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President's Message

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CODE:1606

President's Message

We, first of all, would like to express our deepest sympathies to all those affected by Tohoku Earthquake and Tsunami occurred in the past March. We sincerely hope for the earliest recovery of the afflicted areas.

As for any impact caused by this disaster to our JDC Group, the deep sea drilling vessel "CHIKYU", operated by our subsidiary Mantle Quest Japan Company Ltd., sustained some damages by the Tsunami while berthed at the Port of Hachinohe, Aomori. However, we were successful in commencing the drilling operations by "CHIKYU" offshore Sri Lanka from the early August with only a slightest delay as a result of the intense and devoted repair work effort.

Consolidated Financial Results for the Six Months Ended September 30th, 2011

During the first half period of this fiscal year (April 1st —September 30th, 2011), drilling operations by the Group's rigs underwent smoothly, and the utilization of the five offshore drilling rigs owned by our subsidiaries attained 100.0% compared to 92.7% recorded for the same half-year period in the last fiscal year.

Net sales therefore reached ¥16,923 million for this six months period (up 18.7% year-to-year). However, ordinary income was ¥3,936 million (down 11.2% year-to-year) and net income was ¥2,606 million (down 25.6% year-to-year) mainly due to a decline in equity in earnings of affiliates and foreign exchange losses by the rapid and drastic changes in Yen value.

Future Business Environment and Management Policy

Whilst the global economic outlook still remains uncertain, research organizations specialized in the energy sector such as the International Energy Agency (IEA) forecasts that overall global demand for crude oil will continue to grow. Steady increases in both rig utilization and dayrates for offshore drilling rigs are generally expected in the industry on such basis.

With the prospect of positive business environment, we are concentrating our resources on the following three growth strategies.

  1. - Enhancing our offshore drilling rig fleet
  2. - Full-scale entry into a deepwater market
  3. - Active participation in the Methane Hydrate R&D Project conducted by the Japanese Government.

For our rig fleet enhancement, we have placed an order for a construction of a new premium-class jack-up drilling rig (provisionally named "HAKURYU-11") at Singapore in this spring and it is scheduled to be completed in March 2013.

"NAGA 1", a semi-submersible drilling rig operated by UMW JDC Drilling Sdn. Bhd., our Malaysian joint venture company, will be placed in a drydock in Japan next year to carry out a major upgrade/maintenance program called "Deepdish" conversion which is similar to the one applied to "HAKURYU-5" in 2009.

In addition, two new jack-up drilling rigs are now being constructed by Gulf Drilling International Limited, our Qatari joint venture company, to increase the number of their jack-up drilling rigs to a total of seven.

Also, a new ultra deepwater drillship, in which we participate as a minor equity holder, will be completed in December in a Korean shipyard and it will be immediately mobilized to Brazilian waters for its maiden operations.

For participating in the Methane Hydrate Project, "CHIKYU" will return to Japan after executing the current drilling program offshore Sri Lanka and will start drilling observation/test wells in the Nankai Trough early next year as a preparatory work for methane hydrate production test scheduled for the next fiscal year.

By implementing our growth strategies as above, JDC Group is determined to further strengthen its corporate value. We would sincerely hope to receive the continued understanding and support from all shareholders and other stakeholders.

December 2011
Minoru Murata
President and Representative Director