SeaBird Exploration Plc: Third quarter report 2016
(Thomson Reuters ONE) -
4 November 2016, Limassol, Cyprus
2016 SUMMARY OBSERVATIONS FOR THE THIRD QUARTER
* Revenues for the quarter were $20.4 million, a decrease of 12% compared to
Q3 2015 and down 8% relative to Q2 2016.
* Contract revenues for the period were $20.1 million, down 13% from Q3 2015
and a decrease of 6% from Q2 2016.
* Multi-client revenues were $0.3 million, up from $0.1 million reported in Q3
2015 and down from $0.8 million reported in Q2 2016.
* Adjusted EBITDA of $6.9 million. Reported EBITDA was $10.7 million compared
to $4.6 million for Q3 2015 and $6.3 million for Q2 2016.
* Adjusted EBIT of $3.1 million. Reported EBIT for the quarter was negative
$3.0 million compared to $0.0 million for Q3 2015 and positive $1.9 million
for Q2 2016.
* Net non-recurring charges of $4.6 million relating to reversal of bad debt
charges and change in provisions for laid-up vessels, vessel impairment and
financial gain on the Hawk Explorer lease.
* Vessel utilization for the period was 84.0%. Contract surveys during the
third quarter represented 78.6% of vessel capacity compared to 86.2% during
the third quarter 2015. Multi-client surveys accounted for 5.4% of vessel
capacity compared to 0% in the third quarter 2015.
* 7.0% technical downtime in the quarter compared to 9.0% for Q3 2015.
* Zero lost time injury frequency (LTIF) in the quarter.
KEY HIGHLIGHTS
Operational review
The third quarter of 2016 was challenging with weak seismic market demand.
Although there are signs of a market stabilization, total vessel utilization is
reduced and the timing of a sustained market recovery is still highly uncertain.
Active vessel utilization for the third quarter of 2016 was 84.0%, up from
82.0% in the second quarter. Contract surveys represented 78.6% of vessel
capacity compared to 74.9% for the second quarter of 2016. Technical downtime
for the fleet was 7.0% in Q3 2016, up from 5.8% in Q2.
Hawk Explorer, Aquila Explorer and Northern Explorer were in production on the
Mexico Gigante project during the quarter. Hawk Explorer and Aquila Explorer
left Gigante and transited to the Caribbean mid-quarter while Northern Explorer
was in production on the Mexico Gigante project during the whole period. The
Mexico Gigante project was 99.9% completed at the end of the quarter. Osprey
Explorer finished its source project in North West Europe before commencing and
completing an undershoot survey in the North Sea. Harrier Explorer completed a
2D contract survey in the Barents Sea and commenced a new multi-client survey in
the same area.
Voyager Explorer was redelivered to its owner in September. The Munin Explorer
remained stacked. On 1 September, the company acquired the Hawk Explorer along
with all seismic equipment on the vessel, further cancelling all future lease
payments and additional obligations. Subsequent to quarter end, SeaBird
announced that it had entered into an agreement for the sale and decommissioning
of the Hawk Explorer. The decommissioning of the vessel will effectively improve
the cash position and is a part of the company's efforts to reduce cost and
adjust fleet capacity to better reflect current market demand. The company will
retain the vessel's seismic equipment.
Voyager Explorer completed its scheduled docking in Singapore in September. Yard
stay represented 0.0% of active vessel capacity during the quarter.
Multi-client surveys represented 5.4% of vessel utilization in the quarter,
compared to 7.0% in the previous quarter and nil the same quarter last year.
Multi-client revenues were $0.3 million in the period, compared to $0.8 million
in the previous quarter.
The company announced one new prefunded 4,000 km multi-client survey in the
Barents Sea during the quarter. The company commenced operation on this survey
in September and will complete the project in the fourth quarter.
Operational expenses were reduced during the third quarter relative to previous
quarters as a result of ongoing cost cutting initiatives.
