Pareto World Wide Offshore AS

Transcription

1 Pareto World Wide Offshore AS 1st quarter report 2014 Link:

2 Executive Summary NAV PWWO NOK 104/share NAV POK NOK 48/share (as of ) The first quarter has been quite uneventful for PWWO s portfolio. The projects continue as planned and the contract coverage continues to be above 80% based on NAV. The markets are stable, with some positive developments particularly for offshore support vessels. The oil price is flattish with no immediate signs of significant change. Market Development Offshore oil services demand has been robust so far this year. The much discussed slow down in oil major upstream spending has not had any visible impact so far and it would appear that we re dealing with a situation where growth is moderating rather than evaporating all together. We emphasize that oil majors only account for some 20% of global E&P spending, and the rest of the industry is maintaining a healthy growth rate in their upstream investments. Based on this, it seems that markets where the expected supply side growth is moderate will fare reasonably well in terms of asset utilization and pricing. Segments where newbuilding orderbooks indicate a sharp rise in available supply in the coming years look more vulnerable, such as ultra deepwater rigs and high-end subsea vessels. For such assets, oil majors also represent the biggest client base. PWWO has no exposure to these segments and therefore looks to be in a good position. going forward, but in the absence of project realizations, the dividend capacity for 2014 is significantly below the NOK 26 per share that has been paid out during The term of PWWO was extended to July 2015 at the Annual General Meeting in June The Manager and the Board are working to provide shareholders with stable realisation proceeds in the coming years, but shareholders should expect the term of PWWO to be extended further to enable a realisation of the portfolio at maximum value. The latest NAV per share was reported as of The next NAV will be reported as of Portfolio The contract coverage is 83% with a weighted average contract length of 3.2 years. The portfolio is focused on modern assets and is well spread across several market segments and geographic regions. The high contract coverage is expected to preserve a good dividend capacity until exits are made. The ultra large AHTS Iceman, which was delivered in October 2013, has performed better than expected during the winter season. The way forward PWWO has paid NOK 48 per share to its shareholders during the past two years. The contract backlog will support continued dividends

3 Portfolio News PWWO is invested in a broad range of offshore projects, which implies a significant diversification across different asset types and market segments. This section provides an update on the quarter s most important news flow related to the underlying investments. BassDrill Alpha Ltd The uptime of the rig has improved during Q1 14 from an unsatisfactory level during H2 13, which was caused by weather related rig move delays and equipment issues. The rig went on a two-year contract extension on a higher day rate which expires in December The tender rig market overall appears to have levelled out and it will be of interest to follow the trend in jackup rig rates in the coming year, as these normally act as the benchmark for tender rigs. Neptune Subsea IS The charterer has both vessels employed on short term contracts, one in West Africa and one in the North Sea. The hire payments are on track. As mentioned in the previous quarterly report, funds managed by Hitec Vision have now assumed 100% ownership of the charterer (Reef Subsea) and has implemented a new organisational structure and a more focused growth strategy. If anything, this should have a positive impact on the project. is a seasonally slow period for such vessels. Songa Eclipse While the project was sold in Q3 11, PWWO has been subject to a USD 5.6m claim from the initial rig manager, LOG, relating to a dispute regarding a socalled slot fee. In a ruling in November 2013, the Oslo Municipal Court (Oslo Tingrett) rejected the claim. However, the claimant has appealed the ruling to Borgarting Court of Appeals (Lagmansretten). As a result, PWWO will have to continue to make a provision for a potential negative outcome until the next round in the Courts has been concluded. A court date has been set for March Project sales There have been no project sales during Q1 14. Payments from projects During Q1 14, PWWO received NOK 0.3m in payments from projects. Vestland Seismic IS The vessel M/V Vikland is still idle despite good interest in both leasing and buying the vessel. There are several ongoing processes that could lead to a solution. Master & Commander IS The Commander has embarked on a 3 year timecharter with Fairfield Nodal (with 1+1 year options). The rate is at a level that aligns well with previous charters (Reflect and CGG) and provides good cashflow to service the debt as well as contribute to dividend capacity. The Phoenix continues on bareboat charter to CGG until Asian Offshore III IS The average day rate for the six vessels was $ 7,700/d during Q1 14, down 17% from the preceding quarter, due to seasonally weak markets in South East Asia. The integration process together with AO I and partner ACS continues to be developed. Iceman IS The ultra large AHTS has been trading in the North Sea spot market since delivery in October 13. The day rates obtained have been 19% below the annual budget, which is reasonable considering that the winter

