Solstad Offshore’s Operating Revenue Rises

Solstad Offshore (SOFF) announces operating revenue for 2013 of NOK 3,546 which is 5% higher than last year. The revenues from the construction service segment were significantly higher compared to 2012 due to higher utilization and day rates.

Further, revenues from the anchor handling and supply market were also higher this year. The main reason is an enhanced spot market.

Operating revenue for the fourth quarter of 2013 was NOK 877 million (NOK 760 million). The increase compared to fourth quarter 2012 is primarily related to higher day rates as well as a higher exchange rate against the USD. Net freight income for the quarter is NOK 85 million lower than the third quarter, again as a result of a combination of lower utilization and day rates in the anchor handling segment.

Total operating costs were NOK 2.058 million in 2013, which is an increase of NOK 134 million compared to 2012. Contract related expenses for operations in Australia, which are compensated through higher operating income, accounts for approximately NOK 110 million of the increased costs. In addition a NOK 15 million provision for bad debt is posted. Sale of vessels has reduced the cost base by NOK 45 million. Adjusted for sale of vessels and increased cost related to the Australia operations, the cost increase compared to last year is approximately 3% the company’s remaining activities.

When compared to the previous quarter, operating costs increased by NOK 80 million. The increase is due to contract related expenses and provision for bad debt as described above, variation of repairs and maintenance between the quarters, own consumption of bunkers as well as expenses related to sale of vessels of NOK 10 million.

Cashflow from operations (EBITDA) for the year was NOK 1,565 million.

EBITDA for 2012 was NOK 1,428 million. EBITDA for the fourth quarter was NOK 347 million (NOK 303 million).

Due to variation of both the USD and GBP against the NOK in the fourth quarter an unrealized currency loss of NOK 22 million has been posted relating to the company’s long-term debt. Furthermore, NOK 20 million has been posted in realised currency loss relating to the company’s currency deposits. Compared to the currency rate at the beginning of the year, both USD (9%) and GBP (12%) have strengthened against the NOK. In 2013, an unrealized currency loss of NOK 159 million has been posted relating to long-term currency loans whilst NOK 7 million has been posted as realised currency loss relating to currency deposits.

Result before tax for 2013 is a profit of NOK 532 million versus a profit of NOK 366 million in 2012. The improvement in the result is due to a significantly higher operating result and lower interest expenses.

The Group’s net interest- bearing debt at the end of 2013 is NOK 8,183 million, a reduction of NOK 297 million during the course of the year.

This change is mainly due to positive net cashflow from operations and sale of vessels.

Interest-bearing long-term debt at 31.12.2013 was NOK 9,332 million (NOK 9,222 million), NOK 1,632 million (NOK 2,057 million) of which is classified as short-term debt and is divided as follows: 50% NOK, 37% USD and 13% GBP. At the end of the year, 2-5 year hedging agreements were entered for approximately 30% of the total long-term debt.

Furthermore, some of the NOK debt is linked to the USD through financial instruments so that actual debt exposure is 46% NOK, 41% USD, 13% GBP.

Short-term debt includes bond loans planned to be refinanced in 2014.

The market value of the Group’s fleet at 31.12.2013 was NOK 18.7 billion.

This valuation is based on the average of three broker valuations at 31.12.2013 on a charter free basis. The value adjusted equity before tax and excluding minority interests is approximately NOK 9.470 million at the end of the year. This corresponds to NOK 246,- per share, compared to NOK 237,- for the same period last year. The value of the fleet has fallen insignificantly over in the last six months. Booked equity at 31.12.2013 was NOK 4,954 million or NOK 128,- per share.

In August one of the Group’s charterers declared an option to buy the construction service vessel “Normand Clough”. The vessel was delivered to the new owner on November 1st, 2013.

In the first quarter of 2014 agreements for sale of one older construction service vessel and one small anchor handling vessel were entered. The vessels were built in 1983 and 2006 respectively. The transactions will give the Group a gain of approx. NOK 35 million. Assets relating to the vessels are presented on a separate line on the balance sheet.

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 50 wholly owned or partly owned vessels, including 2 new builds (CSV). The fleet, including the new builds, consisted of: 20 Construction Service Vessels (CSV’s), 21 Anchor Handling Vessels (AHTS’s) and 9 Platform Supply Vessels (PSV’s).

After the sale of one CSV and one AHTS during 1.quarter of 2014, 48 vessels are managed from offices in Skudeneshavn, Aberdeen, Rio de Janiero and Singapore. Of these, 8 are operating on the Brazilian Continental Shelf, 6 in the Gulf of Mexico, 2 in West/East Africa, 3 in Australia, 5 in Asia, 2 in the Mediterranean, with the remaining 20 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 demand for subsea vessels has been good during the quarter and based on the contract coverage in this segment the prospects for 2014 are considered to be good. The spot market activity in the quarter has been weak for the AHTS-segment. This market is still volatile. The company has registered increased demand for offshore vessels in all geographic areas where the company operates. With the past improved market activity, the company expect that the rate developments, in both the spot and period markets, will continue to develop positively going forward.

At the end of January, the Group’s fleet had fixed contract coverage of 60% for the remainder of 2014. Including options the contract coverage was 69%. In 2015, the contract coverage is 37% and 57% respectively.

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Press Release, February 27, 2014