MIS has released its period results for Q1 2008 to March 31 2008. These results display strong Q1 2008 Revenue of US$ 82mn (growth of 40% over Q1 2007), and quarterly net income of US$ 3mn, which is lower than same period in 2007. The increased revenue is a result of MIS' growing volume of work in the quarter as it works off its backlog of three new-build rigs while maintaining a substantial volume of traditional work. The reduced net income figures as compared to 2007 are a result of several factors, the main one being the escalation of the new-build rigs' completion costs caused partly to maintain the scheduled delivery dates. MIS is pleased to report that both Seawolf rigs (Hull #104 and Hull# 105) remain on schedule for delivery in August and December 2008 respectively, while the 3rd rig, for KSAM2 Petrodrill (Hull #107), is well ahead of progress and contractual delivery schedule. The main factors contributing to the reduction in profits on the first two new build rigs were the increased number of man-hours over the original budget, impact of higher cost in man-hours than originally estimated and increasing freight, inspection and coordination costs of the procured items. Other increased costs impacting MIS in Q1 were interest and non revenue costs on Hull #106 and Hull #108, for which slots remained unsold at the end of the quarter. These increasing costs were partially offset by increased margins on the traditional works. However, margins were reduced by the recognition of significant revenue assumed at cost due to unsettled variation orders in a project in Qatar.Prospects:
At the end of Q1 the prospects for new sales for the two unsold rig slots, Hull #106 and Hull #108, were improving as the volume of inquiries grew, especially after the Offshore Technology Conference in Houston. The number of inquiries for traditional works is also maintaining a very good level, as local "predominantly National" oil and gas companies continue their aggressive expansion plans. These expansions encompass not only capital expenditure on new facilities, but increasingly the repair, maintenance and upgrade of existing plants, for much of which MIS has a strong performance history and established customer relationships. With the strongly anticipated sales of at least the two available rig slots and the indicated increase in other traditional works, MIS prospects for increased revenue and profits in 2008 remain good.Non-Financial Events in the Quarter:
The highlight of the first quarter was MIS' widely-publicized naming ceremony held for the SeaWolf Oritsetimeyin (Hull 104), the first offshore jack-up drilling rig to be built in the Middle East. The event was attended by a number of UAE dignitaries and key clients and partners of MIS. The event captured the attention of both the industry and the business media resulting in MIS' coverage in a number of media vehicles including a special report on BBC.
In addition to this key milestone for Hull 104, in Q1 MIS also kept the momentum across all its newbuild rigs benefiting from the increased expertise in the new-build area. Steel-cutting for Hull 106 took place in February 2008 in keeping with the production schedule.
In traditional work, MIS secured several key contracts during Q1 from established long-term clients such as Ras Al Khaimah Gas Co (RAKGAS) and Margham Development Establishment (MDE). RAKGAS and MDE are subsidiaries of the Ras Al Khaimah, U.A.E. and Dubai, U.A.E. governments respectively.Market outlook:
The market outlook in the oil and gas industry continues strong and healthy, and record high oil prices are supported by continued world demand. There are continuing demands for all MIS business lines, from pressure vessel fabrication, with orders currently in progress for both local and international markets; continuing land based petrochemical facility expansions throughout the Gulf area, a steady stream of offshore drilling rig refurbishments or repair, reflecting the increased level of offshore drilling and development activities in the area, all competing for available capacity with new-build jackup rigs.
Virtually every competent shipyard in the Middle East/South East Asia area is fully committed for several years ahead. MIS considers that the current and near-to-mid term market outlook is very strong.
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