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Awilco Drilling PLC

Earnings Release Feb 11, 2016

3547_rns_2016-02-11_f5bb565e-c6c1-4ea7-b9be-b0ba81f782d7.pdf

Earnings Release

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FOURTH QUARTER 2015 PRELIMINARY FULL YEAR 2015 RESULTS

Awilco Drilling PLC is a UK based offshore drilling company owning and operating two semi submersible drilling rigs. The Company is listed at the Oslo Stock Exchange (Oslo Axess) under the ticker code AWDR.

Q4 Report – Highlights

  • Awilco Drilling PLC reported contract revenue of USD 19.1 million (USD 90.4 million in Q3), EBITDA of USD 3.7 million (USD 74.0 million in Q3) and net loss of USD 32.9 million after an impairment charge of USD 30 million (USD 57.7 million profit in Q3)
  • Revenue efficiency was 97.7% whilst operational during the quarter (90.3% in Q3)
  • Contract utilisation including unpaid shipyard time was 50.0% during the quarter, excluding unpaid shipyard time was 26.1% (60.2% in Q3)
  • Contract backlog at the end of Q4 was approximately USD 258 million (approximately USD 276 million Q3)
  • The Board approved a dividend distribution payable in Q1 2016 of USD 0.25 per share. The share will trade ex-dividend on 23 February 2016, the record date is 24 February 2016 and the payment date is on or around 18 March 2016.

Key financial figures:

In USD million, except per day operating expenses and EPS

USD million Q4 2015 Q3 2015 2015 2014
Contract revenue 19.1 90.4 247.0 276.1
Operating expenses 12.8 14.5 57.6 64.2
EBITDA 3.7 74.0 180.2 197.4
Net (loss)/profit (32.9) 57.7 129.2 137.5
EPS (1.10) 1.92 4.30 4.58
Total assets 454.4 507.1 454.4 458.1
Total equity 232.6 280.5 232.6 208.4
Interest bearing debt 110.0 115.0 110.0 120.0
Gearing ratio -12.2% -15.0% -12.2% 17.5%
Per day operating expenses 69,549 78,710 78,947 87,915

Financial Results – Quarter 2015

Comprehensive Income Statement

Awilco Drilling reports total comprehensive loss for the fourth quarter 2015 of USD 32.9 million.

Revenue earned in the fourth quarter was USD 19.1 million.

In the fourth quarter Awilco Drilling had rig operating expenses of USD 12.8 million. General and administration expenses were USD 2.6 million. This includes USD 0.1 million in respect of the stock award of synthetic stock options. The stock award provision is restated each quarter based on the valuation of the Company's shares.

EBITDA for the fourth quarter was USD 3.7 million while the operating loss was USD 30.7 million.

In the fourth quarter Awilco Drilling incurred an impairment charge of USD 30 million, primarily due to the negative developments in both the UKCS and global drilling markets.

Interest expense amounted to USD 2.0 million, which relates to accrued interest on the secured bond.

Loss before tax was USD 32.9 million and with minimal tax impact the resulting net profit was also USD 32.9 million. Earnings per share (EPS) for the second quarter were USD (1.10).

Statement on financial position

As of 31 December 2015, total assets amounted to USD 454.4 million. At the same date, Awilco Drilling had USD 135.3 million in cash and cash equivalents.

Financial Results - Full Year 2015

Awilco Drilling reports total comprehensive income for 2015 of USD 99.3 million. Total full year revenues were USD 247.0 million. Rig operating expenses were USD 57.6 million and general and administration expenses were USD 8.6 million. EBITDA for the year was USD 180.2 million with an impairment charge of USD 30 million while the operating profit was USD 132.2 million. Profit before tax was USD 123.5 million. The tax charge for the year was USD 24.2 million. The resulting net profit was USD 99.3 million. Earnings per share (EPS) for the year were USD 3.31.

Operations and Contract Status

WilPhoenix

In Q4 2015 the WilPhoenix was in continued operations for Apache North Sea Ltd until 17 November when the rig proceeded to the Able Shipyard in Hartlepool to commence the five yearly renewal survey, where it remained through the end of the quarter. As of the date of this report, the SPS and capital work on the WilPhoenix is substantially complete. The rig is currently undergoing final project acceptance, which is delaying the rig's return to operations. The total cost of the yard stay project is expected to be less than the budget of USD 42.5 million.

