Marine Subsea - 30 Sept 2010 Condensed interim financial information. (All amounts in USD if not otherwise stated)

Transcription

1 Marine Subsea - 30 Sept 2010 Condensed interim financial information (All amounts in USD if not otherwise stated)

2 REPORT 3Q 2010 About Marine Subsea AS Marine Subsea is an oil service company focused on the West African Offshore oil sector. The Group has a fleet of eight units including five offshore support barges in operation, two multipurpose/intervention vessels (one in operation and one ready for delivery) and one semisubmersible accommodation & crane vessel under construction. Third Quarter Financial Highlights Marine Subsea reported an operating profit of USD 5,1 million for 3Q 2010 on operating revenues of USD 42,1 million. EBITDA amounted to USD 8,0 million. As of end September 2010, Marine Subsea has recorded revenues of USD 117,2 million, EBITDA of USD 23,8 million and an operating profit of USD 14,9 million. Financial expenses amounted to USD 17 million in 3Q. This includes a write down of USD 8,1 million of capitalized up-front fees for the Karianne facility with Standard Bank / GIEK / Eksportfinans that was signed in December Net loss after minority interests for the third quarter amounted to USD 8,8 million, while the year to date net loss was USD 25,6 million. The Subsea Construction & Well Intervention business continued to disappoint with a negative EBITDA of USD 2,7 million for the third quarter and USD -2,6 million as of September. The Offshore Support & Charter Logistics businesses performed well with the full fleet of five barges enjoying a full quarter of work and strong chartering activity in Angola. The business area reported an EBITDA of 10,5 million in the quarter and USD 27,5 million as of end September. Marine Subsea s total assets as of 30 September 2010 amounted to USD 585,5 million, and total cash and cash equivalents were USD 15,9 million. Total liabilities stood at USD 577,8 million and shareholders equity at USD 17,3 million. The board would however stress that due to the situation outlined below for the Subsea Construction and Well Intervention business, there is a significant risk related to the Going Concern assumption and thus the equity value. Offshore Support, Chartering and Logistics The financial results for the Offshore Support, Chartering and Logistics businesses were characterised by full utilisation for all of the company s five offshore support barges as well as an exceptional quarter of high activity for the Angolan Chartering & Logistics business. Total EBITDA as of end September was USD 27,5 million, slightly higher than expected. After local withholding taxes, the areas contribution to group earnings was approx USD 22 million. Operations Marine Subsea has four barges working in Africa on long-term contracts and one unit on a six-month contract in the Mediterranean. African Worker and the two leased units African Caribe and African Fjord, continued their operations for Total Angola, Saipem/Chevron Angola and Diamond/Eni Congo. African Lifter enjoyed its first full quarter working on the five year contract for Sonangol. The block 2 project has been delayed by 4 months, however Lifter left Luanda in September and is now installed on the field. African Installer is on a six-month contract for Geocean in the Mediterranean. There is currently a total of USD 18 mill outstanding of debt to the Jaya yard on the African Worker. This debt falls due by 31 December. We are currently in discussions with Jaya in order to extend this maturity date. 1

