Quarterly Report • Nov 21, 2017
Quarterly Report
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(Figures in brackets relate to the second quarter 2017. The figures are unaudited.)
| NOK million | Q3 17 | Q2 17 | YTD Q3 17 | Q3 16 | YTD Q3 16 | 2016 |
|---|---|---|---|---|---|---|
| Revenues | 12.8 | 13.1 | 38.0 | 21.9 | 98.8 | 117.1 |
| EBITDA | -26.6 | -12.9 | -56.1 | -5.9 | -88.0 | -104.0 |
| Net Profit | -30.1 | 26.8 | -15.3 | -4.0 | -231.6 | -241.4 |
| EPS (NOK) | -0.57 | 0.51 | -0.29 | -0.08 | -4.40 | -4.59 |
| Operating cost, excluding one-off items | -20.4 | -22.0 | -65.5 | -25.6 | -121.9 | -146.8 |
| Adjusted EBITDA | -7.6 | -8.9 | -27.6 | -3.7 | -23.0 | -29.7 |
| Cash and cash eq. | 161.6 | 179.1 | 161.6 | 209.1 | 209.1 | 213.9 |
| Equity ratio (%) | 87 % | 90 % | 66 % | 60 % | 60 % | 60 % |
| Number of shares outstanding | 52.6 | 52.6 | 52.6 | 52.6 | 52.6 | 52.6 |
| Number of employees | 32 | 32 | 32 | 53 | 53 | 35 |
Sevan Marine delivered engineering services in the quarter mainly to the ExxonMobil FLNG, Goliat, Dana Western Isles and HiLoad FRD Regas projects.
Sevan Marine also continued to provide engineering support for the Shell Penguins redevelopment project in the quarter. Payments under the License Agreement remain subject to the field developers' final investment decision.
Work for ExxonMobil under the framework agreement announced in Q1, and for a specific FLNG field development, continued in the quarter.
Sevan Marine provided engineering support services to the Dana Western Isles project on the UK Continental Shelf. Sevan Marine is entitled to a variable license fee linked to production with respect to the Western Isles project. Sevan Marine understands that the unit has recently started production with commissioning and start up activities continuing
Sevan Marine's subsidiary HiLoad LNG continued the marketing and development of both the HiLoad LNG offloading system for FLNG and the Floating Regas Dock ("FRD") for small scale regasification projects.
The FRD Regas technology is a cost effective alternative to standard floating, storage and regasification unit ("FSRU") solutions, particularly for small scale regasification projects. HiLoad LNG announced in April a cooperation with Flour Corporation for the development of the FRD regas technology. The FRD has attracted further market interest and initial pre-FEED work for a specific LNG regas development was carried out during the quarter.
Sevan Marine has continued to work on new developments based on the cylindrical hull technology and expertise. This includes work on a new mid-water drilling application, work on a floating power distribution hub and work on a new fish farming concept.
Sevan Marine looks to continue developing new applications for its cylindrical hull technology and related concepts with the objective of delivering cost effective solutions to existing and new offshore markets.
Operating revenue for continued operations for the third quarter 2017 was NOK 12.8 million, down from NOK 13.1 million last quarter. EBITDA was negative NOK 26.6 million (negative NOK 12.9 million) and net loss was NOK 30.1 million (profit of NOK 26.8 million). EBITDA was negatively impacted by NOK 19.0 million in one-off costs mainly related to a loss of NOK 12.0 million for the Logitel arbitration settlement and an accrual for legal fees related to the Logitel bond loan court case of NOK 4.1 million.
As of 30 September 2017, cash and cash equivalents amounted to NOK 161.6 million (NOK 179.1 million). The negative cash flow in the quarter of NOK 17.5 million is mainly related to the operational loss for the quarter.
The equity ratio was 87 percent as of 30 September 2017.
Balance sheet composition 30 September, 2017:
We refer to the earnings release in the second quarter of 2016 and comments made regarding the circumstances surrounding the legality and potential claims in relation to the Logitel Offshore Agreements.
Sevan Marine reserves the right to, at any time, pursue other involved parties. Agreements suspending time-bar limitations have been entered into with such involved parties.