Revenue efficiency for the quarter was 97.7%. Contract utilisation was 52.2% excluding 44 days of shipyard time.

At the end of December and as of the date of this report, WilPhoenix had a total remaining contract backlog of approximately USD 258 million.

WilHunter

In Q4 2015 the WilHunter remained hot stacked in Invergordon.

Capital Requirements and Dividend

The Company's intention is to pay a quarterly dividend in support of its main objective to maximise returns to shareholders. All of the Company's free cash flow is intended to be distributed subject to maintaining a robust cash buffer to support working capital requirements, planned capital expenditure and future market prospects.

Organisation

At the end of Q4 2015, Awilco Drilling's Aberdeen based employees numbered 29 permanent personnel supported by 3 contractors. Awilco Drilling Pte. Ltd. offshore personnel numbered 203 permanent personnel. The Awilhelmsen Group continues to supply some support personnel via the management agreement.

Market Outlook

The current low oil prices are likely to push new drilling programmes further out in time and few new requirements are emerging. This indicates that the fleet of available units is likely to increase in 2016/17.

Statement of Responsibility

We confirm that, to the best of our knowledge, the condensed set of financial statements for the fourth quarter of 2015, which has been prepared in accordance with IAS 34 Interim Financial Statements, gives a true and fair view of the Company's consolidated assets, liabilities, financial position and results of operations, and that the interim management report includes a fair review of the information required under the Norwegian Securities Trading Act section 5-6 fourth paragraph.

Aberdeen, 10 February, 2016

The Board of Directors of Awilco Drilling PLC

CEO: Jon Oliver Bryce Mobile: +44 1224 737900 E-mail: [email protected]

Investor Relations: Cathrine Haavind Mobile: +47 93 42 84 64 E-mail: [email protected]

Company background

Awilco Drilling was incorporated in December 2009. Awilco Drilling owns two semi submersible drilling rigs; WilPhoenix built in 1982 and upgraded in 2011 and WilHunter built in 1983 and upgraded in 1999 and 2011.

Awilco Drilling was listed on the Oslo Stock Exchange (Oslo Axess) in June 2011 under ticker code AWDR. Awilco Drilling's headquarters are located in Aberdeen, UK.

The total number of outstanding shares of Awilco Drilling at the date of this report is 30 031 500.

www.awilcodrilling.com

Forward Looking Statements

This Operating and Financial Review contains certain forward-looking statements that involve risks and uncertainties. Forward-looking statements are sometimes, but not always, identified by such phrases as "will", "expects", "is expected to", "should", "may", "is likely to", "intends" and "believes". These forward-looking statements reflect current views with respect to future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. These statements are based on various assumptions, many of which are based, in turn, upon further assumptions, including Awilco Drilling's examination of historical operating trends. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including the competitive nature of the offshore drilling industry, oil and gas prices, technological developments, government regulations, changes in economical conditions or political events, inability of the Company to obtain financing on favourable terms, changes of the spending plan of our customers, changes in the Company's operating expenses including crew wages, insurance, dry-docking, repairs and maintenance, failure of shipyards to comply with delivery schedules on a timely basis and other important factors mentioned from time to time in our report.

Condensed statement of comprehensive income

in USD thousands, except earnings per share Full Year Full Year
Q4 2015 2015 Q4 2014 2014
(unaudited) (unaudited) (unaudited) (audited)
Contract revenue 18,946 193,949 70,116 271,971
Reimbursables 181 1,711 699 3,969
Other revenue 15 51,385 55 198
19,142 247,045 70,870 276,138
Rig operating expenses 12,797 57,632 15,687 64,178
Reimbursables 64 645 283 1,157
General and administrative expenses 2,597 8,578 2,134 15,706
Other (income) - - (2,485) (2,485)
Other expense - - 382 180
Depreciation 4,427 18,008 4,542 17,912
Impairment 30,000 30,000 - -
49,885 114,863 20,543 96,648
Operating (loss)/profit (30,743) 132,182 50,326 179,490
Interest income 20 130 46 161
Interest expense (1,979) (8,349) (2,221) (11,861)
Other financial items (235) (445) -
Net financial items (2,194) (8,664) (2,175) (11,700)
(Loss)/profit before tax (32,937) 123,518 48,151 167,790
Tax benefit/(expense) 26 (24,171) (9,215) (30,306)
Net (loss)/profit (32,911) 99,347 38,935 137,484
Total comprehensive (loss)/income (32,911) 99,347 38,935 137,484
Attributable to shareholders of the parent (32,911) 99,347 38,935 137,484
Basic and diluted earnings per share (1.10) 3.31 1.30 4.58

