SeaBird Exploration Plc: Third Quarter Report 2014
(Thomson Reuters ONE) -
2014 SUMMARY OBSERVATIONS FOR THE THIRD QUARTER
* Revenues for the quarter were $22.7 million, a decrease of 55% compared to
Q3 2013 and down 49% relative to Q2 2014.
* Contract revenues for the period were $16.4 million, down 67% from Q3 2013
and a decrease of 60% from Q2 2014.
* Multi-client revenues were $6.3 million, up 250% from $1.8 million reported
in Q3 2013 and an increase of 70% from $3.7 million reported in Q2 2014.
* EBITDA was negative $2.1 million compared to positive $13.2 million for Q3
2013 and positive $12.6 million for Q2 2014.
* EBIT for the quarter was negative $11.1 million compared to positive $6.7
million for Q3 2013 and negative $2.6 million for Q2 2014.
* Vessel utilization for the period was 65%. Contract surveys during the
third quarter represented 35% of vessel capacity compared to 72% during the
second quarter 2014. Multi-client surveys accounted for 30% of vessel
capacity compared to 13% in the prior period.
Operational review
Third quarter revenues decreased from the prior period as a result of a
continuous softening in seismic market demand. The increased competition from
3D vessels entering the 2D and source markets also impacted utilization.
Vessel utilization was 65%, down from 85% in the second quarter. Operational
performance for the quarter remained strong, with the exception of the technical
issues encountered by the Geo Pacific in West Africa. Technical downtime for the
overall fleet was 3%, down from 6% for Q2.
Contract surveys represented 35% of vessel capacity compared to 72% for the
second quarter of 2014. Aquila Explorer completed two 2D surveys in Australia,
while Osprey Explorer started a 2D survey in the Gulf of Mexico. Hawk Explorer
completed a survey in the Middle East and remained off hire afterwards. Munin
Explorer performed source operations in the North Sea during the period while
Northern Explorer was idle. Geo Pacific commenced a new survey in Ghana at the
end of the quarter. Voyager Explorer and Harrier Explorer worked nearly
exclusively on multi-client surveys.
Multi-client sales increased significantly and represented 30% of vessel
utilization for Q3 compared to 13% for Q2. Nearly half of the multi-client
revenues related to prefunding for new surveys commenced in the period, which
are in addition to partner contributions that are reported as a reduction in
capitalized cost. Remaining multi-client revenues related to prefunding for Geo
Pacific's West African survey and late-sales from the existing multi-client
library. An additional impairment of $0.6 million was charged to Geo Pacific's
multi-client survey.
Osprey Explorer completed its scheduled maintenance in Curacao in July. Yard
stay represented 2% of vessel capacity during the quarter.
During the quarter the company extended the lease of the 3D vessel Voyager
Explorer at a reduced rate of $13,200 per day. The firm period of the lease is
two years, with another three yearly extension options. Additionally, the Hawk
Explorer lease was renegotiated. Under the revised lease terms, the remaining
principle will be repaid over 17 months from 1 September 2014 and the vessel
with related equipment will be delivered to the company at the completion of the
lease term.
The company delivered another quarter of solid health, safety, security,
environment and quality (HSSEQ) results. The controls in place are still proving
effective to maintain the Lost Time Injury Frequency (LTIF) rate at zero for the
quarter. The methodology of ratifying these performance dynamics has been by
focusing on compliance of established procedures, effective supervision and
avoiding complacency. Furthermore, there has been a campaign to verify
management system processes by increasing the audit frequency and type in order
to identify areas of concern and seek opportunities for improvements.
Regional overview
Revenues were down in all of our geographic regions as a result of a global
weakening in market demand.
Sales in Europe, Africa and the Middle East (EAME) of $11.8 million accounted
for 52% of total revenues. The decrease in EAME revenues compared to the prior
period was mainly due to lower contract utilization. Munin Explorer worked in
the region under its long-term charter agreement. Harrier Explorer completed a
multi-client project in the North Sea and commenced a second multi-client survey
in the region.
Asia Pacific (APAC) sales of $8.7 million accounted for 38% of total revenues.
APAC revenues were down compared to the second quarter of 2014 due to the
decline in seismic demand. Aquila Explorer completed two contract surveys in
Australasia by mid-August and subsequently mobilized for a multi-client project
in South East Asia. Voyager Explorer completed a 2D multi-client project within
the same region.
Sales in North and South America (NSA) of $2.3 million represented 10% of total
revenues. NSA revenues were down from the previous period as only one vessel was
active in the region during the quarter. Osprey Explorer commenced a 12,000 km
2D contract survey in the Gulf of Mexico towards the end of August, following
its scheduled maintenance. The vessel is expected to remain in the region for
the foreseeable future.
Outlook
Global seismic market demand weakened substantially through the third quarter.
In addition to a reduction in the volume of contract surveys, the large number
of 3D vessels operating in the 2D and source markets also increased the pressure
on the company's core business segments.
In light of the decline in oil prices, we expect oil companies to take a more
cautious spending approach. This has impacted all of the company's business
units. Moreover, we anticipate the financial uncertainty of the company to
possibly delay new contract awards. However, we are seeing interest in longer-
term 2D contract opportunities from select clients. Nevertheless, we expect the
current market softness to impact earnings and utilization in the remaining part
of 2014.