4 Portfolio The portfolio is highly robust, with most assets on long term contracts. Assets on long term contracts make up 83% of the total exposure, and are well distributed across the different offshore oil services segments. Investments and capital PWWO s portfolio consists of 11 projects which owns stakes in 25 units. The average contract length is 3.2 years and the contract coverage is 83%. The gross nominal value of the contract backlog is roughly NOK 506m Total debt in the projects amounts to around NOK 500m. The backlog is primarily made up by solid counterparts. PWWO had a cash holding of NOK 55m as of There are no known capital requirements in the underlying projects. However, the company has made a provision for the dispute with Larsen Oil & Gas in connection with the Songa Eclipse. Charterparty Distribution based on NAV+commited Bareboat 57% Timecharter 25% Spot/Asset Play 18% The life cycle of PWWO expires 30 June The underlying projects are expected to yield good cash flow until then. Asset and/or portfolio sales will be considered at the opportune time to provide shareholders with the best possible exit values. Current market conditions indicate that exits should be made as late as possible to maximize values. The contracted cash flow is evenly spread across five main segments; rigs, supply, accommodation, seismic and subsea. Segment Distribution based on NAV+commited Subsea 34% Seismic 11% Tender Rig 25% PSV/AHTS (Asia) 12% Contracted cash flows will be more than sufficient to cover scheduled debt service through to The projects in PWWO s portfolio also have a relatively steep debt repayment profile, which gives the opportunity to refinance when financing conditions have improved. Accommodation 13% PSV/AHTS (Europe) 5% Charter hire backlog by counterpart Swiber 14% Reef Subsea 16% African Offshore Services 23% Total / CNR 38% CGG 4% Bourbon 2% Fairfield Nodal 2% Hallin 1%

5 Portfolio (continued) Project / company Segment Contract Charterparty Charterer Neptune Subsea IS Subsea Feb-17 Bareboat Reef Subsea Bassdrill Alpha Ltd Tender Rig Dec-15 Timecharter Total / CNR ParBarge IS Accommodation Jul-23 Bareboat African Offshore Services Vestland Seismic IS Seismic Spot/Asset play Albatross Shipping Ltd. Asian Offshore III IS PSV/AHTS (Asia) Spot/Asset play Bukhit Timah Offshore DIS PSV/AHTS (Asia) Jul-20 Bareboat Swiber Offshore Marine Pte Offshore Accommodation IS Accommodation Dec-21 Bareboat African Offshore Services Iceman IS PSV/AHTS (Europe) Spot/Asset play Master and Commander IS Seismic Aug-18 Bareboat CGG/Fairfield Nodal Carlisle Subsea IS Subsea Oct-15 Bareboat Hallin Marine Subsea 3B Offshore IS PSV/AHTS (Europe) Nov-17 Bareboat Bourbon 1000 PWWO - Cash flow composition vs debt service, NOKm PWWO - EBITDA composition Capex (-) / Sale of assets (+) Spot EBITDA Contracted EBITDA Debt service Rigs 15% Oil Service 60% Supply 25% PWWO - Debt in projects, NOKm PWWO - Duration of contract backlog Sellers credit Bank debt Later 52% 1-2 years 48%

6 Second Hand Market and Share Liquidity As of PWWO had 4.37m shares outstanding. Pareto Project Finance AS ( PPF ) strives to facilitate an active second hand market for shares. The last trading price prior to year end 2013 in PWWO was NOK 81 per share (6 Dec 13). Investors who wish to buy or sell shares should contact their advisors. POK As of POK had 5.3m shares outstanding, net of 160,000 own shares that were purchased by POK during Q3 13. The last trading price in POK was NOK 33 per share (16 May 14) and the previous five trades are displayed in the table below. Second hand prices have been rather stable, and the discount to NAV has been around 30%, as can be seen from the graph below (red dots). Investors who wish to buy or sell shares should contact their advisors. Date Share price No. of shares Volume (NOK) 29/04/ , ,000 07/05/ ,980 67,320 12/05/ ,100 37,400 14/05/ , ,638 16/05/ ,000 33,000 Number of trades since startup: 551 Volume traded since startup (NOK): 90,486,934 Average volume per trade (NOK): 164, Pareto Offshorekapital ASA - Second Hand Trades Volume traded Nav per share NAV per share (dividend adjusted) Second hand price per share 5,000 4,500 4, ,500 Price per share ,000 2,500 2,000 1,500 Volume (Thousand NOK) 25 1,

