China Oilfield Falls After Statoil Ends Troll Rig Contractsby
COSL may see a 5%-6% revenue cut by losing the contracts: CICC
Statoil cancels Innovator rig contract for Troll license
China Oilfield Services, known as COSL, dropped as much as 5 percent and was trading down 3.9 percent at HK$6.48 at 9:50 a.m. in Hong Kong, the first decline in five days. The benchmark Hang Seng Index gained 0.6 percent.
Service and engineering companies such as COSL have been punished as explorers including Statoil, Total SA and Royal Dutch Shell Plc slashed spending amid oil’s crash. Brent crude, the global benchmark, has tumbled more than 60 percent since a peak in June 2014.
COSL may see revenue this year and next cut by as much as 1.5 billion ($230 million), or as much as 6 percent, because of the contract termination, Bin Guan, analyst at China International Capital Corp, said in a report on Monday.
“We expect the company may have to make further impairment on goodwill due to the contract termination and suspension,” Guan wrote.
Statoil believes the conditions for terminating contract signed with COSL units have been met, the company said in a statement Sunday. COSL “strongly disagrees” with Statoil’s decisions and reserves the right to take legal action, the company said in a separate statement.
Statoil canceled the contract for the COSLInnovator and will cease drilling operations with the COSLPromoter rig “when it is safe to discontinue well operations,” the company said.
COSLInnovator started an eight year contract with Statoil for operations on the Troll production license in November 2012, while COSLPromoter started in January 2013, also at Troll, COSL said on its website.