INTERIM FINANCIAL REPORT FOURTH QUARTER

Transcription

1 SEVAN DRILL ING ASA INTERIM FINANCIAL REPORT FOURTH QUARTER 20111

2 Highlights fourth quarter 2011 Operating revenues of USD 38.0 million which also includes USD 1.3 million of revenues related to work delivered to Cosco shipyard on rig no. 3 and rig no. 4 Good operation in Q4 2011, with 98. 5% technical uptime for Sevan Driller Sevan Brasil on schedule to be delivered in Q1 2012, and to commence operations under a six year charter contractt with Petrobras in Q The Q result also reflects : - USD 3.5 million in bonus payment for USD 2.5 million in compensation to offshore employees for changed remuneration structure which will result in lower cost for the Company going forward - USD 1.8 million in one-off expenses related to financial and legal advise Revenues negatively impacted due to USD appreciation against Brazilian reais All figures in MUSD Operating revenue EBITDA Operating Profit Net financial items Net profit (loss) EPS Technical Uptime (%) Commercial Uptime (%) Max charter rate Drillerr per day ('000) Operating revenue per day ('000) Cash Opex per day ('000) Q Q Page 2

3 Performance summary for the fourth quarter 2011 Operating revenues for the quarter amounted to USD 38.0 million (USD 36.5 million in Q3 2011). EBITDA was USD 6.5 million (USD 13.2 million in Q3 2011). Operating Revenues ($m) Q Q Q Q Operating revenues consist of the charter contractt for Sevan Driller with Petrobras S.A. which commenced operations in June Sevan Driller had an average technical uptime of 98.5% in Q and commercial uptime of 100.2% %. The day rate for the Sevan Driller has increased from July 2011 to July 2012 from USD 420,000 per day to USD 456,0000 per day in accordance with the contract. The increased day rate has a cash effect in the above mentioned period but from an accounting perspective the increased revenue is amortized over the contractt period. Operating expenses were USD 31.5 million (USD million in Q3 2011) consisting of the following: Net operational expenses of USD 15.5 million (USD per day) Non-cash operational expenses of USD 0.7 million Pre-operational expensess for Sevan Brasil of USD 2.0 million USD 5.5 million overhead cost USD 3.5 million in bonus payment for full year USD 2.5 million in compensation to offshore employees for change in remuneration structure which will result in lower cost for the Company going forward USD 1.8 million in one-off expenses related to financial and legal advise Sevan Driller cash opex per day ($ $k) Q Q Q Operating profit was USD 0.7 (USD 3.8 million in Q Q million Net financial items were USD 7.8 million (USD 20.9 million in Q3 2011) consisting of the following items: USD 6.0 million interest expense on the USD 480 million term loan and the vendor credit USD 0.3 million is guaranteee fee to Sevan Marine ASA USD 1.6 million is amortisation of the upfront fee paid on the USD 480 million term loan (non-cash item) USD 0.9 million is unrealised hedging gain (non-cash item) USD 1.0 million is group adjustments USD 0.2 million foreign exchange gain relating to financing The Sevan Drilling Group had a net loss of USD 8.5 million in the quarter compared to a net losss of USD 18.2 million in Q Balance sheet As of 31 December 2011 total assets amounted to USD 1,599.5 million (USD 1,,479.6 million in Q3 2011) of which USD Page 3

4 1,319.3 million was capitalised to the Company s drilling rigs as follows: Sevan Driller USD million (USD 661,7 million in Q3 2011), Sevan Brasil USD million (USD million in Q3 2011), Sevan Rig no. 3 of USD million (USD million in Q3 2011) and Sevan Rig no. 4 of USD 31.9 million (USD 32.0 million in Q3 2011). Cash and cash equivalents amounted to USD million (USD million in Q3 2011). The Group has USD 46 million available for drawdown under a bank facility for financing of Sevan Brasil. This is not reflected in the balance sheet as of 31 December In addition the Company as of 31 December 2011 has an undrawn long term vendor credit facility relating to Sevan Brasil of USD 8 million which is not included in the cash balance. Additional rigs for delivery Sevan Brasil: Mobilisation of the Sevan Brasil is progressing according to plan. Sevan Brasil completed sea-trials on 2 February 2012 and the rig is now undergoing final preparations for transport. The window for heavy-lift transport to Brazil is March 1 - March 7, The rig is expected to arrive in Rio de Janeiro in mid-april, and commence the 6 year Petrobras contract during Q The construction and mobilisation Sevan Brasil is progressing according plan. Sevan Brasil is based on the same design as the Sevan Driller, and the Group is therefore experiencing an improved construction performance due to of to experiences from construction and operating the Sevan Driller. This has been used to make modifications to the already successful Sevan rig design, enhancing the construction process, and reducing certain construction costs. Rig no. 3: Rig no. 3 is progressing according to plan. Keel-laying took place 8 October 2011 and erection of main hull is ongoing Fabrication of the drill-floor has started Rig no. 3 is scheduled to be delivered Q Rig no. 4: Rig no 4 is progressing according to plan Keel-laying took place 16 December 2011, and erection of lower part of main hulll is ongoingg Rig no. 4 is scheduled to be delivered Q The all-in turnkey price for Rig no. 3 and Rig no. 4 is USD 526 million each. Rig no. 5 and Rig no. 6: Cosco Shipyard has agreed to extend the options for entering into the Construction Contracts for the two rigs to 10 December Financing activities Sevan Drilling has agreed with Cosco Shipyard on changed payment terms for Rig no 4. USD 26 million (5% of the total all-in turn-key contract price) was paid to Cosco upon execution of the construction contract in May 2011 and the next instalment of USD 26 million is due in February The remaining 90% of the all-in turn-key contractt price is due upon delivery of the unit in Q Page 4

