over NOK 267 mm from the rigs alone so far this year. The rig fleet currently is at 97 % capacity, which is 13 % better than just three months ago.

Source: IINX via Iinoil
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