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Awilco Drilling PLC

Earnings Release May 9, 2018

3547_rns_2018-05-09_28c64f15-c6a9-4dbf-b520-bae5c7df4aaf.pdf

Earnings Release

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FIRST QUARTER 2018

Awilco Drilling PLC is a UK based offshore drilling company owning and operating two semi submersible drilling rigs. The Company has also ordered one new build rig of Moss CS60 ECO MW design equipped for drilling in harsh environments. The Company is listed at the Oslo Stock Exchange (Oslo Axess) under the ticker code AWDR.

Q1 Report – Highlights

  • Awilco Drilling PLC reported contract revenue of USD 34.1 million (USD 33.9 million in Q4 2017), EBITDA USD 24.0 million (USD 24.5 million in Q4 2017) and net profit of USD 19.1 million (USD 16.9 million loss in Q4 2017).
  • Revenue efficiency was 98.0% during the quarter (95.2 % in Q4 2017).
  • Contract utilisation was 50.0% during the quarter, (50 % in Q4 2017).
  • Contract backlog at the end of Q1 was approximately USD 7.6 million (approximately USD 41 million Q4 2017).
  • During the quarter, a contract was signed with Keppel FELS shipyard in Singapore for the building of one new CS60 ECO MW semisubmersible drilling rig, with options to build up to three additional rigs, such options to be independent of each other.
  • The Board approved a dividend distribution payable in Q2 2018 of USD 0.20 per share. The shares will trade ex-dividend on 22 May 2018, the record date is 23 May 2018 and the payment date is on or around 22 June 2018.

Key financial figures:

In USD million, except EPS

USD million Q1 2018 Q4 2017 Q3 2017 2017
Contract revenue 34.1 33.9 32.4 131.7
Operating expenses 7.2 7.2 8.1 27.8
EBITDA 24.0 24.5 20.9 94.8
Net profit/(loss) 19.1 (16.9) 14.2 28.2
EPS 0.62 (0.56) 0.47 0.94
Total assets 409.6 331.9 368.8 331.9
Total equity 308.2 231.2 254.1 231.2
Interest bearing debt 90.0 90.0 95.0 90.0
Gearing ratio -0.8% -14.5% -8.9% -14.5%

Financial Results – Quarter 1, 2018

At the end of Q1 2018, the WilPhoenix was in operations for Apache North Sea Ltd at the Garten location and the WilHunter was cold stacked in Invergordon.

Comprehensive Income Statement

Awilco Drilling reports total comprehensive profit for the first quarter 2018 of USD 19.1 million.

Revenue earned in the first quarter was USD 34.1 million.

In the first quarter Awilco Drilling had rig operating expenses of USD 7.2 million. General and administration expenses were USD 2.8 million. This includes USD 0.6 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 first quarter was USD 24.0 million while the operating profit was USD 20.6 million.

Interest expense amounted to USD 1.6 million, which relates to accrued interest on the secured bond.

Profit before tax was USD 19.8 million. The tax expense for the quarter was USD 0.7 million resulting in a net profit of USD 19.1 million. Earnings per share (EPS) for the first quarter were USD 0.62.

In late March 2018, a private placement of 17,600,000 shares was carried out. After the issue, the total share capital of Awilco Drilling is GBP 309,604.75 divided into 47,631,500 shares, up from GBP 195,204.75 divided into 30,031,500 shares as at the end of 2017.

In addition, a subsequent offering of up to 1,400,000 shares will be carried out once a prospectus is approved by the Norwegian Financial Supervisory Authority, expected to be around late May 2018. The purpose of the share issue was to fund the deposit on the new build rig.

Statement on financial position

As of 31 March 2018, total assets amounted to USD 409.6 million. At the same date, Awilco Drilling had USD 92.5 million in cash and cash equivalents.

Operations and Contract Status

WilPhoenix

In Q1 2018 the WilPhoenix was in continued operations for Apache North Sea Ltd at the Val D'Isere location before moving to the Garten location where it remained through the end of the quarter. On 5 April 2018 the rig moved to the N11A abandonment well and finished operations with the Apache contract on 25 April 2018.

Revenue efficiency for the quarter was 98.0%. Contract utilisation was 100%.

At the end of March, WilPhoenix had a total remaining contract backlog of approximately USD 7.6 million.

WilHunter

During Q1 2018 the WilHunter was cold 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 uncertain future market prospects. In view of the Company's new building programme, the Board intends to review the future dividend policy.

Organisation

At the end of Q1 2018, Awilco Drilling's Aberdeen based employees numbered 26 permanent personnel supported by 2 contractors. Awilco Drilling Pte. Ltd. offshore personnel numbered 116 permanent personnel. The Awilhelmsen Group continues to supply some support personnel via the management agreement.

Market Outlook

AWDR sees limited further opportunities in the UK in 2018 but enquiries suggest that demand in 2019 will be incrementally higher than this year. Lower levels of winter utilisation are however likely to persist into 2020. Attrition in the harsh environment mid-water space continues and this coupled with stable commodity pricing and forecast decommissioning demand is expected to underpin higher future levels of utilization. In the NCS Ultra Harsh Environment space, fixture activity, rate development and asset transaction values are supportive of AWDR's long term view of this market.

