Prosafe expects strong demand for its floatels

Prosafe, an owner and operator of semi-submersible accommodation rigs, has delivered its Q1 financial report for 2014. Net profit amounted to USD 18.3 million, compared to USD 0.7 million loss in the same period last year.

Operating profit for the first quarter amounted to USD 22.9 million (USD 19 million). Utilisation of the fleet was 76 per cent (74 per cent).

Net financial expenses for the first quarter were USD 4 million (USD 18.6 million). The reduction is mainly related to favourable revaluation of forward exchange contracts.

Total assets at 31 March amounted to USD 1 597.5 million (USD 1 459.2 million), while the book equity ratio rose to 43.9 per cent (42 per cent). Net interest-bearing debt stood at USD 728.9 million (USD 608.1 million).

On 28 May 2014 the Board of Directors resolved to declare an interim dividend equivalent to USD 0.16 per share to shareholders of record as of 6 June 2014.

The shares will trade ex-dividend on 4 June 2014. The dividend will be paid in the form of NOK 0.95 per share on 18 June 2014.

In May 2014, Prosafe closed a seven-year term loan facility of USD 288 million for the post-delivery financing of Safe Notos and Safe Eurus, which are under construction at COSCO (Qidong) Shipyard in China. The facility has an interest rate of 3-month USD LIBOR plus 2.25 percent and a repayment profile of 12 years.

The global accommodation vessel market remains busy. Although the number of outstanding tenders is lower than at the same point in time last year, Prosafe is set to continue to grow contract backlog in 2014. As at 31 March 2014, the firm contract backlog amounted to USD 1,192 million, USD 2,509 million including clients’ extension options, compared to USD 936 million, USD 1,098 million including clients’ extension options, at 31 March 2013.

Over the past few years there has been a strong growth in demand related to hook-up and commissioning of new production installations in the North Sea. The activity level in this area is set to remain high for the next couple of years, but based on the oil companies’ announced plans and schedules, the pace of new developments seems to be slowing down beyond 2016. However, with an aging infrastructure combined with a continuous drive for higher recovery rates, demand for accommodation vessels in the North Sea should remain at a robust level in the foreseeable future.

As a result of increased activity in shallow waters in Mexico, the market has developed positively over the past few years. This development is expected to continue based on the number of drilling jack-ups scheduled to enter the market. Recently introduced reforms are expected to open up for international oil companies in Mexican waters and as such are supportive for the long-term outlook in deep water areas.

Demand in the Brazilian market continues to require accommodation vessels with Petrobras having increased its requirements from zero accommodation vessels under contract in 2010, to nine vessels currently under contract. So far, all the vessels are deployed in the Campos basin, but it is anticipated that demand will also emerge from other areas in the future.

The strong demand growth in Brazil has attracted new suppliers. This has resulted in a competitive and fragmented market (the nine contracted vessels are owned by eight different companies).

“It is therefore difficult not only to realise economies of scale and establish efficient cost structures, but also to achieve the desired level of return in the Brazilian market despite the strong demand growth. Although there are signs of increasing day rates, it is likely that returns in the Brazilian market remain below the returns in other core markets over the next few years,” Prosafe said.