Norway's Odfjell Drilling defies oil and gas sector gloom

OSLO, May 13 (Reuters) - Shares in Norway's Odfjell Drilling rose on Wednesday after it more than doubled quarterly net profit, standing out in a depressed offshore oil and gas market.

The company, which operates floating rigs able to drill in harsh environments such as the North Sea, said it has been shielded by its order backlog and close relationships with leading producers such as BP and Equinor.

Odfjell's shares rose 6.6% by 1000 GMT, outperforming a 1.6% decline for the broader European oil and gas index.

However, the shares are still down more than 50% since the start of March, when oil prices dropped sharply because of the demand slump triggered by the coronavirus pandemic.

"We further expect the negative shift in oil prices to have limited effect on Odfjell Drilling in the short to medium term as we have firm contract backlog for our sixth-generation harsh environment fleet to 2021/22," the company said.

The company's first-quarter net profit rose to $23 million from $10 million a year ago, in contrast to rivals that have reported net losses because of impairments on their drilling assets.

Odfjell had a pipeline of $1.2 billion in firm orders, with a further $1 billion of potential orders, at the end of March.

"The quarter was slightly better than expected and they are quite optimistic about the outlook, given the general market depression," said Carnegie analyst Fredrik Lunde.

While overall utilisation of Odfjell's total available drilling fleet is expected to remain low, especially for ultra-deepwater and benign water operations, the company said utilisation for its harsh-environment fleet is expected to remain high.

Odfjell, however, said some reduction in demand and day rates in the harsh-environment market should be also expected going forward.

"We further expect that the market weakness will trigger more scrapping and further eliminate any new supply in the short to medium term," it added. (Reporting by Nerijus Adomaitis Editing by David Goodman)