3 African Challenger As reported in the second quarter, Marine Subsea and Yantai have negotiated a revised technical specification for the semisubmersible accommodation & crane vessel and Yantai has proposed a longterm lease contract with purchase option. Marine Subsea and Yantai are yet to agree on the final commercial terms of the lease contract. The Yantai yard has however commenced work on the revised unit. The shipyard has set up an entirely new fabrication plant in Haiyang, and steel cutting, handling and welding has so far been done in accordance to high quality standards, while design methods allow for a more systematic planning and execution. As of today, 39 out of 198 sections have been completed. The current production schedule is aiming at completion end March Outlook Both African Caribe and African Fjord go off contract mid 2011, while African Installer will end work in December this year. We are working on securing a 3 year extension with Diamond/ENI for African Fjord, while we are optimistic on securing long term employment in Africa with 2011 start-up for both Installer and Caribe. For the year as a whole we expect to report en EBITDA of USD million. Subsea Construction & Well Intervention The multipurpose intervention vessel MS Sarah worked on 4 plug and abandonment projects for various clients (Acergy, Maersk, Repsol) in the North Sea during the quarter, and Marine Subsea successfully demonstrated that our organisation and vessels can execute on this type of Subsea Construction work as well as meet the requirements of leading North Sea operators. The financial results were however unsatisfactory. As a result of Marine Subsea not being able to execute on Sonangol s Canuku plug and abandonment project, the client has not paid for the unit since March. Our earnings therefore have not met the levels we and our financers have targeted. The Canuku Project The Canuku field in Block 3 Angola comprised of eight subsea wells with production to an FPSO. The FPSO and flowlines were removed after the wells were shut in, however the eight subsea trees remain in 48m to 61m water depth. Sonangol awarded Marine Subsea the USD 34 million lump sum contract earlier this year to plug and abandon the eight subsea wells using riserless technology. Marine Subsea was to provide everything necessary in terms of expertise, manpower, equipment, materials, licenses, etc. to carry out and complete the project. Marine Subsea s project director is Jean Luc Lafitte, formerly Head of Well Intervention, Total Pau. The accepted methodology was to be: a. Preparation campaign using divers or ROV b. Re-enter each well using a subsea wireline lubricator deployed from the Sarah c. Well bore cleaning and kill with fluid pumped from the vessel d. Isolate the reservoir with a mechanical and cement barrier balanced in each well e. Set an intermediate cement plug to provide a second barrier and isolate open annuli f. Retrieve the Christmas Tree and top section of completion tubing. g. Set an environmental cement barrier below the mudline h. Explosively sever the Wellhead and recover from the seabed i. Transport equipment to shore Specialist services and equipment, such as Wireline, Cementing, Subsea Lubricator and ROV were to be subcontracted with contracts ready for execution and start-up late 4Q. 2

4 The contract with Sonangol is very attractive. This project is expected to generate approximately USD 7 million over 4 months. Marine Subsea has free access to the work site, with no penalties or termination rights relating to completion date. Indemnification for downhole risks and well conditions are included, according to Marine Subsea s standard contracting principles. Status with Vessel Financers Unfortunately, the Vessel Financers (Standard Bank and GIEK) notified in late October that they will not permit Sarah to leave the North Sea, thus making it impossible for Marine Subsea to deliver the services required by Sonangol under our agreement with them. Furthermore, the Vessel Financers notified Marine Subsea that the take-out financing for Karianne is not available, and in early November they informed us that all amounts outstanding under the Sarah financing, were declared immediately due and payable. The Vessel Financers took arrest in the vessel on the 10 th of November. The Vessel Financers requested also that Marine Subsea voluntarily agree that the lenders initiate a sales process that was to be started immediately, and finalised within a maximum of two weeks. Marine Subsea responded that we could not accept a sales process without taking the interest of all creditors into consideration. Furthermore, we argued that the refusal to allow the vessel to work for Sonangol was non-compliant with our contractual obligations to Sonangol. The Trustee for Marine Subsea s corporate bonds, Norsk Tillitsmann, was informed immediately of the situation and a dialogue initiated with certain bondholders and their legal and financial advisors, Bingham McCutchen and AMA Capital Partners. Furthermore, Marine Subsea has informed Ulstein of the situation throughout the process. The Karianne is now ready for delivery and as a result of the Vessel Financers position, Ulstein has formally given notice of their right to cancel the shipbuilding contract. Outlook Marine Subsea will work closely with Ulstein, bondholders and the Vessel Financers in order to secure the best possible outcome for all parties. The outcome of the discussions between Ulstein, bondholders representatives and the Vessel Financers will determine the process going forward. In the mean time, Marine Subsea continues to work on securing long-term contracts for both Sarah and Karianne in West Africa, in order to provide the financial basis for a solution with our lenders. In addition, Marine Subsea is now actively seeking to cooperate with an industrial partner. Regarding the Canuku project, we continue to believe that this is a critical project for the future of Marine Subsea s well-intervention business and the relationship to Sonangol. Due however to the Vessel Financers position, Marine Subsea has decided to warm stack the Sarah vessel pending further developments. Furthermore, the operative subsidiary in Aberdeen, Marine Subsea UK, has been put into liquidation. We have thus cut costs to an absolute minimum, although we retain access to key personnel if the situation should change. For further information, please contact: Kristen Jakobsen, Board member, tel: Erik Sandøy, Finance Director, tel:

