Solstad Offshore Announces 3rd Quarter Financial Results

Solstad Offshore (SOFF) announces operating income for the three first quarters, excluding gain on sale NOK 36 million, was NOK 2,631 million, compared to last year’s NOK 2,550 million. The revenues from the construction service segment were significantly higher compared to 2012. Available charter days were however lower due to sale of “Normand Oceanic” to joint venture.

Higher utilization and higher rates are the main reasons for the increased revenue. The supply and anchor handling markets show somewhat lower revenue compared to the same period last year, amongst others due to the sale of one smaller anchor handling vessel in the second quarter 2013.

Operating income for the third quarter 2013 was NOK 962 million, compared to NOK 884 million for the same period in 2012 and NOK 872 million for the second quarter 2013. The increase to the second quarter 2013 and third quarter 2012 is primarily related to higher utilization and improved rates. Utilization as per 30.09.2013 was approximately 90% (88% in 2012).

Operating costs for the three first quarters were NOK 1,498 million which is NOK 49 million or approximately 3% higher than the same period last year. The increase is mainly due to contract-related costs for operations in Australia. Sale of two vessels has reduced the costs by NOK 39 mill.

Operating costs for the third quarter were NOK 480 million (NOK 460 million in 2012). The increase is due to same reasons as described above. The operating costs for the second quarter were NOK 492 million. Cashflow from operations (EBITDA) for the three first quarters was NOK 1,218 million. EBITDA for the same period last year was NOK 1,125 million.

EBITDA for the third quarter was NOK 510 million (NOK 440 million). Compared to the second quarter of 2013 EBITDA has increased by NOK 101 million.

GBP has increased by 6% against the NOK in the third quarter, while the USD exchange rate is unchanged. As a result of this, an unrealized currency loss of NOK 49 million has been posted relating to new longterm debt in the third quarter. Furthermore, NOK 12 million has been posted in realized currency loss relating to the company’s currency deposits. Compared to the beginning of the year, the NOK has decreased by 8% against the USD and the GBP. Hence, the accounts show unrealized currency loss related to debt in foreign currency (NOK 137 million) and realized currency gain related to currency deposits (NOK 13 million).

The Group’s result before tax for the first three quarters of 2013 is a profit of NOK 458 million (NOK 471 million). The result before tax for the third quarter alone is a profit of NOK 236 million (NOK 294 million).

The Group’s net interest- bearing debt at the end of the third quarter 2013 was NOK 8,744 million which is an increase of NOK 264 million since the beginning of the year. This increase is mainly due to additional loans for a vessel which was previously on a long-term lease agreement, impact of a higher USD and GBP currency exchange rate, investment of equipment and dividend paid.

Interest-bearing long-term debt at 30.09.2013 was NOK 9,664 million (NOK 9,562 million), NOK 1,169 million (NOK 2,057 million) of which is classified as short-term debt. Long-term debt is split with 52% in NOK, 36% in USD and 12% in GBP. The reduction in short-term debt is mainly attributed to re-financing loans in 2013. At the end of the third quarter, 2-6 year hedging agreements were entered into for approximately 29% of the total long-term debt (excluding debt in joint ventures).

Furthermore, some of the NOK debt is tied to the USD through financial instruments so that the real debt exposure is 48% in NOK, 40% in USD and 12% towards GBP. Booked equity at 30.09.13 was NOK 4,925 million, NOK 127 per share.

In August one of the Group’s charterers declared an option to buy the construction service vessel “Normand Clough”. Assets related to the vessel is presented in a separate line on the balance sheet. The sale and delivery of the vessel was completed 1st November 2013 with marginal effect on the profit and loss.

The quarterly accounts are prepared using the same accounting principles as last year’s accounts and in accordance with IAS 34 Interim Financial Reporting.

THE FLEET

At the end of the quarter, the fleet consisted of 51 wholly owned or partly owned vessels, including 2 new builds (CSV). The fleet, including the new builds, consisted of: 21 Construction Service Vessels (CSV’s), 21 Anchor Handling Vessels (AHTS’s) and 9 Platform Supply Vessels (PSV’s). In total, 49 vessels are managed from offices in Skudeneshavn,

Aberdeen, Rio de Janiero and Singapore. Of these, 9 are operating on the Brazilian Continental Shelf, 4 in the Gulf of Mexico, 5 in West/East Africa, 4 in Australia, 6 in Asia, 2 in the Mediterranean, with the remaining 19 vessels operating in the North Sea area. In addition, two new builds (CSV) are managed from Skudeneshavn with delivery in the second quarter of 2014.

THE MARKET

The Group has entered into several long-term contracts so far this year. All, at improved terms as compared to the vessels previous contracts. The demand for subsea vessels has been good during the quarter and the prospects for the coming winter season, as well as for 2014 as a whole, is considered to be good.

The spot market activity in the quarter has been good in both the PSV and the AHTSsegment. The market is still volatile, but there is established a higher day rate level when compared to the level at the beginning of the year, and also compared with the summer season of 2012. The company has registered increased demand for offshore vessels in all geographic areas where the company operates. With the past improved marked activity, the company expect that the rate developments, in both the spot and period marked, will continue to develop positively going forward.

At the end of September, the Group’s fleet had fixed contract coverage of 69% for the remainder of 2013. Including options the contract coverage was 79%. In 2014, the contract coverage is 52% and 69% respectively.

THE COMPANY AND ITS SHAREHOLDERS

With effect from 2nd September 2013, the Company initiated a share buy-back program of up to 385,000 treasury shares. Currently, the company has purchased approximately 122,000 shares, corresponding to 1/3 of the total share buy-back program.

The company currently has 2,862 shareholders with approximately 10% owned by foreign investors. The company is listed on the Oslo Stock Exchange with a market value of approximately NOK 4,600 mill.

Press Release, November 07, 2013; Image: SOFF