We refer to the press releases of October 9th 2017 and November 8th 2017. The Oslo District Court ruled against Sevan Marine ASA's subsidiary Sevan Holding V AS in relation to the USD 60 million loan granted to Logitel Offshore Pte Ltd. The ruling has been appealed. The appeal will most likely not be heard before the second half of 2019.
We refer to the press release of October 16th 2017 whereby Sevan Marine ASA entered into a settlement agreement with Logitel Offshore Pte Ltd and Teekay Offshore Partners. Sevan Marine ASA has received USD 4.5 million (NOK 35.7 million) as full and final settlement of the arbitration dispute. The settlement led to an accounting loss of NOK 12 million which has been accounted for in Q3 2017.
Sevan Marine is exposed to market risk, credit risk and liquidity risk. The company's overall risk management program focuses on the uncertainty of financial markets and seeks to minimize potential adverse effects on the company's financial performance.
Sevan Marine's major customers are typically oil companies with a strong financial basis, but, as with suppliers and customers in general, there is a risk that unforeseen financial difficulties on the counterparty's side may arise which could have material adverse effects on the financial condition, the cash flows and/or the prospects of Sevan Marine.
The exposure to the oil and gas market also means that the company is subject to the market risk of declining work and price pressure. The company is also subject to field development and reservoir risk in situations where the license fee is tied to production.
The outcome of the Logitel bond loan case and the timing or ability to recover any award remains highly uncertain. Despite Sevan Marine's belief that the Appeal Court will overturn the Oslo District Court's ruling, there remains material uncertainty regarding both the amount and timing of any potential payments in relation to this case.
As announced, the Board received in October 2015 the external investigation report regarding allegations of possible improper conduct related to historical contracts with Petrobras in Brazil from Advokatfirmaet Selmer DA ("Selmer"). Sevan Marine provided the report to the Norwegian authority for investigation and prosecution of economic and environmental crime ("ØKOKRIM"). Sevan Marine has made no payments and had no interaction with the agent in question or any of his companies since the IPO of drilling activities and restructuring of Sevan Marine ASA in 2011. Sevan Marine is cooperating fully with relevant authorities in the various jurisdictions involved (Norway, Brazil, US and UK). Sevan Marine adheres to the strictest of compliance and ethical standards and continues to take this matter very seriously. Sevan Marine ASA has to date not been charged by any of the authorities involved.
Sevan Marine ASA was informed during the quarter that Sembmarine SSP Inc. and Jurong Shipyard Pte Ltd have initiated patent infringement proceedings against Sevan Marine ASA as well as Sevan Drilling Ltd and Sevan Drilling North America LLC in the Southern District Court of Texas in relation to the U.S. Patent No. 9,266,587. Sevan Marine has yet to be formally served the lawsuit. Sevan Marine believes the case is without merit and will vigorously defend it. The plaintiffs have not yet quantified their claim for damages. Seven Marine does not believe that this will result in any material negative consequences with respect to either existing or future uses of the Sevan technology.
Sevan Marine continues to operate in a challenging market where many of its key prospects have been delayed over the past years. There has recently been an improvement in market sentiment.
Sevan Marine is optimistic that additional study work can be won in 2018 for FPSO, FLNG and HiLoad FRD applications. With prospective license income from both the Western Isles project and Shell Penguins redevelopment projects 2018 should show improved results.
Sevan Marine remains confident that given its unique cost effective solutions, the increased market interest, its solid cash position and strong balance sheet that it has the resources and ability to successfully weather the current slowdown in activity and to regain growth and profitability.
Sevan Marine is a technology, design and engineering company. The company is developing, designing and delivering cost effective offshore solutions based on its unique cylindrical hull design and the HiLoad LNG offloading and regas technologies.
Sevan Marine is focusing its efforts on independently developing, marketing and supporting projects based on its designs and engineering competence. In doing such, the company is seeking to work with industry leading partners to further promote and develop its designs, concepts and services.
The Sevan Marine cylindrical design is widely seen by oil majors around the world as a credible and proven alternative to other floating installation designs. The inherent advantages are well understood. Amongst these are lower operating costs, favorable motion characteristics, high deck load capacity, large storage space and substantially lower construction cost compared with alternatives where a turret is needed.