5 Originally, 5% of the contract price was due upon execution of the construction contract; 15% due 8 weeks prior to steel cutting and 80% due upon delivery of the unit. Events quarter since the end of the Sevan Driller had a technical uptime of 55.9% in January Most of the down- with the wash-pipe. During routine maintenance to replace the wash pipe the threadedd connection between the wash pipe and the swivel was damaged. The repair required that the swivel was removed and replaced with a new swivel. There were no time in January is related to an incident injuries or environmental damages related to this incident and the rig was back on contractt 3 February The rig was partly on rate during the incident, and total days offf rate was about 14 days. Following its acquisition of 28.5% of the shares in Sevan Drilling ASA in December, the Company received a request from Seadrill Limited that an extraordinary general meeting (EGM) in Sevan Drilling ASA is convened for the purpose of electing a new board of directors reflecting the new shareholder base. The EGM was held 9 January As follows from the minutes, it was duly resolved to appoint new directors as proposed, so that the new Board of Directors of the Company now consists of Chairman Erling Lind (new), Kitty Hall, Anne Breive, Per Wullf (new) and Kristian Johansen (new). appoint a new nomination committee as proposed, the committee now thus consisting of Harald Thorstein, Jarle Sjo and Geir Tjetland, and approve the proposed guidelines. nomination committee change the articles of association so that the registered business address of the Company shall be in Oslo. approve the proposed long term incentivee program (LTIP) and grant of authorization to the Board of Directors to issue up to 10,000,000 new shares in order to fulfil such program. Each option will give the holder the right to subscribe for one share in the Company at a strike price of NOK The options will vest with 1/3 annually, subject to certain terms and conditions. On 25 January, Oslo Børs approved transfer of Sevan Drilling from Oslo Axess to Oslo Børs and the first day of the listing was 13 February Health, Safety and Environmental Quality The Group maintains a proactive management system for Health, Safety and Environmental Quality. Safety results continue to be top class with the Cosco shipyard now having exceeded over 5.5 million man-hours on the Sevan Brasil without a Loss Time Incident (LTI). Sevan Driller has passed 20 months without an LTI. In addition, there have been no incidents with an environmental impact. Risk factors The presented financial statements are based on a going concern. The Group s activities expose it to a variety of risks in its operations. These include financial risks, operational risks, equipment risks, project delivery and cost, plus volatility in demand for services. The Group has a risk management program covering these factors (among others) and Page 5

6 seeks to minimize overall exposure to risk and the impact of external factors on performance. The Group is exposed to a variety of financial risks, ncluding market risks, credit risks and liquidity risks. The Group s risk management program includes focusing on the unpredictability of financial markets and seeks to minimize potential adverse effects of such risks on its financial performance. The Group will therefore continue to manage its currency and interest exposures through certain derivative financial instruments in accordance with market practice and to maintainn flexibility in the liquidity by keeping committed credit lines available. A limited part (25%) of the Group s debt financing carries floating interest rates which fluctuate with the market. The Group may therefore to a limited extent be exposed to risks due to changes in interest rates. The value of the Group s charter contracts may to a limited extent be affected by changes in currency exchange rates or exchange control regulations. However, the revenues in Brazilian reais match the operating costs in the same currency almost fully; meaning that the currency risk related to the revenues is hedged. Sevan Drilling requires additional capital in the future to finance the instalments due on delivery of the two new build vessels (80% on Rig no. 3 and 90% on Rig no. 4). The Group plans to utilize a combination of equity and bank financing to finance the instalments. Obtaining such financing may be subject to market risks and other risks that may influence the availability, structure and terms of such financing. Further, the Group may require additional capital in the future due to unforeseen operational issues, unforeseenn liabilities or potential acquisitions, joint ventures or other business opportunities that may be presented to it. There can be no assurance that the Group will be able to obtain necessary financing in a timely manner on acceptable terms. Historically, demandd for offshore exploration, development and production has been volatile and closely linked to the price of hydrocarbons. The demandd for the Group s services in connection with exploration in the offshore oil and gas sector is particularly sensitive to price decreases, fluctuations in production levels and disappointing exploration results. Contracts in the offshore sector require high standards of performance and safety, entailing considerable riskss and responsibilities. These include technical, operational, commercial and political risks. Changes in the legislative and fiscal framework, including tax rules, governing the activities of the oil companies, could have material impact on exploration, production and development activity or affect the Group s operations directly. In connection with the construction of the drilling rigs, the Group has used its best efforts to prepare proper specifications, ncluding the supply and installation of equipment. Despite these efforts, there can be no assurances thatt delays and cost overruns will not occur and such events, if occurring, could have an adverse impact on the Group s financial position. The experience gained to date by the Group, the shipyard and main suppliers, is expected to benefit the construction of future rigs. However, the Group cannot guarantee that cost increases and delays in delivery of future units will not occur. Outlook Except from the incident in January on the Sevan Driller, the company expects good Page 6

