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UPDATE- Amedeo Resources says first rig remains on schedule

Amedeo doesn't expect the current weakness in rig markets to continue through the medium term
UPDATE- Amedeo Resources says first rig remains on schedule
YZJ Offshore's first rig is on schedule to be complete before the year's end


Amedeo Resources (LON:AMED) told investors that the first order for a mobile jack-up drilling rig remains on schedule to be completed by the end of this year.

The investment company, with a stake in a Chinese rig building venture, this morning revealed first half losses narrowed considerably to US$15,000 from US$271,000. It comes as cash administration costs reduced to US$248,000 from US$453,000.

Amedeo ended the period, to June 30, with cash of US$3.28mln.

Amid weak international oil prices, the company says the rig market remains difficult. Talks with several potential purchasers of new rigs continue, though no new orders have yet been obtained.

The company describes the situation as disappointing, though it highlighted that the facilities have the capability to build many different types of vessels and, at the same, time it does not expect weakness in the rig market to continue in the medium term.

Amedeo says it remains focussed on a long term strategy of building a vertically integrated business in the resource and energy related infrastructure sectors.

“With the current difficulties with the rig market, winning new orders at YZJ Offshore has been difficult,” the company said.

“We do not expect this situation to continue in the medium term, and when the recovery does come, YZJ Offshore, having proved itself with Explorer 1 and with its capability to produce advanced, specialised and localised rigs as well as a range of other vessels, is well placed to take advantage of it.”

Amedeo also reported that its part-owned iron ore trading business has been responding to the reduced demand by continuing to monitor the market and also explore opportunities among other commodities, including ‘soft’ commodities long the East and South East Asia, South Asia, Middle East and Africa corridors. It added that ‘actual broking activities’ during the period were minimal.

John Cummins, analyst at broker WH Ireland, says Amedeo’s results demonstrate a tight control of costs against the challenging market backdrop.

“Whilst end markets are likely to remain challenging for some time, we believe that Amedeo remains well positioned to benefit when the cycle turns,” he said in a note.

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