The HiLoad LNG offloading and regas technology is an innovative solution allowing direct loading, offloading and regasification of LNG, minimizing major capital investments.
Oslo, November 21, 2017 The Board of Directors of Sevan Marine ASA Erling Øverland Peter Lytzen Chairman Board Member Ingvild Sæther Torstein Sanness Kathryn M. Baker Board Member Board Member Board Member
Vidar Andersen Ann-Kristin Nielsen Løvland Reese McNeel Employee Representative Employee Representative CEO
| NOK million | Q3 17 | Q2 17 | YTD Q3 17 | Q3 16* | YTD Q3 16* | 2016* |
|---|---|---|---|---|---|---|
| Continued operations | ||||||
| Operating revenue | 12.8 | 13.1 | 38.0 | 21.9 | 98.8 | 117.1 |
| Operating expense | -39.4 | -25.9 | -94.1 | -27.8 | -186.8 | -221.1 |
| EBITDA | -26.6 | -12.9 | -56.1 | -5.9 | -88.0 | -104.0 |
| Depreciation, amortization and impairment | -0.5 | -0.6 | -1.7 | -0.4 | -1.3 | -3.3 |
| Operating profit/(loss) | -27.1 | -13.5 | -57.8 | -6.3 | -89.3 | -107.3 |
| Financial income/(expense) | 0.6 | 2.8 | 10.7 | 0.7 | -127.1 | -127.7 |
| FX gain/(loss) | -3.6 | -1.8 | -7.4 | -4.6 | -21.3 | -12.2 |
| Net financial items | -3.0 | 1.0 | 3.3 | -3.9 | -148.3 | -139.8 |
| Profit/(loss) before tax | -30.1 | -12.5 | -54.5 | -10.2 | -237.6 | -247.1 |
| Tax income/(expense) | 0.0 | 39.3 | 39.3 | 6.2 | 6.0 | 5.7 |
| Net profit/(loss) continued operations | -30.1 | 26.8 | -15.3 | -4.0 | -231.6 | -241.4 |
| Discontinued operations | ||||||
| Disposed group classified as held for sale | 0.0 | -7.6 | -10.1 | 1.1 | 26.4 | 25.1 |
| Net profit/(loss) discontinued operations | 0.0 | -7.6 | -10.1 | 1.1 | 26.4 | 25.1 |
| Net profit/(loss) | -30.1 | 19.2 | -25.4 | -2.9 | -205.3 | -216.3 |
| NOK million | Q3 17 | Q2 17 | YTD Q3 17 | Q3 16* | YTD Q3 16* | 2016* |
|---|---|---|---|---|---|---|
| Net profit/(loss) | -30.1 | 19.2 | -25.4 | -2.9 | -205.3 | -216.3 |
| Actuarial gains/losses | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | -0.7 |
| Total comprehensive income | -30.1 | 19.2 | -25.4 | -2.9 | -205.2 | -217.0 |
* Restated due to change of presentation currency from USD to NOK see Note 1 for further information
| NOK million | Note | 30.09.17 | 30.06.17 | 30.09.16* | 31.12.16* |
|---|---|---|---|---|---|
| Fixed assets | 0.2 | 0.3 | 2.0 | 1.4 | |
| Intangible assets | 4.7 | 5.1 | 7.6 | 5.9 | |
| Deferred tax assets | 0.0 | 0.0 | 0.9 | 0.0 | |
| Other non-current assets | 3 | 3.5 | 45.5 | 43.9 | 46.7 |
| Total non-current assets | 8.4 | 50.9 | 54.4 | 54.0 | |
| Trade and other receivables | 3 | 52.3 | 19.6 | 114.2 | 22.2 |
| Cash and cash equivalents | 161.6 | 179.1 | 218.7 | 213.9 | |
| Total current assets | 214.0 | 198.7 | 332.9 | 236.1 | |
| Assets held for sale | 75.5 | ||||
| Total assets | 222.4 | 249.6 | 387.3 | 365.5 | |
| Share capital | 2 | 210.4 | 210.4 | 210.4 | 210.4 |
| Other equity | -17.1 | 13.0 | 11.0 | -0.7 | |
| Total shareholders' equity | 193.4 | 223.4 | 221.5 | 209.7 | |
| Non-controlling interest | 0.2 | 0.3 | 9.2 | 9.2 | |
| Total equity | 193.6 | 223.7 | 230.6 | 218.9 | |
| Retirement benefit obligations | 0.0 | 4.2 | 6.4 | 6.4 | |
| Other non-current liabilities/provisions | 0.0 | 0.0 | 3.3 | 0.0 | |
| Total non current liabilities | 0.0 | 4.2 | 9.7 | 6.4 | |
| Current liabilities | 28.8 | 21.7 | 146.9 | 77.1 | |