5 Condensed consolidated interim income statement Unaudited Unaudited Unaudited Unaudited Audited For the 3 months For the 3 months For the 9 months For the 9 months For the 12 months (All amounts in USD ending 30 Sept ending 30 Sept ending 30 Sept ending 30 Sept ending 31 Dec if not otherwise stated) Note Sales Total revenue Cost of sales Employee benefit expenses Other operating expenses Impairment Depreciation and amortisation Total operating expenses Net operating profit (loss) Share of loss of assosiates Financial income Financial (expenses) Net financial income (loss) Net profit (loss) before income tax Income tax expense Net profit (loss) Exchange differences on translating foreig Total comprehensive income for the perio Attributable to: Equity holders of the company Minority interest Basic and diluted earnings per share -0,13 0,06-0,38 0,07-0,61 Attributable to: Equity holders of the company Minority interest Number of shares

6 Condensed consolidated interim balance sheet Unaudited Unaudited Audited As of 30 Sept As of 30 Sept As of 31 December (All amounts in USD if not otherwise stated) Note ASSETS Non-current assets Property, plant and equipment Intangible assets Investments in joint venture Long term receivables and other receivables Total non-current assets Current assets Inventories Trade and other receivables Cash and cash equivalents Total current assets TOTAL ASSETS EQUITY AND LIABILITIES Shareholders' equity Share capital Share premium Other reserves Retained earnings Total shareholders equity Minority interest in Equity Total Equity Non-current liabilities Interest bearing-debt Deferred tax liabilities Retirement benefit obligation Long term liabilities Total non-current liabilities Current liabilities Interest bearing-debt Trade and other payables Current income tax liabilities Total current liabilities TOTAL EQUITY AND LIABILITIES

7 Condensed consolidated interim statement of changes in equity IFRS Share Share Other Retained Minority (All amounts in USD if not otherwise stated) capital premium reserves earnings Total interest Total Inception on 16 October Net profit/ (loss) for the period Balance at 31 December Issue of share capital, net of share issuance cost January Issue of share capital, net of share issuance cost July Employee share option scheme, value of employee services Net profit/ (loss) for the period Balance at 31 December Issue of share capital, net of share issuance cost August Net profit/(loss) for the period Balance at 31 December Total comprehensive income for the period Acqusiton of subsidary Balance at 31 december Total comprehensive income for the period Balance at 30 September

8 Consolidated cash flow statement Audited Unaudited Year ended 31 Amounts in USD Note As of Sept 2010 December 2009 Cash generated from operations Net profit (loss) before income tax Depreciation and amortisation and impairment Amortisation of debt issuance cost Upfront fees paid on Karianne facility Changes investment in joint venture Exchange gain / (loss) Taxes paid Changes in assets and liabilities Trade and other receivables Trade and other payables Net cash flow from operating activities Cash flow from investing activities Net investment/disposals in property, plant and equipment (PPE) Net cash flow from investing activities Cash flow from financing activities Proceeds of issuance from ordinary shares (net of share issuance c 0 0 Proceed from issuance of loans Repayments of loans Net cash flows from financing activities Cash and cash equivalents at 1 January Exchange gain/losses) on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 30 Sept Of which is restricted