7 The offshore oil services market The activity growth in the oil services markets continued last year, albeit with some slowness emerging in the seismic markets towards the end of the year. In the absence of a rising oil price, the oil industry is trimming its upstream investment plans to be able to preserve shareholder dividends, which is resulting in a slower growth outlook near term. The longer term, however, looks promising. The oil and gas markets Recent data also suggest a weakness in Chinese demand, with official statistics suggesting that the y-oy growth has been negative for four months in a row. This may be additional anecdotal evidence of the perceived weakning of Chinese economic growth. The oil imports to China have, however, been record high in recent months, with a meaningful build-up in product investors and strategic investories of crude. One may caution against the reliability of these data, but one comforting factor at least is the fact that the oil price does not seem to have tracked the rise in imports, but rather seem to discount the apparently sluggish demand figures. The seismic market under scrutiny With the much publicised slowdown in spending by the oil majors, many observers have pointed to the seismic market as the obvious loser. Firstly, because oil majors are big buyers of seismic data, and secondly because seismic is normally the first segment to feel the pinch when spending budgets are trimmed. Source: Pareto Securities Data suggests that the seismic markets already corrected during 2013, where seismic spend was flat while overall E&P spending was up 8%. Based on the seismic contractors backlogs and tendering activity, the seismic market is expected to post moderate growth in 2014 and possibly also for Promising outlook for North Sea AHTS The North Sea AHTS market posted a solid end to 2013 and activity so far this year has been strong during the seasonally weak winter months. The market balance looks set to change in the favour of the owners this year. Demand is set to rise owing to a 10% increase in the righ fleet. The available capacity looks set to decrease as ten or more ships are contracted outside of the North Sea, while the inflow of newbuilds will be limited. Source: Pareto Securities With very few North Sea spec vessels being built, it is expected that this situation will persist or even strengthen during 2015, making large AHTS one of the real bright spots in offshore oil services.

8 Fund Management Team Richard Jansen Head of Fund Management Shipping/Offshore Phone: E- richard.jansen@pareto.no Patrick Kartevoll Fund Manager Shipping/Offshore Phone: patrick@pareto.no Dronning Mauds Gate 3, P.O. Box 1396 Vika, NO-0114 Oslo, Norway, Tlf: ,

9 Disclaimer This Quarterly Report has been prepared in order to provide information about Pareto World Wide Offshore AS ( PWWO or the Company ) and must not be considered an offer to trade in the shares of the Company. actual events to differ materially from any anticipated development. All investors must verify these assumptions themselves. The company cannot give any assurance as to the correctness of such information and statements. Information contained in this Quarterly Report is obtained by Pareto Project Finance AS ( Pareto Project Finance, Pareto, or PPF ). Information is presented to the best of our efforts and knowledge, but Pareto Project Finance AS cannot guarantee that the information is correct or all inclusive. Pareto Project Finance AS takes no responsibility for any loss caused by information given being misleading, wrongful or incomplete nor for any other loss suffered as a consequence of investments made in the Company. Historic returns and return forecasts do not constitute any guarantee for future returns. Returns may vary as a consequence of fluctuations in currency exchange rates. Investors should be aware that there is significant uncertainty related to valuations in the current volatile market. The valuation process is described in PPF s market report as per November Risks and costs are further described in the prospectus (information memorandum) produced in relation to share issues in the Company. This Quarterly Report includes and is based on, among other things, forward-looking information and statements. Such forward-looking information and statements are based on the current expectations, estimates and projection of the company or assumptions based on information available to the company and Pareto Project Finance AS. Such forwardlooking information and statements reflect current views with respect to future events and are subject to risks, uncertainties and assumptions that may cause The contents of this presentation are not to be construed as legal, business, investment or tax advice. Each recipient should consult with its legal-, business-, investment-, and tax advisors as to legal, business, investment and tax advice. Specifically, Pareto Project Finance AS has been engaged as the company s financial advisor and does not render and shall not be deemed to render any advice or recommendations as to a transaction.