| Total current liabilities | 28.8 | 21.7 | 146.9 | 77.1 | |
| Total liabilities | 28.8 | 25.9 | 156.7 | 83.4 | |
| Liabilities held for sale | 63.2 | ||||
| Total equity and liabilities | 222.4 | 249.6 | 387.3 | 365.5 |
* Restated due to change of presentation currency from USD to NOK see Note 1 for further information
| Non | |||||
|---|---|---|---|---|---|
| Share | Share | Retained | controlling | Total | |
| NOK million | capital | premium | earnings | interest | equity |
| Equity as of December 31, 2016 (Restated) | 210.4 | 122.9 | -123.0 | 8.6 | 218.9 |
| Total comprehensive income for the period | -17.0 | -8.4 | -25.4 | ||
| Equity as of September 30, 2017 (Restated) | 210.4 | 122.9 | -140.0 | 0.2 | 193.6 |
| Non | |||||
|---|---|---|---|---|---|
| Share | Share | Retained | controlling | Total | |
| NOK million | capital | premium | earnings | interest | equity |
| Equity as of December 31, 2015 | 210.4 | 122.9 | 96.4 | 6.1 | 435.9 |
| Total comprehensive income for the period | -208.3 | 3.0 | -205.2 | ||
| Equity as of September 30, 2016 | 210.4 | 122.9 | -111.8 | 9.2 | 230.6 |
| NOK million | Q3 17 | Q2 17 | YTD Q3 17 | YTD Q3 16* | 2016* |
|---|---|---|---|---|---|
| Cash flows from operating activities | |||||
| Cash from operations | -17.5 | -5.7 | -67.4 | -49.1 | -44.3 |
| Taxes paid/repaid | 0.0 | 31.7 | 31.7 | -31.7 | -31.7 |
| Net cash generated from continued operating activities | -17.5 | 26.0 | -35.7 | -80.8 | -76.0 |
| Net cash generated from discontinued operating activities | 0.0 | 13.4 | 25.1 | -42.5 | -40.2 |
| Net cash generated from operating activities | -17.5 | 39.3 | -10.5 | -123.4 | -116.2 |
| Cash flows from investment activities | |||||
| Sale of shares KANFA Aragon AS | 0.0 | 0.0 | 0.0 | 20.0 | 20.0 |
| Sale of shares KANFA AS | 0.0 | 0.9 | 0.9 | 0.0 | 0.0 |
| Net cash from continued investment activities | 0.0 | 0.9 | 0.9 | 20.0 | 20.0 |
| Net cash from discontinued investment activities * | 0.0 | -37.1 | -37.1 | 0.0 | 0.0 |
| Net cash from investment activities | 0.0 | -36.2 | -36.2 | 20.0 | 20.0 |
| Cash flows from financing activities | |||||
| Dividends paid | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Net cash from continued financing activities | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Net cash from discontinued financing activities | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Net cash from financing activities | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Net cash flow for the period - continued activities | -17.5 | 26.8 | -34.8 | -60.8 | -56.0 |
| Net cash flow for the period - discontinued activities | 0.0 | -23.7 | -12.0 | -42.5 | -40.2 |
| Cash balance at beginning of period | 179.1 | 176.0 | 225.9 | 322.1 | 322.1 |
| Cash balance at end of period | 161.6 | 179.1 | 179.1 | 218.7 | 225.9 |
| Cash balance at end of period continued operations | 161.6 | 179.1 | 179.1 | 209.1 | 213.9 |
| Cash balance at end of period discontinued operations | 0.0 | 0.0 | 0.0 | 9.6 | 12.0 |
* Restated due to change of presentation currency from USD to NOK see Note 1 for further information
** Reflects the cash position in KANFA Group before deconsolidation.
Sevan Marine ASA is a technology, project development and engineering company.