9 (All amounts in USD if not otherwise stated) General information Marine Subsea is an oil service company focused on the West African Offshore oil sector. The group has a fleet of eight units including five offshore support barges in operation, two multipurpose/intervention vessels (one in operation and one ready for delivery) and one semisubmersible accommodation & crane vessel under construction. Marine Subsea AS was incepted on 9 October The company is a limited liability company incorporated and domiciled in Norway. The address of its registered office is Strandveien 50, 1366 Lysaker. The condensed consolidated interim financial information for the period ended 30 September 2010 includes the company and its subsidiaries. Investments in associates are accounted for using the equity method. These Group condensed consolidated interim financial statements were authorised for issue by the board of directors on 11 November Note 1 - Accounting policies The consolidated financial statements of Marine Subsea AS have been prepared in accordance with IAS 34, Interim Financial Reporting in context of the Financial Reporting Standards (IFRS) as adopted by the EU. The same accounting policies and methods of computation, except from those disclosed below, are followed as compared with the financial statements for the year ending December 31, 2009, and these condenced consolidated interim financial information should therefore be read togheter with the consolidated financial statements for the year ended December 31, 2009 prepared in accordance with IFRS as adopted by EU. Standards, interpretations and amendments to published standards that are effective from 1 January 2010 With effect from 1 January 2010 Marine Subssea adopted certain revised and amended accounting standards and improvements to IFRSs as further outlined in the Basis of preparation note disclosure to Marine Subsea's financial statements for None of these revised standards or amendments has significantly impacted the interim financial statements for the third quarter of 2010, nor have there been any other significant changes in accounting policies compared to the annual financial statement" 8

10 Note 2 - Segment information Marine Subsea currently operates in three business segments: Subsea Construction & Well Intervention, Offshore Support and Charter Logistics. In the first business segment we have Sarah delivered and Karianne ready for delivery at Ulstein Yard as of October In the Offshore Support segment, we have five Work/Accomodation barges, all delivered and on contract. The last segment consists of five tugs, anchor handlers and Platform Support Vessels on charter in Angola. For the 3 months ending Sept 2010 Amounts in USD Subsea Construction & Offshore Charter/ Unallocated/ Total Vell intervention Support logistics eliminated Sales - external customers Sales - intercompany Sales Cost of sales Employee benefit expenses Other operating expenses Depreciation and amortisation Total operating expenses Net operating profit (loss) Share of loss of assosiates Net financial income (loss) Net profit (loss) before income tax Income tax expense Net profit (loss) For the 3 months ending Sept 2009 Amounts in USD Subsea Construction & Offshore Charter/ Unallocated/ Total Vell intervention Support logistics eliminated Sales Cost of sales Employee benefit expenses Other operating expenses Depreciation and amortisation Total operating expenses Net operating profit (loss) Share of loss of assosiates -4-4 Net financial income (loss) Net profit (loss) before income tax Income tax expense Net profit (loss)

11 Note 3 - Sales For the 3 months For the 3 months For the 9 months For the 9 months For the 12 months ending 30 Sept ending 30 Sept ending 30 Sept ending 30 Sept ending 31 Dec Charter revenues Other operating revenues Total Sales Note 4 - Property plant and equipment/ Intangible assets Goodwill Trademark Amounts in USD and Total licences Accumulated cost 1 January Additions Acquisition of subsidiay Exchange differences Disposals and liquidation Depreciation and amortisation Balance as at 31 Dec Additions/Change of group Acquisition of subsidiay Exchange differences Disposals and liquidation Depreciation and amortisation Balance as at 30 Sept As at 1 January Acquisition cost Accumulated depreciation and amortisation Balance as at 31 December As at 1 January Acquisition cost Accumulated depreciation and amortisation Balance as at 30 Sept Economic life Depreciation method 3-5 years straight line 10

12 Amounts in USD Vessels under Vessels Machinery construction equipments Total Accumulated cost 1 January Additions Acquisition of subsidiay Capitalised borrowing cost Exchange differences Disposals and liquidation Change of group Depreciation and amortisation Balance as at 31 Dec Additions Acquisition of subsidiay 0 0 Capitalised borrowing cost Exchange differences Disposals and liquidation Change of group 0 0 Depreciation and amortisation Balance as at 30 Sept As at 1 January Acquisition cost Accumulated depreciation and amortisation Balance as at 31 December As at 1 January Acquisition cost Accumulated depreciation and amortisation Balance as at 30 Sept Economic life years 3-5 years Depreciation method straight line straight line 11