Total net non-recurring charges were $4.6 million in the quarter. Of this
amount, $3.3 million represented a reversal of bad debt costs and was charged to
SG&A in the period. Additionally, the company booked an impairment of $9.9
million on the Hawk Explorer. Further, the company reported a $1.4 million gain
in relation to the purchase of Hawk Explorer and settlement of the Hawk Explorer
financial lease. Net non-recurring cost of sales in the quarter amounted to
positive $0.5 million, which mainly relates to a $1.4 million cost reversal for
Geo Pacific in relation to the final commercial settlement with its owner,
partly offset by a $0.5 million charge for the planned sale and decommissioning
of the Hawk Explorer and additional Voyager Explorer redelivery costs of $0.4
million.
Capital expenditures were $0.7 million during the quarter compared to $1.7
million Q3 2015.
Lost time injury frequency (LTIF) rate for the quarter was zero.
Regional review
North and South America (NSA) continued to be the most active region during the
quarter. NSA revenues of $13.3 million represented 65% of total revenues for the
quarter, all of which were related to Mexico Gigante.
Europe, Africa and the Middle East (EAME) revenues of $7.2 million represented
35% of total Q3 revenues. Osprey Explorer completed a source job and an
undershoot project in the quarter, while Harrier Explorer completed a 2D
contract and commenced a prefunded multi-client project.
No SeaBird vessels worked in Asia Pacific (APAC) during the quarter and revenues
were nil in the region.
Outlook
Global seismic demand continued to be weak in the third quarter. Oil industry
exploration spending is anticipated to remain depressed for the foreseeable
future and this is likely to continue to negatively impact seismic activity.
The company's fleet capacity has been reduced to better reflect current market
demand. The company continues to evaluate and execute savings initiatives to
reduce the company's overall cost level, and this may include temporary stacking
of additional vessels.
The fourth quarter is expected to be negatively impacted by idle periods as well
as the potential repositioning of vessels before start-up of new projects. We
expect the current seismic market softness to continue to impact the seismic
sector in 2017. The company is reviewing a number of survey opportunities.
However, the current market uncertainty makes it difficult to predict the level
of contract coverage that is possible to obtain.
FINANCIAL REVIEW
Financial comparison
All figures below relate to continuing operations unless otherwise stated. For
discontinued operations, see note 1. The company reports net loss of $3.0
million for Q3 2016 (net loss of $1.7 million in the same period in 2015).
Revenues were $20.4 million in Q3 2016 ($23.2 million). The decreased revenues
are primarily due to lower utilization and reduced fleet size.
Cost of sales was $10.2 million in Q3 2016 ($14.5 million). The decrease is
predominantly due to fewer vessels in operation, lower operating expenses and
non-recurring restructuring charges for onerous long-term lease contracts taken
in 2015.
SG&A was $3.1 million in Q3 2016, down from $4.3 million in Q3 2015. The
decrease is principally due to cost saving initiatives, reduced headcount and
bad debt charges incurred in Q3 2015.
Reversal of bad debt charges was $3.3 million in Q3 2016.
Other income (expense) was $0.2 million in Q3 2016 ($0.1 million).
EBITDA was $10.7 million in Q3 2016 ($4.6 million).
Depreciation, amortization and impairment were $13.7 million in Q3 2016 ($4.6
million). This increase is largely due to an impairment on the Hawk Explorer
taken in the quarter.
Finance expense was $1.3 million in Q3 2016 ($1.6 million).
Other financial items were $1.4 million in Q3 2016 ($0.0 million). The increase
is due to the financial gain recorded in relation to the settlement of the Hawk
Explorer finance lease that was booked in the quarter.
Income tax expense was $0.1 million in Q3 2016 ($0.2 million).
Capital expenditures in the quarter were $0.7 million ($1.7 million).
Multi-client investment was $0.6 million in Q3 2016 ($0.1 million).
Liquidity and financing
Cash and cash equivalents at the end of the period were $11.8 million ($5.4
million in Q3 2015), of which $0.4 million was restricted in connection with
deposits and tax. Net cash from operating activities was $7.6 million in Q3
2016 ($1.0 million in Q3 2015).