Condensed statement of financial position

in USD thousands

31.12.2015 31.12.2014
(unaudited) (audited)
Rigs, machinery and equipment 234,336 251,165
Deferred tax asset 903 2,486
235,239 253,651
Trade and other receivables 7,352 12,116
Prepayments and accrued revenue 2,682 28,938
Inventory 5,015 4,800
Cash and cash equivalents 135,257 75,951
Current tax 68,899 82,594
219,205 204,399
Total assets 454,444 458,050
Paid in capital 130,142 130,142
Retained earnings 102,479 78,211
232,621 208,353
Deferred tax liability 7,517 0
Long-term interest-bearing debt 100,000 110,000
107,517 110,000
Current portion of long-term debt 10,000 10,000
Trade and other creditors 5,990 3,233
Accruals and provisions 17,702 17,942
Current tax payable 80,614 108,522
114,306 139,697
Total equity and liabilities 454,444 458,050

Condensed statement of changes in equity for the period from

1st January 2014 to 31 December 2015

in USD thousands

Other equity
(retained
Paid-in-equity earnings) Total equity
Equity at 1 January 2014 130,142 77,370 207,512
Total comprehensive profit to 31 December 2014 - 137,484 137,484
Dividends paid (136,643) (136,643)
Balance as at 31 December 2014 130,142 78,211 208,353
Total comprehensive profit to 31 December 2015 - 99,347 99,347
Dividends paid - (75,079) (75,079)
Balance as at 31 December 2015 130,142 102,479 232,621
2015
2014
(unaudited)
(audited)
Cash flow from operating activities
Profit before tax
123,518
167,790
Depreciation
18,008
17,912
Impairment
30,000
-
Interest cost
8,219
11,695
Sharebased payment
(844)
(7,149)
(Increase)/decrease in trade and other receivables
4,764
2,301
(Increase)/decrease in stock
(215)
-
(Increase)/decrease in prepayments and accrued revenue
25,963
(6,375)
Increase/(decrease) in trade and other payables
3,814
3,347
Interests paid
(8,509)
(11,929)
Interests received
130
161
Taxation paid
(29,283)
(15,610)
Net cash flow from operating activities
175,565
162,144
Cash flow from investing activities
Purchase of property, plant and equipment
(31,180)
(23,797)
Net cash flow from investing activities
(31,180)
(23,797)
Cash flow from financing activities
Dividends paid
(75,079)
(136,643)
Issue of loans
-
125,000
Repayment of loans
(10,000)
(103,098)
Net cash flow from financing activities
(85,079)
(114,741)
Net increase/(decrease) in cash and cash equivalents
59,306
23,604
Cash and cash equivalents at beginning of the period
75,951
52,347
Cash and cash equivalents at the end of the period
135,257
75,951
Condensed statement of cash flow for the period Full Year Full Year

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Basis of preparation

These unaudited interim condensed financial statements have been prepared in accordance with IAS 34 "Interim financial reporting".

Significant accounting policies

The accounting policies used in the preparation of the interim financial statements are consistent with those used in the annual audited financial statements for the year ended December 31, 2014. This interim report should be read in conjunction with the audited 2014 financial statements, which include a full description of the Group's significant accounting policies.

Notes

Note 1 - Rigs, machinery and equipment

in USD thousands, except per share data

Semi submersible
Other fixtures and
drilling rigs/SPS equipment Total
Opening balance 1 Jan 2015 329,321 1,872 331,194
Additions 31,154 26 31,180
Closing balance 360,475 1,898 362,373
Opening balance 1 Jan 2015 (78,994) (1,035) (80,029)
Depreciation (17,827) (180) (18,008)
Impairment (30,000) - (30,000)
Accumulated depreciation per ending balance (126,821) (1,215) (128,037)
Net carrying amount at end of period 233,654 683 234,336
Expected useful life 5-20 years 3-10 years
Depreciation rates 5% - 20% 10% - 33%
Depreciation method Straight line Straight line
Residual value per rig is USD 15 million.

