Tom Ehret, Chief Executive Officer, said, "We have had an encouraging start to the year with a high volume quarter in West Africa and the North Sea and earnings in line with our expectations. We still have a challenging year ahead of us with major projects in the early part of the installation phase. As previously indicated, we expect that quarterly earnings may show some volatility. The Greater Plutonio installation continues on track and we expect most of the construction work on this project to be behind us by the time we report second quarter results. The Pertinacia, the first of the five new ships that will be delivered this year, has joined the fleet since quarter end."
Acergy Africa and Mediterranean -- This was another very active quarter in Africa with the installation of Moho Bilondo now in progress and EPC2B now substantially completed. The steady rate of progress on Greater Plutonio continues with most of the flowlines now laid, the FPSO moored and preparation ongoing for the riser tower installation in the second quarter. The high level of activity in this region is expected to continue throughout the year. The awards of many of the major contracts that were bid in 2006 and others now going through the bidding process are expected to be delayed until the latter part of 2007 and possibly into 2008, due to rising costs and local constraints.
Acergy Northern Europe and Canada -- In an unusually active first quarter for the North Sea, the Eldfisk pipelay and the Britannia Satellites projects were completed and progress was made on a number of other projects. The Marathon Volund award and the Statoil five year frame agreement for survey work were won during the quarter and the very large Nord Stream trunkline project has been bid. Strong market conditions continue to be experienced.
Acergy North America and Mexico -- The discontinued business in Trinidad is now substantially complete. Engineering services for projects in Brazil are helping to meet the fixed costs in this region. A high level of tendering for the international market and for the Gulf of Mexico continues.
Acergy South America -- Both ships on long term contracts experienced down time due to thruster problems. This offset the effect of revenue growth in what was otherwise a higher volume quarter for Brazil as the PRA-1 contract progressed to the installation phase. The award of the $400 million Mexilhão contract by Petrobras for the Acergy Piper, since quarter end, is expected to be a major contribution to the growth of our business in this region in 2008.
Acergy Asia and Middle East -- The Kerisi project was completed during the quarter and the Dai Hung project progressed. The Toisa Proteus will start work on the Maari and Vincent projects when she joins the fleet in the second quarter. Commercial activities are now running at a very high level confirming our expectations for the development of this region.
The new build and conversion programs on ships progressed throughout the first quarter against a continuing backdrop of supplier delays and cost escalations. The Pertinacia was delivered in March and starts work in Brazil imminently. The Polar Queen continues to suffer shipyard delays, postponing delivery from the second quarter until early in the third quarter. The Toisa Proteus is still expected to join the fleet in the second quarter. Delivery of the Sapura 3000 and the Acergy Viking is now expected in the third quarter. The Skandi Acergy is still expected to join the fleet in the second quarter of 2008.
Non-consolidated joint ventures -- This was a low quarter for the non-consolidated joint ventures with a contribution of $2.4 million compared to $5.5 million at this time last year. The NKT Flexibles and the Subsea7 joint ventures had modest first quarters. The Seaway Heavy Lifting joint venture had the Stanislav Yudin in dry dock in December and did not start work until the second quarter. The SapuraAcergy joint venture is expected to make a positive contribution later in the year after delivery of the Sapura 3000.
Net operating revenue from continuing operations for the first quarter increased by 54% compared to the same quarter in 2006 to $565.8 million primarily due to increased activity levels in West Africa and the North Sea.
Net operating income from continuing operations for the first quarter was $49.4 million compared to $27.6 million for the same period in 2006 as a result of a higher level of activity.
After including a gain of $4.2 million from discontinued operations, net income from all operations for the quarter ended February 28, 2007 was $40.4 million compared to $40.9 million for the same period in 2006, which included a gain on sale of assets of $16.4 million.
The cash and cash equivalents position at the quarter end was $728.7 million, compared to $717.5 million as at November 30, 2006. Total advance billings at the quarter end were $243.9 million compared to $234.8 million at the 2006 year end.
At quarter end, as a result of the share buyback program, Acergy S.A. held directly 5,560,025 of its own shares representing 2.85% of the total outstanding shares, as well as indirectly holding 879,121 shares, representing 0.45% of the total outstanding shares.
The backlog for continuing operations as at February 28, 2007 was $2.6 billion, of which $1.4 billion was for execution throughout the remainder of 2007. The Group also held an additional $470 million in pre-backlog at the quarter end.
In $ millions as at: Feb.28.07 Nov.30.06 Feb.28.06 -------------------- --------- --------- --------- Backlog (1) 2,557 2,576 2,286 Pre-Backlog (2) 470 302 538 (1) Backlog restated to exclude amounts related to discontinued operations in Acergy North America and Mexico of $2.1 million (Feb.28.07), $11.2 million (Nov.30.06) and $23.5 million (Feb.28.06). Backlog reflects the stated value of signed contracts. (2) Pre-backlog reflects the stated value of letters of intent and the expected value of escalations on frame agreements
The outlook for seabed-to-surface engineering and construction remains strong with bidding activity continuing at a high level for West Africa, the North Sea and Asia. The majority of the bids for the large deepwater field developments in Africa, that were bid in 2006 and those currently in the bid process, once awarded, are expected to continue to drive the market.
Acergy S.A. is a seabed-to-surface engineering and construction contractor for the offshore oil and gas industry worldwide. We plan, design and deliver complex, integrated projects in harsh and challenging environments. We operate internationally as one group -- globally aware and locally sensitive, sharing our expertise and experience to create innovative solutions. We are more than solution providers, we are solution partners -- ready to make long-term investments in our people, assets, know-how and relationships in support of our clients.
Three Months Ended ---------------------- in $ millions Feb.28.07 Feb.28.06 Unaudited Unaudited --------- --------- Net operating revenue from continuing operations $ 565.8 $ 367.6 Gross profit 84.3 50.9 Net operating income from continuing operations 49.4 27.6 Income from continuing operations 36.2 20.4 Income from discontinued operations 4.2 4.1 Gain on disposal of discontinued operations - 16.4 Net income $ 40.4 $ 40.9 PER SHARE DATA (Diluted) Three Months Ended ---------------------- Feb.28.07 Feb.28.06 Unaudited Unaudited --------- --------- Earnings per share from continuing operations $ 0.18 $ 0.10 Earnings per share from discontinued operations $ 0.02 $ 0.11 Net earnings per share $ 0.20 $ 0.21 Weighted-average number of common shares issued (millions) 216.8 196.8 Highlights -- A high level of activity in a traditionally low quarter -- Commercial activity globally was at a particularly high level during the quarter -- Two significant contract awards in Norway -- a $140 million award for Marathon and a $120 million award for Statoil Post Quarter Activity -- Award of $400 million Mexilhao trunkline contract for Acergy Piper in Brazil in 2008 -- Pertinacia sailed on March 18th to start long term contract in Brazil
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