SeaBird in urgent need of capital boost as black turns to red
- Business & Finance
Norwegian marine seismic data provider SeaBird Exploration sank from a profit to a loss during the second quarter of the year amid weak seismic market demand. SeaBird is in urgent need of capital, otherwise it might be facing liquidation.
During what the company says was a challenging quarter, SeaBird recorded a loss of $11 million compared to a profit of $0.1 million in the second quarter of 2016.
Impacted by lower utilization, SeaBird’s revenues decreased during the second quarter of the year to $2.6 million compared to $22.2 million in the corresponding period of 2016.
Namely, SeaBird recorded a 18.4% active vessel utilization during the second quarter of 2017 with one vessel working in the Europe, Africa and the Middle East (EAME) region and one vessel completing a project in the North and South America (NSA) region early in the quarter. The seismic player explained that the low utilization was due to delayed discussions on a number of surveys under review. This compares to 36.4% in the first quarter of the year. Year over year, this compares to 75% contract utilization and 7% multi-client.
Seismic tender activity has picked up in 2017 relative to 2016, but contracting lead-time remains long with substantial competition and high market uncertainty.
During quarter two, the company implemented a further reduction in onshore headcount and a complete conversion of all offshore crew contracts to flexible voyage contracts. SeaBird continues to evaluate and execute savings initiatives to reduce the its overall cost level and this may include temporary stacking of additional vessels.
“We observed a significant pick-up in requests for quotes in the beginning of the year. Still, the third and fourth quarter 2017 revenues are expected to be negatively impacted by slow contract award lead times resulting in idle periods as well as the potential re-positioning of vessels before start-up of new projects,” the company said.
Several factors, including the continued very challenging market conditions, low cash balance, limited working capital, low level of firm contract backlog and negative cash flow development for the second half of the year, create a material risk to a going concern assumption. SeaBird said it is in urgent need of equity financing in order to enable the company to continue trading as a going concern and avoid initiating voluntary liquidation procedures in Cyprus. In the event that new financing cannot be raised, new backlog cannot be secured on satisfactory rates or at all, project performance is significantly worse than expected or contracts and other arrangements in respect of the employment of SeaBird’s vessels are cancelled, or significantly delayed, the company would need to sell assets or raise additional financing, which may not be available at that time.
SeaBird is working with its financial advisors to raise additional capital. Still, no firm commitments are currently in place. Alternatives may exist to sell or otherwise monetize certain assets, but the ability to sell or otherwise monetize assets, being primarily made up of owned vessels, would require consent from lenders as all such assets are held as security for loan arrangements, and may therefore not be available within a short time frame or at all.
Should none of these financing arrangements be available at that time, such circumstance would have a significant negative effect on SeaBird’s financing situation and its ability to continue operations. In such a scenario, the company would be unable to meet its liabilities as they fall due and to continue as a going concern. In such event, SeaBird would be unable to realize the carrying value of its property, plant and equipment, whose values on a forced sale basis would be significantly lower than their carrying values. Furthermore, goodwill and intangibles would be written off as their carrying values largely represent their values in use.
The company emphasized it is working closely with its financial advisors to evaluate financial alternatives and raise additional capital. The restructuring of the company’s debt and lease obligations has been completed subsequent to quarter end. Any issue of further equity capital is likely to result in substantial dilution to existing shareholders. There can be no guarantee that sufficient additional financing is available in a timely manner, and the absence of additional financing would have the effect that the company will be unable to continue operations.
Offshore Energy Today Staff