PGS Updates Vessel Utilization and METI Transaction
Petroleum Geo-Services ASA announced that, compared to the guidance given in the company's interim financial report for Q3, the expected Q4 productive time and related revenues and margins in the marine contract segment have been reduced. This is primarily due to longer than scheduled yard stays and steaming for two Ramform vessels and a delay in obtaining operational permits for one Ramform vessel.
PGS's expectations for a strong full year 2008 has been further strengthened through several significant contract awards, at terms well above the 2007 level, bringing the company's order backlog up to a total of approximately $950 million for the marine and onshore segment combined, the highest ever.
PGS also announced that it has been invited to deliver additional services relating to Ramform Victory after the sale to the Japanese Ministry of Economy, Trade and Industry (METI), including the maritime operation of the vessel, and that delivery of the vessel is now expected shortly after year-end.
After relocating Ramform Explorer from the North Sea to India during November to start a multi-season acquisition contract, the company has experienced permitting delays caused by the high activity level in the area, leading to approximately 20 days of unpaid standby in December.
Ramform Challenger and Ramform Valiant, as previously disclosed, have been completing yard stays and 10-year classing in Q4. In total the number of yard days, and related steaming, has increased compared to PGS' earlier estimates.
PGS now expects steaming, yard and standby to be around 31% of total capacity, compared to its previous guidance of 22-25%. The Company expects the 2007 full year marine contract EBIT margin to be marginally below 50%.
Steaming, which is seasonally higher in Q4, is mostly considered in contract pricing, but revenue recognition is made over the active acquisition period causing the financial benefit to be realized subsequent to the steaming period. The relocations done in Q4 are expected to benefit utilization and the number of planned active production days in the first part of 2008.
In relation to the agreement with METI to sell Ramform Victory and provide ongoing technology and operational services, PGS has been asked to provide certain additional services, including the maritime operation of the vessel. If the parties agree on this increased scope, this will provide substantial benefits for both parties, allowing for increased crew continuity as well as the ability to leverage PGS' broader resource base to secure efficient and uninterrupted operations. The delivery of the vessel is likely to occur in January 2008, consequently PGS expects the gain relating to sale of the vessel to be recognized in Q1 2008 and not in Q4 2007 as earlier disclosed. The payment of the 50% advance on the sales price is still expected to be received before year-end. Since PGS plans for its Norwegian vessel owning company to enter the new tonnage tax rules in Norway, PGS expects the gain on sale to be tax free.
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