Sevan Marine ASA is a public limited company, incorporated and domiciled in Norway. The condensed consolidated interim financial statements consist of the company and the company's interests in associated companies.
The company prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by EU and these financial statements have been prepared in accordance with the International Accounting Standard for Interim Financial Reporting (IAS 34). As the interim financial statements do not include the full information and disclosures as required in the annual financial statements, it should be read in connection with the Annual Financial Statements for 2016.
The company has changed the functional and presentation currency to Norwegian Krone (NOK) from USD. The company has done a reassessment of the functional and presentation currency based on the relevant IFRS accounting standards and has concluded that the functional and presentation currency shall be changed to NOK from USD with effect from January 2017. The rationale for this change is that the vast majority of the company's revenue, cost and assets are based in NOK. All financial figures, including comparable figures, are now presented in NOK.
In June 2017 Sevan Marine ASA sold the remaining shares in KANFA AS to Technip Norge AS. The KANFA AS Group was the remaining part of Sevan Marine's Topside and Process Technology segment presented as discontinued operations. As Sevan Marine now is left with one segment, Floating Production, the segment note will not be part of the quarterly reporting.
The accounting policies adopted in the preparation of the interim financial statements are consistent with those followed in the preparation of the Annual Financial Statements for the year ended December 31, 2016.
| 20 largest shareholder accounts November 16, 2017 (source: VPS) | No. of shares | %-share |
|---|---|---|
| TEEKAY SERVICE HOLDINGS COÖPER. UA | 22,893,631 | 43.52 |
| SKANDINAVISKA ENSKILDA | 2,644,962 | 5.03 |
| STRAWBERRY CAPITAL AS | 2,435,448 | 4.63 |
| MATHIAS HOLDING AS | 1,700,000 | 3.23 |
| SUNDT AS | 1,257,486 | 2.39 |
| KING KONG INVEST AS | 1,250,000 | 2.38 |
| DNB NOR MARKETS, AKS | 1,091,653 | 2.08 |
| HORTULAN AS | 1,000,000 | 1.90 |
| CITIBANK, N.A. | 991,133 | 1.88 |
| MP PENSJON PK | 837,584 | 1.59 |
| ANDENERGY AS | 804,326 | 1.53 |
| INVESCO PERP EURAN S | 765,804 | 1.46 |
| BAKLIEN ÅSMUND | 700,000 | 1.33 |
| TIGERSTADEN AS | 602,092 | 1.14 |
| APOLLO ASSET LTD. | 600,000 | 1.14 |
| BEKKESTUA EIENDOM AS | 542,066 | 1.03 |
| ALTEA PROPERTY DEVEL | 500,828 | 0.95 |
| SVENSKA HANDELSBANKE | 498,681 | 0.95 |
| GRANLUND HOLDING AS | 427,201 | 0.81 |
| INVESCO FUNDS | 419,109 | 0.80 |
| Total, 20 largest shareholders | 41,962,004 | 79.77 |
| Other shareholder accounts | 10,644,995 | 20.23 |
| Total no of shares | 52,606,999 | 100.00 |
| Foreign ownership | 27,404,998 | 52.09 |
| NOK million | Q3 17 | Q2 17 | YTD Q3 17 | Q3 16* | YTD Q3 16* | 2016* |
|---|---|---|---|---|---|---|
| Sale to related parties | ||||||
| Sale to Teekay | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 1.4 |
| Sale to Logitel Offshore | 0.0 | 0.0 | 0.0 | 5.0 | 21.0 | 21.0 |
| Purchase from related parties | ||||||
| Purchase from Arendal Brygge | 1.1 | 1.2 | 3.5 | 1.2 | 2.9 | 3.8 |
| Receivable from related parties | ||||||
| Receivable from Logitel Offshore | 35.9 | 49.4 | 35.9 | 47.9 | 49.6 | 51.6 |
| Loan to related parties | ||||||
| Logitel Offshore | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
* Restated due to change of presentation currency from USD to NOK see Note 1 for further information
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