The Board of Directors of Scorpion Offshore Ltd. has approved the Company's audited consolidated annual financial statements for the year ended June 30, 2008. These financial statements are reported in US dollars and have been prepared in accordance with US Generally Accepted Accounting Principles.
Currently Scorpion has 3 jackups delivered and operating. Five rigs remain under construction, two jackups at Keppel Am FELS in Brownsville, Texas, two jackups at Lamprell in Sharjah, U.A.E. and one deepwater semisubmersible at Keppel FELS in Singapore.
As of June 30, 2008, two jackups were working under contract. The Offshore Courageous completed its initial contract in India and mobilized to Oman in March 2008, where it began working for RAK Petroleum on April 9, 2008. Offshore Courageous achieved a revenue utilization rate of 99.2% during the 4th quarter and an impressive 98.8% revenue utilization rate during fiscal year 2008.
The Offshore Defender started its contract in Brazil for Petrobras on March 1, 2008. The rig had a revenue utilization rate of 87.1% for the 4th quarter despite suffering 10 days of down time which was solely attributable to a leading OEM provider's manufacturing defect. Excluding the equipment failure, the Offshore Defender achieved a 97.9% revenue utilization rate for the quarter. After the fiscal year end the Offshore Resolute started its contract with Thang Long offshore Vietnam on August 2, 2008. In the three weeks of operations, the rig has achieved revenue utilization of 99.6%.
Since commencement of construction in July 2005 and operations in June 2007, Scorpion has yet to experience a lost time incident. This is a tribute to quality of our field personnel as well as the 'user-friendly' safety and operating management systems developed by the Company.
4th Quarter Results
Net income for the 4th quarter and fiscal year ended June 30, 2008 totaled $10.3 million and $15.6 million, respectively. Contract drilling revenue for the 4th quarter, including mobilization revenue, totaled $32.6 million, which is up from $28.5 million last quarter. Operating expenses for the quarter, including mobilization costs, were $14.4 million compared to $10.0 million last quarter. Interest expenses for the quarter totaled $1.8 million, which is up from $0.3 million in the 3rd quarter. All other interest costs were capitalized.
Fiscal Year 2008 Results
Net income for the fiscal year ended June 30, 2008 totaled $15.6 million compared to a net loss of $8.4 million last year. As Scorpion did not have any rigs operating during the 2007 fiscal year, a year on year comparison is not meaningful.
Total assets as of 30 June 2008 were $880.9 million. This primarily consists of fixed assets of $458.3 million, $351.5 million in construction in progress, $12.8 million in cash and cash equivalents and trade receivables of $19.3 million. Debt, including the current portion of long term debt, and short-term debt, totaled $472.3 million.
The Offshore Vigilant and Offshore Intrepid are currently under construction at the Keppel AmFELS shipyard in Brownsville, Texas. The Offshore Vigilant will be delivered on September 5, and after Scorpion has conducted its demanding acceptance test, the rig will mobilize to Venezuela to begin its 11 month contract with Gazprom. The Offshore Intrepid is expected to be delivered in January 2009.
The Offshore Freedom and Offshore Mischief are under construction at Lamprell in Sharjah, U.A.E. and will be delivered in March and December 2009, respectively.
In July, 2008, pursuant to its 6 year contract award by Petrobras, Scorpion entered into a rig construction contract with Keppel FELS Limited in Singapore for a newbuild semisubmersible. This rig will be a proven Keppel FELS DSS 38 design which is dynamically positioned and capable of drilling wells up to 8,500 meters deep in water depths of 2,400 meters. The rig will be delivered in December 2011.
The international jackup drilling rig market remains strong as evidenced by the recent letter of commitment (LOC) awarded to the Offshore Freedom by Al-Khafji Joint Operations for work in the Neutral Zone between Kuwait and Saudi Arabia. Over its four year duration, the Al Khafji program should generate revenues of approximately $280 million.
Commodity prices remain high despite their recent correction, and demand for drilling services remains strong in the Arabian Gulf, Mexico, West Africa, US Gulf of Mexico, Venezuela and Southeast Asia. In addition we are seeing a renewal of interest in deep gas prospects in the US Gulf of Mexico. Current and projected high levels of bid activity and oil company enquiries give Scorpion comfort that the demand for jackups will be sufficient to absorb the newbuild deliveries expected during the next 18 months.
Deepwater prospects remain bright with relatively little availability of suitable rigs until 2011 or later. The Company is attempting to build on its recent success with Petrobras and is pursuing numerous deepwater contracting opportunities around the world. At this time Scorpion will only consider further deepwater fleet additions if an oil company contract is awarded prior to Scorpion placing a shipyard order.
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