The Company has performed an impairment test which resulted in an impairment of USD 30 million. The impairment test was based on future industry conditions and operations, future expected utilisation, contract rates, opex and capital requirments of the rigs. A discount rate of 10.5% has been applied.

Note 2 - Debt and financing

The Company completed a USD 125 million secured bond in the Norwegian bond market in April 2014. The bond was issued with an interest rate of 7% with maturity in April 2019. Repayment terms are USD 5 million six monthly and commenced in October 2014

Total
Secured Bond 125,000
Repayment of debt (15,000)
Total debt per end of accounting period 110,000
Current portion of long term debt
Long term debt per end of period
10,000
100,000
110,000

Note 3 - Related party transactions

in USD thousands except per share data

In the normal course of its business, Awilco Drilling enters into a number of transactions with Awilhelmsen which is a major shareholder through its wholly owned subsidiary Awilco Drilling AS.

Transactions with Awilhelmsen are specified as follows:

YTD Q4 2015

Purchases (531)
Payables (189)

Note 4 - Segment information

The company owns the semi submersible rigs WilHunter and WilPhoenix. Currently, the company is only operating in the mid water segment in the UK sector of the North Sea. The potential market for the rigs will be the international drilling market. As the rigs are managed as one business segment, the Company has only one reportable segment.

Note 5 - Restricted cash

The company has restricted cash of USD 1.45 million which has been deposited in relation to the forward hedge agreements.

Note 6 - Corporation taxes

Corporation tax provision is based on the tax laws and rates in the countries the rigs are operated and where the rigs are owned. During Q4 the rigs were operational and average tax rates have been applied consistent with the prevailing average tax rate for the year.

Note 7 - Capital commitments

Outstanding Capital Commitments as at the end of Quarter 4 were USD 15.1 million.

Note 8 - Share capital

As of 31 December 2015 total outstanding shares in the Company was 30,031,500 with a nominal value per share of GBP 0.0065. The share capital and share premium reserve below are expressed in USD at the exchange rate at time of conversion from USD to GBP.

Shares Par value
per share
Share
capital
Share premium
reserve
Share capital per 31 December 2015 30,031,500 £0.0065 304,173 129,837,405
Basic/diluted average number of shares,
1 January - 31 December 30,031,500
Basic/diluted average number of shares, YTD 30,031,500
Ranking Shares Ownership
AWILHELMSEN OFFSHORE 12,998,938 43.28%
UBS SECURITIES LLC 3,323,016 11.07%
EUROCLEAR BANK S.A./ 1,888,652 6.29%
CITIBANK, N.A. 1,394,724 4.64%
CITIBANK, N.A. 1,169,839 3.90%
CITIGROUP GLOBAL MAR 1,131,100 3.77%
JPMORGAN CHASE BANK 1,045,260 3.48%
AVANZA BANK AB 676,067 2.25%
MERRILL LYNCH,PIERCE 635,561 2.12%
CLEARSTREAM BANKING 418,183 1.39%
JPMORGAN CHASE BANK 371,521 1.24%
NORDNET BANK AB 362,435 1.21%
DEUTSCHE BANK AG 293,185 0.98%
UBS SECURITIES LLC 260,877 0.87%
PERSHING LLC 201,966 0.67%
FIRST CLEARING A/C L 172,417 0.57%
SIX SIS AG 170,628 0.57%
GOLDMAN SACHS INTERN 161,668 0.54%
JPMORGAN CHASE BANK 152,809 0.51%
JP MORGAN CLEARING C 136,056 0.45%
OTHER 3,066,598 10.21%
30,031,500 100.00%

Note 9 - Derivative Financial Instrument

in USD thousands

31.12.2015
(unaudited)

Fair value of foreign currency forward contracts \$443k

The foreign currency forward contracts were entered into in order to minimise the Group's exposure to losses resulting from adverse fluctuations in foreign currency exchange rates on monthly operating expenses. The fair value of the forward exchange contracts, as shown above, is recorded as other income in the Statement of Comprehensive Income and classified as accruals in the Statement of Financial Position.

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