7 uptime for 2012 and stable revenues as a consequence of that. The group will continue its efforts to reduce operating costs and has already identified a number of potential areas for improvement. Sevan Brasil will commence operation under a six year charter contract with Petrobras from Q2 2012, and the company is currently in dialog with oil companies for marketing of the two new builds with target of obtaining charter contracts in due course before their delivery in Q and Q The deepwater drilling market continues to be strong with increasing day rates. Oslo, 15 February 2012 The Board of Directors Sevan Drilling ASA Page 7

8 Interim financial statements The company owning Sevan Driller, Sevan Drilling Rig Pte Ltd, was transferred from Sevan Marine ASA to Sevan Drilling ASA 21 March All consolidated figures includes Sevan Drilling Rig Pte Ltd from this date (and not from 1 January 2011). Condensed Consolidated Income Statement Unaudited figures in USD million Q4 11 Q Q Note Operating income Operating expense EBITDA Depreciation, amortization and impairment Operating profit/(loss) Financial income/(expense) Foreign exchange gain/ /(loss) relating to financing Net financial items Profit/(loss) before tax Tax income/(expense) Net profit/( (loss) EPS Included in year to date is a hedge loss of USD 6.6 million (Q1:2.2 and Q:2 4.4) and the call premium of USD 7 million reported in Q1, that was incorrectly accounted for in previously periods. Q1 and Q2 report are not reissued. Statement of Comprehensivee Income Unaudited figures in USD million Q4 11 Q Q Net profit/(loss) Foreign currency translation Total comprehensive income Page 8

9 Condensed Consolidated Balance Sheet Unauditedd figures in USD million Note Drilling Rigs Other fixed assets Intangible assets Deferred income tax assets Other non-current assets Total non-current assets Inventories Trade and other receivables Cash and cash equivalents Total current assets s Total assets Share capital Other equity Total equity Interest-bearing debt Other non-current liabilities/provisions Total non-current liabilities 1, , , Interest-bearing debt Current liabilities Total current liabilities Total liabilities Total equity and liabilities 1, Page 9

10 Condensedd Consolidated Cash Flow Statement Unauditedd figures in USD million Cash flows from operation activities Cash from operations Interest paid Non - cash financial elements Net cash generated from operating activities Cash flows from investment activities Purchasess of property, plant and equipment (PPE) Purchasess of intangible assets Net cash flow from investment activities Cash flows from financing activities Net proceeds from capital increase Proceeds from interest-bearing debt Repayment interest-bearing debt Net cash flow from financing activities Net cash flow for the period Cash balance at beginning of period Cash balance included in contribution in kind Cash balance at end of period Condensed Consolidated Statement of Changes in Equity Unaudited figures in USD million Equity as of January 1st 2011 Conversionn of debt Contribution in kind (SD I AS Group) Capital increase Tax effect of fees capital increase Total comprehensive income Equity as of December 31st 2011 Share Capital Share Premium Retained Earnings Total Equity Page 10

