SCAN Geophysical ASA has provided its financial results for the third quarter ended September 30, 2008.
(figures for the third quarter of 2007 are shown in brackets)
Operating revenues totalled NOK 163.6 million in the third quarter 2008 (NOK 106.9 million), which is NOK 26.1 million higher than the NOK 137.5 million reported for the second quarter this year. The main reason for the increased revenues is the contribution from the first survey of the third vessel M/V SCAN Stigandi, which commenced operation at the end of July. The year-to-date revenues amount to NOK 417.8 million (NOK 310.9 million).
The 3D vessel M/V SCAN Resolution contributed with NOK 67.4 million to the revenues in the third quarter, down from NOK 100.6 million reported in the second quarter, due to the planned class docking and installation of an additional compressor in September. Of the NOK 67.4 million, NOK 8.5 million is related to data processing services.
The 2D vessel M/V Geo Searcher improved its production significantly in the third quarter and contributed NOK 62.7 million to the revenues, up from NOK 36.3 million in the second quarter.
The 3D vessel M/V SCAN Stigandi contributed with NOK 32.9 million in the third quarter. As the vessel commenced production at the end of July, there were no revenues from this vessel in the previous quarter. M/V Stigandi headed back to the Bahamas on September 6 to install the planned azimuth thruster.
Other revenues are related to lease of streamer modules of NOK 0.6 million this quarter, which is the same level as in the previous quarter, and NOK 1.6 million year-to-date 2008.
Vessel operating costs this quarter amounted to NOK 88.4 million (NOK 49.6 million), up from NOK 65.2 million in the previous quarter.
Vessel operating costs for M/V SCAN Resolution amounted to NOK 38.5 million this quarter (NOK 26.4 million), a decrease of NOK 2.0 million from previous quarter, due to lower production related costs in while in class docking in September.
Vessel operating costs for M/V Geo Searcher amounted to NOK 29.9 million this quarter (NOK 20.8 million), compared to NOK 19.7 million in the previous quarter. This increase is explained by increased operation this quarter, mainly heavy freight- and port-costs related to the freight of sections from M/V SCAN Stigandi to M/V Geo Searcher (NOK 2.8 million) and increased fuel-costs. Included are also extra costs for chaseboat and equipment required by, and reinvoiced to the client. This figure is included on a gross basis as vessel operating cost and revenues respectively.
Vessel operating costs for M/V SCAN Stigandi, in operation from end of July, amounted to NOK 18.7 million this first quarter of operation (NOK 2.0 million), compared to NOK 3.3 million in the previous quarter. The vessel is recognized as financial lease resulting in only the maritme management component classifies as operational expense. The bareboat charter portion is recognized as interest costs and amortization of debt.
For the first nine months this year, total vessel operating costs amounted to NOK 218.8 million (NOK 145.4 million).
Payroll costs amounted to NOK 41.4 million in the third quarter (NOK 25.3 million), compared to NOK 27.7 million in the second quarter of 2008. The cost level in the previous quarter was low due to reversal of accrued employer taxes on share options of NOK 5.4 million. Further, the increase is due to a growing organization. For the first nine months of the year, payroll costs were NOK 92.6 million (NOK 69.5 million).
Depreciation amounted to NOK 19.8 million (NOK 12.8 million), which is higher than the NOK 11.6 million reported in the previous quarter. Included in this quarter is depreciation related to the vessel M/V Stigandi, delivered in July this quarter, and also depreciation of the equipment onboard M/V SCAN Stigandi. Year-to date depreciation amounts to NOK 42.9 million (NOK 37.7 million).
General and administration (G&A) costs amounted to NOK 20.7 million in the third quarter (NOK 14.2 million), a decrease of NOK 5.0 million from the NOK 25.7 million reported previous quarter. The decrease is mainly caused by completion of the PDVSA-survey and thus end of operational related costs classified as G&A for the M/V SCAN Resolution in Venezuela. For the first nine months of 2008, G&A costs amounted to NOK 69.5 million (NOK 29.1 million).
EBITDA for the third quarter 2008 was NOK 13.0 million (NOK 17.8 million), compared to NOK 18.9 million reported in the second quarter of 2008. The decrease of NOK 13.7 million was mainly caused by increased vessel operating cost on M/V Geo Searcher and payroll-costs described in the section "Operating Costs." For the first nine months of this year, the EBITDA amounted to NOK 36.9 million (NOK 66.9 million).
The EBIT amounted to minus NOK 6.8 million in the third quarter this year (NOK 5.1 million), down from an EBIT of NOK 7.3 million in the second quarter of 2008. EBIT for the first nine months this year amounted to minus NOK 6.0 million (NOK 29.2 million).
