Swiber's 3Q Revenue Surges 186.5%

Swiber has reported earnings of US $18.2 million on the back of a 186.5% surge in revenue to US $130.1 million for the three months ended September 30, 2008 (3MFY08). The Group's growth during the quarter was
underpinned by continued buoyant demand for its services in offshore construction sector.

With the latest quarter results, revenue of the Group for the nine months ended September 30 (9MFY08) swelled to US $325.5 million, a 261.3% increase as compared to US $90.1 million a year ago. Correspondingly, Swiber's year to date earnings rose 72.1% to US $50.8 million, from US $29.5 million previously.

For 9MFY08, earnings per share was boosted to 11.12 US cents, from 7.69 US cents a year ago, based on 424,236,697 and 358,828,022 weighted average ordinary shares in issue, respectively. Net asset value per share rose to 52.28 US cents as at September 30, 2008, compared to 41.68 US cents as at December 31, 2007.

Commenting on Swiber's 3QFY08 performance, Executive Chairman and Group Chief Executive Officer, Raymond Goh, said, "Despite the current economic uncertainties brought on by the global financial crisis, Swiber continued to see firm demand for our offshore services. Our strong 3rd quarter was pegged to the successful completions of a higher number of offshore transportation and installation projects in our key markets of Malaysia, Brunei, Indonesia and India. These included, amongst others, the Mampak platform installation for Brunei Shell, which is part of our landmark US $146.6 million contract win."

In tandem with revenue growth, Swiber's gross profit soared 68.4% in 3QFY08 to US $26.0 million as compared to US $15.5 million in 3QFY07.

However, the bottomline of the Group was trimmed by lower operating income and higher administrative and finance costs.

Other operating income declined 38.8% to S$6.8 million from a reduction in vessel disposals gains and a US $2.0 million negative goodwill from the acquisition of Kreuz Shipbuilding and Engineering Pte Ltd (formerly known as North Shipyard (Pte) Ltd) that was written off in 3QFY07.

Administrative expenses rose 85.9% to US $10.1 million, largely in line with the Group's expansion in business activities and headcount during the quarter. At the same time, finance costs rose 215.1% to US $2.9 million from an increase in bond and bank loans.

Said Goh, "Swiber is in a healthy financial position with a very manageable net debt to equity ratio of 1.04 times as at 30 September 2008. In addition, we have a cash pile of US $58.0 million and generated operating cash flows of US $19.0 million for 3QFY08."

Addressing the financing for Swiber's planned 19 vessels purchases by 2010, he added, "Our committed outstanding capex for these vessels, excluding the Equatorial Driller, add up to US$336 million. This amount is fully matched by various sources of funding that include sale and leaseback arrangements, secured bank loans and disposals of our vessels."

Future Outlook

The impact of the financial crisis has transcended every major economy in the world, giving rise to a softening in oil prices, a tight credit situation and a slowdown in economic growth on a global scale. Notwithstanding the challenging environment, Swiber is confident that the long-term fundamentals and outlook of the offshore industry remain positive.

According to the International Energy Agency (IEA) in its latest World Energy Outlook 2008, massive investment of more than US $26 trillion will be needed over the next 20 years to ensurethat the world has enough energy.

Indeed, world energy demand is expected to grow by 1.6% per year on average or 45% in total, with China and India accounting for over half the increase1. In a separate report, Saudi Arabia, which has the world's largest proved reserves of oil, is also implementing large-scale energy projects to boost production and refining capacity. The country has pledged to spend to some US $250 billion on energy by 2012 including raising oil output to 12.5 million barrels a day by next year and increasing refining capacity by 50%2.

The Group is slowing its expansion plans into deep water offshore projects, including deferring the construction of its deep water drillship, the Equatorial Driller, and is aggressively targeting shallow water projects in Asia Pacific and the Middle East instead.

To this end, it has formed strategic alliances with key offshore players to penetrate markets in these regions. Such alliances include joint ventures with CUEL in Thailand, PetroVietnam Construction (PVC) in Vietnam and most recently, Rawabi Holding in Saudi Arabia.

In a move to further lighten its balance sheet, Swiber is also embarking on a new assets transfer strategy with its joint venture partners.

"By aligning ourselves with strong local partners and tapping on their network, we stand to win market share in shallow water projects in our target markets rapidly. In addition, such alliances give us an opportunity to reduce our gearing through the transfer and co-ownership of assets with our partners," said Goh.

The Group is also exploring business opportunities in the offshore windpower sector and intends to extend its current services and capabilities to companies in this sector at a suitable time. Commented Goh, "We believe that our present capabilities in the offshore oil and gas sector can be easily exported to the offshore wind energy sector, and more importantly, it can be done without major capex investments."

As at September 30, 2008, Swiber is sitting on a robust order book of US $607 million. This compared to less than US $180 million a year ago and US $664 million as at June 30, 2008.

"Despite current economic climate, our order book remains strong at US $607 million as at September 30, 2008. Nevertheless, moving into the 4th quarter of 2008 and FY2009, Swiber will be taking a vigilant and cautious stance in conducting our business. No new capex is anticipated in the near term," concluded Goh.