Prosafe Reports Rig Utilization Up, Profits Strong for 3Q
Prosafe noted that its financial results for the third quarter were good, with an operating profit of US $61.2 million and a net profit of US $59.4 million. A strong market outlook, combined with a robust financial position, provides a good basis for further profitable growth.
(Figures in brackets refer to the corresponding period of 2007)
After the spin-off of Prosafe Production (the floating production division) in May this year, only one division remains in Prosafe; the Offshore Support Services. Consequently, no segment information is presented in the notes to the accounts. In accordance with IFRS, the figures relating to floating production are presented net on a separate line in the income statement of Prosafe SE. Thus, when references are made to prior periods, these figures are exclusive of the discontinued operations.
Operating profit for the third quarter amounted to US $61.2 million (US $54.1 million). This improvement reflects significantly higher day rates for Safe Concordia and MSV Regalia. In addition, the day rates for three of the five rigs operating for Pemex in the Gulf of Mexico are now on an uplifted level as communicated earlier this year. The two remaining rigs will start to generate higher day rates in the fourth quarter.
Utilisation of the rig fleet was 93% (92%). Non-recurring operating expenses equalled US $4 million, out of which US $3 million relates to settlement of a dispute regarding a previous operation and USD 1 million relates to tug costs for Safe Concordia in connection with the hurricane Ike in the Gulf of Mexico.
MSV Regalia was off-hire for eight days in July due to operational downtime. Safe Concordia commenced operations in the US Gulf in mid August, and Safe Bristolia finished the operations on the UK shelf on September 8. All other vessels have been fully utilized in the third quarter.
Net financial costs amounted to US $7.9 million (US $18.4 million). This reduction is mainly due to lower interest-bearing debt after the spin-off of Prosafe Production and an unrealised currency gain on the company's bond loan in NOK.
Taxes amounted to US $6.1 million positive (US $5.2 million negative), which reflect a reduction of deferred tax relating to an unrealized currency loss on USD debt in a Norwegian subsidiary.
Net profit amounted to US $59.4 million (US $46.0 million), the highest ever for Prosafe, corresponding to diluted earnings per share of US $0.26 (US $0.13).
Total assets at 30 September amounted to US $1,304.3 million (US $ 2,492.6 million), while the book equity ratio declined to 10.3% (46.4%) as a consequence of the distribution of the shares in Prosafe Production in the second quarter this year.
At the end of the third quarter 2008, Prosafe had a credit facility of US $1.1 billion, of which US $850 million had been drawn.
Applicable margin on the credit facility is 0.85% per annum in 2008. From 2009 onwards it will vary in the range from 0.65% to 0.95% per annum depending on the leverage ratio. The leverage ratio is defined as the ratio of total debt to 12 month historical EBITDA.
The credit facility has a maturity of seven years. The availability under the credit facility is reduced semi-annually by US $70 million, starting in November 2008. This implies that the availability will be reduced to US $1,030 million in November 2008, US $960 million in May 2009 et cetera. Based on a drawn amount of only US $850 million at the end of the third quarter, the first mandatory reduction will be in May 2010.
Financial covenants on the credit facility:
- Minimum cash of US $65 million in the group (Q3 2008: US $116.3 million).
- Leverage ratio 5 (4.5 following the second annum after closing, i.e. in May 2010) (Q3 2008: 3.7).
- Minimum value adjusted equity ratio of 35% (Q3 2008: 58 per cent) based on a calculated value adjusted equity of US $1,585 million.
- Market value vessels/total commitments above 150% (Q3 2008: 225 per cent).
- Working capital (incl. unutilised credit lines with maturity in excess of 12 months) larger than zero (Q3 2008: US $288.2 million).
Prosafe also has two outstanding bond loans; the first with principal of NOK 411 million is maturing in March 2010, and the second with principal of US $50 million is maturing in March 2012. The only financial covenant on the bond loans is that adjusted shareholder equity on a consolidated basis in relation to the borrower's total
consolidated liabilities shall be above 35% (Q3 2008: 155%).
Safe Concordia commenced operation mid-August for Chevron in the US Gulf, and will continue operations into January 2009.
Safe Esbjerg will be in operation for Maersk Oil & Gas in the Danish North Sea during the fourth quarter. Maersk Oil & Gas has recently awarded the Safe Esbjerg a two-year contract with a one-year option from June 2009.
Safe Scandinavia will continue its operation for StatoilHydro in the Norwegian North Sea until 26 November 2008. After a short yard stay, Safe Scandinavia will thereafter commence operation at the Valhall field for BP mid-December. In June 2009, Safe Scandinavia will have a five to six weeks yard stay before commencing a 65-day contract for Shell in the UK North Sea.
Safe Caledonia will be in operation during the fourth quarter, working on a long-term contract for Total in the UK North Sea until September 2010. Safe Caledonia will have a six-week yard stay during the first quarter of 2009.
MSV Regalia will operate for Aker Offshore Partner until mid-December. Thereafter, the rig will transit to the yard to commence a major refurbishment. After the refurbishment, MSV Regalia will take over the contract from Safe Scandinavia for BP on the Valhall field in June 2009. This contract has a firm duration until December 2010 with an option period of six months.
Safe Bristolia is anchored at Firth of Forth in Scotland, and is being marketed for new employment.
Safe Astoria will be in operation on the Sakhalin field in Russia until the beginning of November 2008, after which the rig will transit to a standby location in Southeast Asia during the winter months. In May 2010, Safe Astoria is expected to resume operation at the Sakhalin field.
Within the harsh and semi-harsh offshore environments where Prosafe's accommodation rigs operate, there is a tight supply-demand balance, and the number of newbuilds to be delivered over the next few years is limited.
The market for semisubmersible accommodation rigs remains strong in Mexico. In the North Sea, the fixed installations are mature and require greater maintenance to uphold production and safe operation.
The high exploration and drilling activity that has been undertaken in West Africa and Brazil is expected to result in new field developments. It is anticipated that some of these will require additional accommodation offshore.
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