Statement of Responsibility

We confirm that, to the best of our knowledge, the condensed set of financial statements for the first quarter of 2018, 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, 8 May, 2018

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 47 631 500.

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

Q1 2018 Q1 2017
(unaudited) (unaudited)
Contract revenue 33,759 31,647
Reimbursables 343 296
Other revenue 1 6
34,103 31,949
Rig operating expenses 7,223 6,122
Reimbursables 141 42
General and administrative expenses 2,782 1,013
Depreciation 3,402 3,848
13,548 11,025
Operating profit 20,555 20,924
Interest income 550 32
Interest expense (1,642) (1,817)
Other financial items 358 185
Net financial items (734) (1,600)
Profit before tax 19,821 19,324
Tax expense (706) (3,523)
Net profit 19,115 15,801
Total comprehensive income 19,115 15,801
Attributable to shareholders of the parent 19,115 15,801
Basic and diluted earnings per share 0.62 0.53

Condensed statement of financial position

in USD thousands

31.03.2018 31.12.2017
(unaudited) (audited)
Rigs, machinery and equipment 217,935 178,808
Deferred tax asset 1,483 1,372
219,418 180,180
Trade and other receivables 73,837 17,168
Prepayments and accrued revenue 13,173 6,905
Inventory 4,809 4,809
Cash and cash equivalents 92,472 119,286
Current tax 5,903 3,551
190,194 151,719
Total assets 409,612 331,899
Paid in capital 194,060 130,142
Retained earnings 114,177 101,068
308,237 231,210
Long-term interest-bearing debt 80,000 80,000
80,000 80,000
Current portion of long-term debt 10,000 10,000
Trade and other creditors 926 1,170
Accruals and provisions 10,449 9,519
21,375 20,689
Total equity and liabilities 409,612 331,899

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, 2016. This interim report should be read in conjunction with the audited 2016 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
Cost
Opening balance 1 Jan 2018 381,213 1,898 383,111
Additions 42,529 - 42,529
Closing balance 423,742 1,898 425,640
Depreciation
Opening balance 1 Jan 2018 (202,939) (1,364) (204,303)
Depreciation charge (3,386) (17) (3,403)
Accumulated depreciation per ending balance (206,325) (1,381) (207,706)
Net carrying amount at end of period 217,417 517 217,934
Expected useful life 5-20 years 3-10 years
Depreciation rates 5% - 20% 10% - 33%
Depreciation method Straight line Straight line

Note 2 - Debt and financing

Residual value per rig is USD 15 million.

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

YTD Q1 2018

Total
Secured Bond 125,000
Repayment of debt (35,000)
Total debt per end of accounting period 90,000
Current portion of long term debt 10,000
Long term debt per end of period 80,000
90,000

Note 3 - Related party transactions

in USD thousands except per share data

Transactions with Awilhelmsen are specified as follows:

Purchases (351)
Payables (370)

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 1.0 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 Q1 the 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 1 were USD 1.8 million.

Note 8 - Share capital

As of 31 March 2018 total outstanding shares in the Company was 47,631,500 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. The total project cost for the WilPhoenix reactivation project is USD 70M. Awilco Drilling Limited and the wholly owned subsidiaries, Awilco Arctic II Ltd and Awilco Arctic IV Ltd, were incorporated late

Par value Share Share premium
Shares per share capital reserve
Share capital per 31 March 2018 47,631,500 £0.0065 464,588 193,595,465
Basic/diluted average number of shares,
1 January - 31 March 30,813,722
Basic/diluted average number of shares, YTD 30,813,722
Ranking Shares Ownership
AWILHELMSEN OFFSHORE 17,919,938 37.62%
UBS SECURITIES LLC 4,799,747 10.08%
AKASTOR AS 2,700,000 5.67%
UBS SECURITIES LLC 2,205,455 4.63%
CITIBANK, N.A. 1,896,416 3.98%
EUROCLEAR BANK S.A./ 1,721,619 3.61%
DEUTSCHE BANK AKTIEN 1,265,000 2.66%
CITIGROUP GLOBAL MAR 1,129,000 2.37%
VERDIPAPIRFONDET DNB 1,113,917 2.34%
SEB PRIME SOLUTIONS 1,000,000 2.10%
BANK OF AMERICA, N.A 983,158 2.06%
STRAWBERRY CAPITAL A 825,000 1.73%
CITIBANK, N.A. 727,064 1.53%
AVANZA BANK AB 654,290 1.37%
CLEARSTREAM BANKING 586,025 1.23%
KLP ALFA GLOBAL ENER 520,000 1.09%
FIRST GENERATOR 466,270 0.98%
SUNDT AS 375,000 0.79%
MSIP EQUITY 358,940 0.75%
TVENGE TORSTEIN INGV 350,000 0.73%
OTHER 6,034,661 12.67%
47,631,500 100.00%

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