Given the challenging market situation, the company is actively looking at
savings initiatives to reduce the company's cost level. As a part of this
effort, we are also reviewing the lay-up of vessels until market demand
recovers.
Longer-term, we expect that the scheduled exit of a number of 3D vessels
currently operating in our markets will benefit the company.
Multi-client activity was increased in the third quarter and we commenced four
new well-prefunded projects which also allowed us to improve fleet utilization.
We continue to see multi-client activity as a key business area in the company,
although we expect our late sales to remain erratic until the library is
properly scaled.
FINANCIAL REVIEW
Financial comparison
All figures below relate to continuing operations unless otherwise stated. For
discontinued operations, see note 1.
The company reports a net loss of $20.2 million for Q3 2014 (net income of $4.0
million in the same period in 2013).
Revenues were $22.7 million in Q3 2014 ($50.9 million). The decreased revenues
are primarily due to lower fleet utilization during the period.
Cost of sales was $19.8 million in Q3 2014 ($33.7 million). The decrease is
predominantly due to increased capitalization of costs to the multi-client
library and lower vessel utilization for the period.
SG&A was $5.1 million in Q3 2014, up from $4.7 million in Q3 2013. This is
principally due to an increase in personnel related expenses associated with the
office relocation. This has been partially offset by a reduction in consultancy
costs and office travel expenses.
EBITDA was negative $2.1 million in Q3 2014 (positive $13.2 million).
Depreciation, amortization and impairment were $9.0 million in Q3 2014 ($6.5
million). The increase is predominantly due to an increase in multi-client sales
amortization and impairment.
Finance expense was $8.1 million in Q3 2014 ($2.9 million). The increase is
primarily due to the accelerated finance charge recognized as a result of the
change in maturity of the SBX03 bond loan triggered by the breach of loan
covenants.
Other financial items, net expense, of negative $0.3 million in Q3 2014
(negative $0.5 million).
Income tax expense was $0.7 million in Q3 2014 (tax benefit of $0.6 million).
Capital expenditures were $2.0 million in Q3 2014 ($5.0 million). The majority
of the capital cost incurred during the quarter related to the purchase of
seismic equipment to be utilized across the fleet. The remaining portion was
related to the completion of the dry docking of Osprey Explorer.
Multi-client investment was $13.5 million in Q3 2014 ($1.0 million), which
related to four 2D and one 3D multi-client projects.
Liquidity and financing
Cash and cash equivalents at the end of the period were $10.0 million ($14.0
million), of which $3.5 million was restricted in connection with deposits. Net
cash from operating activities was $14.3 million in Q3 2014 ($7.4 million).
The company has one bond loan, one convertible loan and the Hawk Explorer
finance lease.
* The 6% secured bond loan is recognized in the books at face value of $81.9
million per Q3 2014. The bond loan's stated maturity is 19 December 2015 and
has principal amortization due in semi-annual increments of $2.0 million
that started 19 December 2012. The loan which was previously recognized at
amortized cost has been recognized at face value due to a breach of
covenants and change in maturity.
* The 1% unsecured convertible loan with Perestroika AS is recognized in the
books at face value of $14.9 million. Interest on the convertible loan of
$0.1 million was paid during Q3 2014 while the company was unable to repay
the convertible loan at maturity of 30 September 2014.
* The lease of Hawk Explorer is recognized in the books as a finance lease at
$6.2 million per Q3 2014. Installments of $1.0 million against the Hawk
lease principal and $0.2 million against the interest portion were paid
during Q3 2014 ($1.0 million and $0.3 million in Q3 2013, respectively).
During the third quarter 2014, the company extended the charter agreement
and postponed the delivery of the vessel to February 2016.
Net interest-bearing debt was $92.9 million at the end of Q3 2014 ($87.0
million).
Accrued interest for Q3 2014 was $1.4 million ($1.3 million).
The company was in breach of covenants of the convertible loan from Perestroika
as of 30 September as a result of the inability to repay the $14.9 million face
value at maturity. Moreover, the company was in breach of balance sheet ratios
covenants and cross-default provisions in SBX03 bond agreement. The company
continues the dialogue with equity holders and lenders regarding a long-term
capital structure and expects them to remain supportive in this process.
The company's accounts have been prepared on the basis of a going concern
assumption. Reference is made to the Going Concern section in selected notes and
disclosures for further details on the current financial position of the
company.
The Board of Directors and
Chief Executive Officer
SeaBird Exploration Plc
27 November 2014
The third quarter 2014 presentation will be transmitted live at
http://www.sbexp.com/investor-relations.aspx.
With reference to the announcement on 1 October 2014 on the company's refinance
efforts; pending further clarification, SeaBird has requested that Oslo Børs
maintains suspension of its shares and SBX03 bonds.
This information is subject of the disclosure requirements pursuant to section
5-12 of the Norwegian Securities Trading Act.
Q3-14 Report:
http://hugin.info/136336/R/1875023/660663.pdf
Q3-14 Presentation:
http://hugin.info/136336/R/1875023/660664.pdf
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originality of the information contained therein.
Source: SeaBird Exploration Plc via GlobeNewswire
[HUG#1875023]
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