Skeie Drilling & Production has issued its financial results for the fourth quarter 2008.
Total operating expenses was US $1,6 million for the 4th quarter 2008 compared to US $1,1 million for the 4th quarter 2007. Operating expenses increased from US $1,6 million for the year 2007 to US $3,2 million for year 2008. The operating expenses mainly consist of cost related to management of the company, bid costs and costs related to building up the administration and project organization.
Net financial income for 4th quarter 2008 amounted to US $30,7 million and US $-0,3 million for the 4th quarter 2007. Year to date 2008 net financial income was US $30,5 million compared to US $4,7 million for the year 2007. The main reason for the increase in financial income in 2008 is the accounting treatment of the convertible bond loan issued in June 2007. In order to comply with IAS 39, the convertible rights attached to the bond loan are separately fair valued as financial derivates, presented as liability in the balance sheet.
The fair value of the derivate is directly related to the share price of the company, change in interest and time for the option to expire. As the share price of the company dropped by almost 60% since December 31, 2007, the value of the financial derivates decreased by about US $16,6 million during year 2008, reflected as gain in the financial income statement.
As the convertible bond loan is in NOK and the functional currency is USD, the conversion right is considered as a financial derivate, recorded at fair value through profit and loss account. This has resulted in a currency gain of US $17,6 million for the year 2008. The currency gain is booked under financial derivates.
The interest expenses related to the bond loans for construction of the three jackup rigs reduced by interest income of bank deposits to be invested in the rigs, are capitalized under Rigs under construction in the consolidated balance sheet for the year 2008.
As per end of year 2008, the total assets was US $802,1 million of which US $657,9 million are related to rigs under construction including capitalized net interest on bond loans, yard installments and project costs. US $143,8 million is related to cash at bank.
The underlying demand for the rigs on the Norwegian Continental Shelf ( NCS ) is considered to be unchanged, but the financial crisis together with the low oil price have made operators postpone their plans until market conditions in general have improved.
Based on the current situation on the NCS, SKDP has also started marketing the rigs for drilling/production utilization in special niche markets where there is a need for extra large and/or harsh environment jackups for drilling or combined drilling and production. These areas include Canada, West Africa Middle East and others.
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