Acergy Says Quarterly Revenue Exceeds $700 Million
Acergy's CEO, Tom Ehret said, "In another quarter of high activity levels, with quarterly revenue exceeding $700 million for the first time, significant progress was achieved on a number of major projects. Delivery of first oil on Greater Plutonio was a significant milestone on the largest project that we have undertaken. We expect mechanical completion of this project by year end. The Polar Queen, a key deepwater enabling asset, joined the fleet in August and is now fully committed on projects in West Africa and South America until the first quarter of 2009. The level of awards in the quarter was low with long awaited contract awards in West Africa still outstanding. However, we are confident that we will see material backlog growth by the time we report the full year results."
Acergy Africa and Mediterranean -- A very active quarter in West Africa with revenue up 30% on the same quarter in 2006. On the Greater Plutonio project, significant progress was made during the quarter, resulting in a strong financial contribution. The tie-in programme continued towards the hand over of the southern production system for first oil after quarter end. Installation work on the Moho Bilondo project in the Congo continued with the Polar Queen mobilising to work on this project. Commercial activity continues to be intense with a number of the long awaited major contracts now expected to move closer to award.
Acergy Northern Europe and Canada -- The high level of activity continued throughout the quarter with revenue broadly in line with the same quarter in 2006. The main project activity included work under the CNR Frame Agreement, the Njord Gas export line and the Starling project. The Acergy Piper successfully completed the Tyrihans project ahead of schedule. The technically demanding Tampen Hot-Tap and H7 bypass projects completed during the quarter. All assets deployed in Northern Europe worked at full capacity throughout the quarter.
Acergy North America and Mexico -- Project management and engineering support for projects in Brazil continued throughout the quarter. Targeted tendering continues for deepwater projects in the Gulf of Mexico.
Acergy South America -- The growth in Acergy South America is demonstrated with revenue increasing to $63 million compared to $20 million for the same quarter in 2006. SURF projects now represent 60% of regional backlog. The PRA-1 contract passed a major milestone with the installation of the three manifolds. The build up of the Acergy infrastructure in Brazil continues ahead of the offshore phases of Frade and Mexilhao projects in 2008. The three ships on long term charter to Petrobras achieved 97% utilisation in the quarter.
Acergy Asia and Middle East -- Revenues declined in the quarter compared to the same period in 2006, as the early contribution from current projects did not replace the contribution from the Casino project. The Dai Hung project was physically completed at a loss in the quarter, although contract closure is anticipated in the coming months, and the region continued to build up its organisation. The $5.7 million gain realised on the sale of shallow water assets during the quarter was more than offset by the planned dry docking of the Toisa Proteus which resulted in lower ship utilisation. The Sapura Acergy joint venture remained loss making and will continue to be so until the delivery of the Sapura 3000.
The Polar Queen, was delivered during the latter part of the quarter. Both the Sapura 3000 and the Acergy Viking are expected to join the fleet by year end.
Non-consolidated joint ventures
The contribution from non-consolidated joint ventures in the quarter was down significantly from the same quarter in 2006. This decrease was mainly due to lower activity in the Seaway Heavy Lifting joint venture, due to repairs on the Stanislav Yudin during June, and mobilising to work for our joint venture partner for the remainder of the period. The major contributors in the quarter were the Subsea7 project joint venture in Norway and NKT Flexibles. The Sapura Acergy joint venture remained loss making as expected, prior to the delivery of the Sapura 3000.
Net operating revenue from continuing operations for the third quarter increased 17% to $709.2 million compared to the same quarter in 2006, primarily due to increased activity levels in West Africa and South America.
Net operating income from continuing operations for the third quarter was $125.0 million compared to $108.5 million for the same period in 2006. This was primarily as a result of improved project performance and a higher level of activity, particularly in West Africa, offset by the lower contribution from non-consolidated joint ventures at $10.8 million compared to $23.7 million. Selling, General and Administrative expenses for the quarter increased 25% to $53.1 million compared to the same period in 2006 due to increased activity levels, higher tendering and infrastructure build up costs, including some one-off costs.
The tax charge for the quarter was $41 million, an effective tax rate of 34% for the quarter. Whilst the underlying charge from operations increased to approximately 37%, caused by a change in the profit mix, the partial release of a provision in respect of ongoing tax audits reduced the net quarterly rate to 34%.
Net income was $79.9 million compared to $66.6 million for continuing operations in 2006, reflecting the higher level of activity during the quarter, and compared to $53.8 million for all operations in the same period in 2006, which included a $12.8 million loss on discontinued operations.
The cash and cash equivalents position at the quarter end was $518.1 million, compared to $500.2 million as at May 31, 2007, due to strong cash generation from operations, offset by planned capital expenditure at $65 million and the dividend payment of $38 million. Total advance billings at the quarter end stood at $201.7 million compared to $209.7 million at May 31, 2007.
At quarter end, Acergy S.A. held directly 6,154,845 treasury shares representing 3.2% of the total issued shares, as well as indirectly holding 879,121 treasury shares, representing 0.5% of the total issued shares.
The backlog for continuing operations as at August 31, 2007 was $2.7 billion, of which $0.7 billion is for execution throughout the remainder of 2007. The Group also held an additional $335 million in pre-backlog at the quarter end.
The major SURF projects, especially in West Africa which are experiencing delays, are now expected to move closer to award. Acergy anticipates material backlog growth in the months ahead, with medium to long term market trends expected to remain strong. Clarity of future revenues and the activity level in 2008 and 2009 will become evident as some of the major contracts are awarded.
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.
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