13 Note 5 - Interest-bearing debt, current liabilities Effective yearly As of 31 As of 31 Amounts in USD Face Value Outstanding interest rate % Maturity Sept 2010 Dec 2009 Bond loans: Series , Series , Bank loan: ECA facility A , ECA facility B , Total Current portion Non Current portion Other loans Loan Ulstein Verft, 9, Loan Jaya 8, Leung Kee Holdings Ltd - Brian Chang 15, Total other loans Total current portion Bankloans reclassified as short term debt, as the vessel lenders have issued a notice of default to MS Sarah Bondloans reclassified as short term debt due to the cross-default clause in bond loan agreements Main security Bankloans: First mortgage and first assignments of earnings and insurance from Sarah First assignment on construction contract for Karianne Main security Bondloan - Series 1: First mortgage and first assignments of earnings and insurance from African Lifter Second mortgage: African Installer, African Worker, Sarah Second assignment: construction contract for Karianne Main security Bondloan - Series 2: First assignment: MSCH's shares in and shareholder loans to MS&Consafe Ltd Main security Ulstein Verft: First mortgage and first assignments of earnings and insurance from African Installer Security Jaya: First mortgage and first assignments of earnings and insurance from African Worker Note that there is another USD 2,8 million payables to Jaya, bringing the total commitment to USD 18 million Security Leung Kee Holdings Ltd - Brian Chang: The loan is unsecured 12

14 Note 6 - Comittments Capital commitments contracted for at the balance sheet date, but not recognised in the financial statements are as follows: Ships under construction: Ship Yard Country Delivery Remain. exp (NOKm) "Karianne" - # 287 SX 121 Ulstein Norway Oct In 2008 Marine Subsea entered into an agreement to sell and lease back the two barges African Caribe and African Fjord on long term leases. The leasepayment structure is as follows: Next Between After Amounts in USD months 1-5 years 5 years African Fjord African Caribe Total comittments related to the sale and leaseback agreements Note 7 - Financial income and expenses For the 3 For the 3 For the 9 For the 9 For the 12 months ending months ending months ending months ending months ending Amounts in USD Sept Sept Sept Sept Dec 2009 Financial income: Interest income Capititalised interest income (note 4) Exchange differences on translating foreign operations 56 Currency gain Other financial income Total financial income Financial expenses: Interest expenses Amortisation of debt issue cost of issued b Capitalised interest expenses (note 4) Currency loss Loss on FX forward Karianne Exchange differences on translating foreign Write down investment in joint venture Upfront fees paid on Karianne facility Other financial expenses Total financial expenses

15 Note 8 - Trade and other receivables As of 31 As of 31 Amounts in USD Sept 2010 Dec 2009 Trade receivables Option regarding repurchase of shareholderloan to Marine Subsea & Consafe Ltd Pre-paid Withholding Taxes - Interoil Angola Ltd Other items Total trade and other receivables Marine Subsea has not received payment from Sonangol under the service agreement since March In this period, Marine Subsea has not been able to deliver the well intervention services that it is obligated to under this agreement, and there is uncertainty as to whether Marine Subsea has a valid claim towards Sonangol. The Board of Marine Subsea therefore considers it prudent that the claim is not included in the trade receivables and long term liabilities. Note 9 - Trade and other payables As of 31 As of 31 Amounts in USD Sept 2010 Dec 2009 Trade payables Social security and other taxes Accrued interest Loss on FX contract/accrued commitment fee Deferred income Canucu project Break fee On & Offshore Other items Total trade and other payables The USD 10,1 million, resulting from the loss on the FX contract and accrued commitment fees, is a claim by Standard Bank on MS Karianne Ltd. Note 10 - Cash and cash equivalents As of 31 As of 31 Amounts in USD Sept 2010 Dec 2009 Bank deposits not restricted Restricted bank deposits denominated in NOK Restricted cash in Standard Bank - Sarah facility Total cash and cash equivalents