Financial revenue includes interest from bank deposits and financial exchange gain and amounted to NOK 1.0 million in the third quarter 2008 (NOK 12.2 million), compared to NOK 4.2 million in the previous quarter. Financial costs amount to NOK 50.8 million (NOK 6.9 million) - an increase of NOK 44.8 million from the NOK 6.0 million reported in the previous quarter. Financial costs include interest portion of bareboat charter of NOK 4.6 million, financial exchange loss and interest on leasing liabilities related to seismic equipment on the M/V SCAN Resolution and the M/V SCAN Stigandi, and also financial exchange loss on the financial lease liability related to M/V SCAN Stigandi of NOK 20.9 million.
Result From Associated Company
Until June 2008, the investment in shares in the company Neptune Offshore AS was recognized using the equity method. SCAN's investment in the company is reduced to 16%, and the investment is therefore reclassified to investment in shares. The result from the associated company Neptune Offshore AS amounted to minus NOK 0.1 as per end of June. After that date, SCAN’s share of the company's profit and loss is no longer recognized in the Group's profit and loss.
Loss Before Tax
The loss before tax for the period was NOK 56.7 million (Profit NOK 10.0 million), compared to the profit of NOK 5.1 million in the previous quarter. Loss before tax amounts to NOK 49.9 million for the first nine months of the year.
Income Tax Expense
In the third quarter the tax revenue (change in deferred tax asset) amounted to NOK 14.9 million, compared to tax revenue of NOK 1.0 million in the second quarter.
The net profit for the third quarter 2008 amounted to minus NOK 41.8 million (NOK 17.9 million), compared to the NOK 6.1 million profit reported in the second quarter.
The consolidated figures consist of the parent company SCAN Geophysical ASA and the three subsidiaries SCAN Geofisica CA, SCAN Shipping Ltd and SCAN Equipment Ltd.
Total non-current assets for the group amounted to NOK 1 242.6 million at September 30, 2008 (NOK 699.6 million). This is an increase of NOK 406.0 million from the end of the second quarter mainly related to increased investments in seismic equipment (M/V SCAN Stigandi and the newbuilds) and payments related to the vessels under construction (compressors on the newbuilds). On July 8, SCAN took delivery from Neptune Seismic AS of the converted vessel M/V SCAN Stigandi. The transaction is recognized as a financial lease over the leasing period of ten years with an asset value of NOK 248.9 million and a liability value of NOK 158.0 million. The book value of the vessel is NOK 243.3 million at September 30, 2008.
The book value of tangible fixed assets amounted to NOK 502.2 million at September 30, 2008 (NOK 227.3 million), compared to NOK 373.3 million at the end of the previous quarter, including both seismic equipment financed by the company itself, seismic equipment financed by leasing and capitalized rigging costs. Prepayments to suppliers of equipment are reclassified to fixed assets at date of delivery.
Payments related to the vessels under construction (newbuilds) are capitalised. The capitalized value of NOK 238.5 million at September 30, 2008 (NOK 128.2 million) includes purchase of building contracts, purchase of compressors to the vessels, payments to the shipyard (prepayment of contracts), direct costs related to the building of the vessels and finance and administration costs related to the vessel contract. As per September 30, vessels under construction amounted to NOK 238.5 million. Prepayments to suppliers of seismic equipment amounted to NOK 181.4 million at the end of the third quarter 2008 (NOK 308.8 million), compared to NOK 216.3 million at the end of the previous quarter.
Trade and other receivables amounted to NOK 259.8 million at 30 September 2008 (NOK 217.4million), up from NOK 256.9 million at the end of the last quarter. Increase in accounts receivable this quarter is due to increase in revenues as the third vessel M/V SCAN Stigandi is in operation.
Borrowings consist of the convertible loan totalling NOK 177.0 million at 30 September 2008 (NOK 165.1 million), compared to NOK 175.3 million at the end of the second quarter. Leasing liabilities amounted to NOK 142.2 million. Liability related to M/V SCAN Stigandi (as described above) amounts to NOK 179.0 million.
The total equity of the group at September 30, 2008 amounted to NOK 613.9 million (NOK 641.3 million), which represents an equity ratio of 39.1 per cent, compared to 53.7 per cent at the end of the second quarter.
Cash Flow and Financing
Cash flow from operating activities was minus NOK 47.1 million (minus NOK 2.2 million), compared to NOK 23.4 million in the second quarter. Cash flow from financing activities amounted to NOK 124.4 million (NOK 8.7 million) compared to NOK 46.6 million in the previous quarter, while cash flow from investing activities was NOK 128.7 million (NOK 58.2 million), compared to NOK 77.7 million in the second quarter.
Cash flow from investing activities includes investments and prepayments of seismic equipment and conversions costs related to M/V SCAN Stigandi. Thus, the net cash flow for the period was negative with NOK 51.4 million (NOK 51.7 million), compared to NOK 7.6 million in the previous quarter.
Cash and cash equivalents (including overdraft facility) amounted to NOK 47.4 million at September 30, 2008 (NOK 140.9 million), compared to NOK 98.8 million at the end of the previous quarter, representing a decrease of NOK 51.4 million during the quarter.
Due to the ongoing investments in the newbuild program, the negative development in cash flow continues into the fourth quarter and will require further financing.
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