The company has one bond loan, one secured credit facility and one unsecured
note. The Hawk Explorer finance lease was settled during the quarter.
The SBX04 secured bond loan (issued as "SeaBird Exploration Finance Limited
First Lien Callable Bond Issue 2015/2018") is recognized in the books at
amortized cost of $27.2 million per Q3 2016 (nominal value of $29.3 million plus
accrued interest of $0.2 million plus amortized interest of $2.1 million less
fair value adjustment of $4.4 million). This bond has been issued in two
tranches; tranche A amounting to $5.0 million and tranche B amounting to $24.3
million. The SBX04 bond tranche A is carrying an interest rate of 12.0% and
Tranche B is carrying an interest rate of 6.0%. Interest is paid quarterly in
arrears with first interest instalment paid on 3 June 2015. The bond matures on
3 March 2018, with principal amortizations due in quarterly instalments of $2.0
million starting at 3 June 2017. The outstanding loan balance will be paid at
the maturity date. Interest paid during Q3 2016 was $0.5 million. The bond is
listed on Nordic ABM, and it is traded with ticker SBEF01 PRO and SBEF02 PRO for
the respective two bond tranches.
The three-year secured credit facility is recognized at amortized cost of $2.1
million (initial nominal value of $2.3 million plus accrued interest of $0.02
million plus amortized interest of $0.2 million less fair value adjustments of
$0.4 million). Coupon interest rate is 6.0%. Interest is to be paid quarterly in
arrears and the first interest amount was paid on 3 June 2015. The facility
matures at 3 March 2018 with quarterly instalments of $0.2 million starting on
3 June 2017. The outstanding loan will be repaid in full at maturity. Principal
repayments during Q3 2016 amounted to $0.6 million and additional amounts drawn
on the credit facility during the period was $0.6 million. Interest paid during
Q3 2016 was $0.03 million.
The three-year unsecured loan is recognized at amortized cost of $1.1 million
(initial nominal value of $2.1 million plus amortized interest $0.2 million less
fair value adjustment and accrued interest of $0.3 million less principal
repayments of $0.9 million). Coupon interest rate is 6.0%. Stated maturity date
is on 1 January 2018. Interest is paid quarterly in arrears and the first
payment was due on 1 April 2015. The principal is payable in nine equal
quarterly instalments of $0.2 million commencing on 1 January 2016. Interest
paid during Q3 2016 was $0.02 million and principal repayments during Q3 2016
was $0.2 million.
On 1 September, the company acquired the Hawk Explorer along with all seismic
equipment on the vessel and an agreement to cancel all future lease payments and
additional obligations that were a part of the original charter agreement. The
final Hawk lease settlement, instalments and interest amounting to $1.5 million
were paid during Q3 2016 ($0.6 million in Q3 2015).
Net interest bearing debt was $18.6 million as at the end of Q3 2016 ($28.3
million in Q3 2015).
Accrued interest on the bond loan, credit facility and the unsecured note for Q3
2016 was $0.2 million ($0.2 million).
The company was in compliance with all covenants as of 30 September 2016.
The total outstanding amount of common shares in the company is 3,065,434. The
company has also issued 884,686 warrants, convertible into 884,686 ordinary
shares. The warrants are listed on the Oslo Stock Exchange with ticker SBX J.
The company's accounts have been prepared on the basis of a going concern
assumption. In the view of the board of directors, the continued very
challenging market conditions and the company's limited working capital creates
a material risk to this assumption. In the event that 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. Reference is made to the Going Concern section in
selected notes and disclosures for further details on the financial position of
the company.
The Board of Directors and
Chief Executive Officer
SeaBird Exploration Plc
3 November 2016
The third quarter 2016 presentation will be transmitted live at
http://www.sbexp.com/investor-relations
This information is subject to the disclosure requirements pursuant to section
5-12 of the Norwegian Securities Trading Act.
Q3-16 Report:
http://hugin.info/136336/R/2054253/769057.pdf
Q3-16 Presentation:
http://hugin.info/136336/R/2054253/769058.pdf
This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: SeaBird Exploration Plc via GlobeNewswire
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