Seadrill Ltd. fell in Oslo trading as the offshore driller controlled by billionaire John Fredriksen sees the rig market remaining challenging until next year after a collapse in oil prices.

Seadrill fell as much as 5.1%, the most since May 15, and was down 4.8% at 96.95 as of 12:35 p.m in Oslo trading. The stock has rallied 12% so far this year after plunging 65% last year.

“The industry continues to face challenging times and while the first quarter performance has been solid we are not immune,” CEO Per Wullf said in the company’s first-quarter report. “Indications suggest the remainder of 2015 will see subdued market conditions and the challenging market continuing into 2016.”

Seadrill, the second-biggest offshore drilling company by valuation, is facing lower demand from oil companies after crude prices collapsed last year, exacerbating the effect of a glut of new rigs. The pace at which the industry scraps ultradeepwater drilling vessels will probably accelerate over the next two years after hitting its highest level since the early 1990s this year, the company said.

Seadrill shares fell even as it posted first-quarter net income of $427 million as it cut costs. That beat a $320 million average estimate in a Bloomberg survey of 12 analysts.

Fundamentally Oversupplied

“There wasn’t much positive news and not much negative either, so we’re back to a market that looks extremely difficult the next couple of years,” Robert Andre Jensen, an analyst at SpareBank 1 Markets AS, said by phone. “The figures were good, but what’s going to keep supporting the share? The rig market is fundamentally oversupplied.”

SpareBank 1 Markets has a sell recommendation on the stock.

Seadrill is continuing negotiations with clients on amending contracts, it said. It agreed with Saudi Arabian Oil Co. to reduce dayrates on four jackup rigs for a year, leading to a reduction of $23 million to its order backlog. The consolidated backlog fell to $15.4 billion from $17.2 billion a quarter earlier.

Seadrill also expects to be able to postpone rig deliveries from yards, though it didn’t announce any new delays.

The driller agreed to a leverage covenant waiver with its banks, the company said. That will provide adequate leverage headroom after its completion and equity in the fleet for additional secured funding going forward should the capital markets remain unattractive, it said.

Mark Morris, a former CFO of Rolls Royce Holdings Plc, will take up the same position at Seadrill in September, the company said. Morris replaces current CFO Rune Magnus Lundetrae, who previously said he was stepping down.