11 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS Note 1 General accounting principles Sevan Drilling ASA (the Company ) and its subsidiaries (together with the Company the Group ) is an international offshore drilling contractor specializing in the ultra deepwater segment. The Group owns two ultra deepwater drilling rigs. One deepwater drilling rig, Sevan Driller, is currently operating under a six year fixed term contract in Brazil. This rig entered the second year of its contract in July The second rig, Sevan Brasil, is currently under constructionn with a planned delivery date in Q The Sevan Brasil has a six year charter contract in Brazil which is scheduled to commence in Q In addition, the Group has ordered two additional ultra deepwater drilling vessels from Cosco Shipyards and these units are to be delivered in Q and Q Sevan Drilling ASA is a public limited liability company, incorporated and domiciled in Norway. The Group prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) and these financial statements have been prepared in accordance with the International Accounting Standard for Interim Financial Reporting (IAS 34). As the interim financial statements do not include the full information and disclosures as required in the annual financial statements, it should be read in connection with the Annual Financial Statements for The accounting policies adopted in the preparation of the interim financial statements are consistent with those followed in the preparation of the Annual Financial Statements for the year ended 31 December Note 2 Property, plant and equipment The Group s main non-current assets relate to those classified as Drilling rigs on the balance sheet. The table below summarizes changes to the balance sheet values of such assets for 2010 and as of 31 December During the period the company has reviewed and updated the assessment of the underlying lifetime of the rig assets. After the assessment, the lifetime for the risers on Sevan Driller is increased from 10 years to 20 years. After the change the annual depreciation is reduced from USD 33.5 million to USD 28.4 million, and the average lifetime is increased from 20 to 24 years. Page 11

12 Property, Plant and Equipment Unaudited figures in USD million Year ended December 31, 2010: Book value January 1, Additions Depreciation charge Write-down Book value December 31, At December 31, 2010: Cost Accumulated depreciation and write-down Book value December 31, Drilling Rigs Period ended December 31, 2011: Book value January 1, Additions Addition through contribution in kind Depreciation charge Write-down Book valuedecember 31, At December 31, 2011: Cost Accumulated depreciation and write-down Book value December 31, , , ,329.9 Note 3 Bank Facilities Bank Facilities as at 31 December 2011 Bank Loans Sevan Driller USD 480M Loan Sevan Brasil USD 525M Loan Total Total Facility Drawn as at 30 Sep Drawn as at 31 Dec MUSD Undrawn Page 12

13 Note 4 Shareholder structure Note 5 Breakdown of operating income Q Breakdown Operating Income Max charter rate Sevan Driller less moving/standby rate Sevan Driller less downtime Sevan Driller plus bonus achieved Sevan Driller less penalties Sevan Driller less agency fees Sevan Driller less charter indexation adjustment prior to 4Q2011 Warranty claims Sevan Driller Total Sevan Driller Consultant services Total Operating income Q MUSD Avg KUSD/ /day Page 13

14 Note 6 Breakdown of financial expense Q Breakdown Financial Expense Interest expense Guarantee fees to Sevan Marine ASA Amortization of finance fees Unrealised hedging loss Other finance expense Total financial expenses MUSD Q Q Note 7 Breakdown of operating expense Q Breakdown Operating Expense Q MUSD Sevan Driller cash OPEX 18.0 Sevan Driller non cash OPEX 0.7 Pre operational expenses Sevan Brasil 2.0 Administrative and management expenses Sevan Drilling Group 11.0 Foreign exchange loss/(gain) relating to operation 0.3 Total Operating expenses Q Avg KUSD/day Note 8 Events after balance sheet date Sevan Driller had a technical uptime of 55.9% in January, Most of the down-time in January is related to an incident with the wash-pipe. There were no injuries or environmental damages related to this incident and the rig was back on contract February 3. The rig was partly on rate during the incident, and total days off rate were 14 days. Following its acquisition of 28.5% of the shares in Sevan Drilling ASAA in December, Sevan Drilling ASA received a request from Seadrill Limited that an extraordinary general meeting (EGM) in Sevan Drilling ASA is convened for the purpose of electing a new board of directors reflecting the new shareholder base. The EGM was held 9 January. As follows from the minutes, it was duly resolved to appoint new directors as proposed, so that the new Board of Directors of the Company now consists of Erling Lind (chairman)(new), Kitty Hall, Anne Breive, Per Wullf (new) and Kristian Johansen (new). appoint a new nomination committee as proposed, the committee now thus consisting of Harald Thorstein, Jarle Sjo and Geir Tjetland, and approve the proposed nomination committeee guidelines. Page 14

15 change the articles of association so that the registered business address of the Company shalll be in Oslo. approve the proposed long term incentive program (LTIP) and grant of authorization to the Board of Directors to issue up to 10,000,000 new shares in order to fulfil such program. Each option will give the holder the right to subscribe for one share in the Company at a strike price of NOK The options will vest with 1/3 annually, subject to certain terms and conditions. On 25 January, Oslo Børs approved transfer of Sevan Drilling from Oslo Axess to Oslo Børs the first day of the listing was 13 February The Bank Facility for Sevan Brasil is drawn by USD 479 million and the remaining USD 46 million will be drawn upon delivery of the rig in February Page 15