Northern Offshore Reports Loss in 2001
Consolidated EBITDA for Northern Offshore amounted to US $6.6 million for the fourth quarter 2001, down from US $7.7 million in the third quarter. The result includes costs incurred in connection with the closing down of the Oslo office in December 2001. The Company has reviewed its assets for impairment in accordance with US GAAP. This review is performed on an asset-by-asset basis, not a portfolio basis. For two of the units this has resulted in a total write down of US $31.6 million. This write down reflects the negative development in the drilling market during the last year and is based on third party valuations of assets in idle condition. Due to the lack of liquidity in the market for these types of units, there will be uncertainty in connection with the size of this write down.
Comparing 12 months 2001 with 12 months 2000, the EBITDA reduction of US $10.5 million is partly due to the recording of the settlement of US $6 million from the dispute with Coplex Resources in 2000 and reduced production volume from Northern Producer this year compared with year 2000.
For the fourth quarter of 2001 the net loss was US $35.1 million (fourth quarter 2000: loss of US $1.3 million). Net loss for the full year was US $37.4 million compared with a profit of US $18.6 last year. In addition to the difference in EBITDA the main reason for the reduced profit relates to higher profit on repurchased Bonds in 2000. This was partly offset by adjustment of deferred taxes in connection with the change of domicile for the Company.
The US $340 million 10% US Bond with maturity May 2005 has as of today been reduced to US $143.2 million through repurchases. In addition to the debt outstanding under the US Bond the company has partly financed the acquisition of Energy Searcher in June this year by incurring bank loans of US $20 million. The Energy Searcher financing is divided into two loans that become due in July 2002. The Company will be dependant, from a liquidity point of view, on the refinancing of these loans at the current borrowing level. The Company's total debt outstanding at December 31, 2001, including the US Bond, amounts to US $196.2 million.
The total number of shares outstanding has increased to 104,680,660 shares through an equity placement of 9.5 million shares in connection with the Energy Searcher acquisition in June 2001 and the exercise of employee share options (1.3 million shares).
In the fourth quarter 2001, Northern Producer's production level was 23,800 bbls/day, up from 22,400 bbls/day for the previous quarter. Texaco has drilled a new production well on the Galley field called the Palaeocene. The well was successfully completed and tied into the platform on October 31, 2001. On January 5, 2002, the contract with Texaco was extended to July 2003. Texaco has further options to extend the contract and the next option becomes declarable in July 2002. Present production level is running around 24,500 bbls/day.
Energy Searcher completed a contract with Nexen, Indonesia on November 29, 2001 and began a new contract with OMV Vietnam on December 7. The unit is now contracted to work continuously through to August 2002 and management are in discussions for further employment thereafter.
The Company's drill ships, Northern Explorer II and Northern Explorer III and the semi-submersible drilling rig Galaxy Driller are in lay-up near Singapore, while the drill ship Discoverer 1 is laid up in Mexico. The Company is currently actively marketing these drill ships for new business.
The activity in the Asian drilling market has held up well compared to the development in the US Gulf and drilling rates for units similar to the Company's are still in the region of US $60,000 to 70,000 per day. However, the market is dominated by shorter-term contracts which has made it difficult to find work for the idle units without taking a substantial residual risk of the upgrading costs needed to re-employ the rigs.