Earnings Release • Aug 14, 2019
Earnings Release
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Awilco Drilling PLC is a North Sea Drilling Contractor owning and operating two refurbished and enhanced UK compliant 3rd generation mid-water semi-submersible drilling rigs. The Company has also ordered two new build rigs of Moss CS60 ECO MW design equipped for drilling in harsh environments, including the Barents Sea. The Company is listed at the Oslo Stock Exchange under the ticker code AWDR.
In USD million, except EPS
| USD million | Q2 2019 | Q1 2019 | Q4 2018 | 2018 |
|---|---|---|---|---|
| Contract revenue | 10.4 | 9.1 | 10.2 | 56.5 |
| Operating expenses | 6.1 | 6.3 | 5.5 | 27.3 |
| EBITDA | 2.5 | (0.3) | 4.6 | 20.2 |
| Net loss | (0.4) | (2.4) | (24.2) | (22.9) |
| EPS | (0.01) | (0.05) | (0.49) | (0.52) |
| Total assets | 284.4 | 286.3 | 268.2 | 268.2 |
| Total equity | 278.8 | 279.2 | 261.4 | 261.4 |
Awilco Drilling reports total comprehensive loss for the second quarter 2019 of USD 0.4 million.
Revenue earned in the second quarter was USD 10.4 million. This includes other revenue of USD 0.8 million, of which USD 0.6 million was in respect of bonus arrangements under the Shell contract.
In the second quarter Awilco Drilling had rig operating expenses of USD 6.1 million. General and administration expenses were USD 1.8 million. This includes a credit of USD 0.3 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 second quarter was USD 2.5 million while the operating loss was USD 0.2 million.
Loss before tax was USD 0.3 million. The tax expense for the quarter was USD 0.1 million resulting in a net loss of USD 0.4 million. Earnings per share (EPS) for the second quarter were USD (0.01).
As of 30 June 2019, total assets amounted to USD 284.4 million. At the same date, Awilco Drilling had USD 42.4 million in cash and cash equivalents.
In Q2 2019 the WilPhoenix was in continued operations for Shell UK Ltd at the Gannet location and moved to the Heron location in late June where it remained until after the end of the quarter.
Revenue efficiency for the quarter was 90.5%. Contract utilisation was 100%.
At the end of June, WilPhoenix had a total remaining contract backlog of approximately USD 14.3 million.
During Q2 2019 the WilHunter was cold stacked in Invergordon.
Construction continues on Rig #1 in accordance with the contract and scheduled delivery in March 2021. Rig # 2 will cut steel by the end of Q3 2019 and scheduled delivery is in March 2022.
With the ordering of two new-build high-end semi-submersible rigs, plus an agreement for a further two independent rig options, the Company is in a growth and investment phase. Dividend payments have therefore been suspended and will resume when the Company again reaches an appropriate free cash flow situation.
At the end of Q2 2019, Awilco Drilling's Aberdeen based employees numbered 27. Awilco Drilling Pte. Ltd. offshore personnel numbered 114 plus 2 onshore personnel. The Awilhelmsen Group continues to supply some support personnel via the management agreement. During Q2 2019, work continued on building the Norwegian shorebase organisation with the recruitment of key personnel and the formation of Awilco Drilling Norge AS.
We continue to see strong demand for modern high end semi-submersibles in Norway and internationally with recent fixtures marking positive rate development and 2020 clear availability now limited. The UK market is expected to remain somewhat seasonal as we look towards 2020 but we expect a number of fixtures in the near term in support of high levels of utilisation for the marketed fleet in Q2 and Q3.
We confirm that, to the best of our knowledge, the condensed set of financial statements for the second quarter of 2019, 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.
On 13 August, Awilco Drilling received notice from Shell that they would not be exercising the remaining contract options on WilPhoenix for two abandonment wells and three exploration wells.
Aberdeen, 13 August, 2019
The Board of Directors of Awilco Drilling PLC
CEO: Jens Berge Phone: +44 1224 737900
Investor Relations: Cathrine Haavind Mobile: +47 93 42 84 64 E-mail: [email protected]
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. The Company has ordered two new build rigs of Moss CS60 ECO MW design equipped for drilling in harsh environments, including the Barents Sea. Awilco Drilling also has options for a further two rigs of the same design.
Awilco Drilling was listed on the Oslo Stock Exchange (Oslo Axess) in June 2011 under ticker code AWDR and transferred to the Oslo Stock Exchange main list early September 2018. 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 54,581,500 .
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.
| in USD thousands, except earnings per share | YTD | YTD | ||
|---|---|---|---|---|
| Q2 2019 | 30.06.19 | Q2 2018 | 30.06.18 | |
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| Contract revenue | 9,636 | 18,608 | 8,927 | 42,686 |
| Reimbursables | - | (24) | 67 | 411 |
| Other revenue | 802 | 916 | 2 | 2 |
| 10,438 | 19,500 | 8,996 | 43,099 | |
| Rig operating expenses | 6,131 | 12,384 | 7,440 | 14,663 |
| Reimbursables | - | 2 | 30 | 172 |
| General and administrative expenses | 1,799 | 4,932 | 3,445 | 6,228 |
| Depreciation | 2,746 | 5,397 | 3,146 | 6,548 |
| 10,676 | 22,715 | 14,061 | 27,611 | |
| Operating (loss)/profit | (238) | (3,215) | (5,065) | 15,488 |
| Interest income | 71 | 604 | 506 | 1,056 |
| Interest expense | - | - | (3,025) | (4,667) |
| Other financial items | (163) | (21) | 19 | 378 |
| Net financial items | (92) | 583 | (2,500) | (3,233) |
| (Loss)/Profit before tax | (330) | (2,632) | (7,565) | 12,255 |
| Tax expense | (62) | (112) | (50) | (756) |
| Net (loss)/profit | (392) | (2,744) | (7,615) | 11,499 |
| Total comprehensive (loss)/income | (392) | (2,744) | (7,615) | 11,499 |
| Attributable to shareholders of the parent | (392) | (2,744) | (7,615) | 11,499 |
| Basic and diluted earnings per share | (0.01) | (0.05) | (0.16) | 0.29 |
in USD thousands
| 30.06.2019 | 30.06.2018 | |
|---|---|---|
| (unaudited) | (unaudited) | |
| Rigs, machinery and equipment | 226,501 | 215,182 |
| Deferred tax asset | 352 | 1,435 |
| 226,853 | 216,617 | |
| Trade and other receivables | 7,970 | - |
| Prepayments and accrued revenue | 2,059 | 1,021 |
| Inventory | 4,808 | 4,958 |
| Cash and cash equivalents | 42,397 | 75,787 |
| Current tax | 340 | 5,995 |
| 57,574 | 87,761 | |
| Total assets | 284,427 | 304,378 |
| Paid in capital | 218,905 | 198,719 |
| Retained earnings | 59,927 | 97,035 |
| 278,832 | 295,754 | |
| Trade and other creditors | 983 | 1,068 |
| Accruals and provisions | 4,612 | 7,556 |
| Current tax payable | 0 | 0 |
| 5,595 | 8,624 | |
| Total equity and liabilities | 284,427 | 304,378 |
in USD thousands
| Other equity (retained |
|||
|---|---|---|---|
| Paid-in-equity | earnings) | Total equity | |
| Equity at 1 January 2018 | 130,141 | 101,068 | 231,209 |
| Equity issue at 27 March 2018 | 64,937 | 64,937 | |
| Equity issue costs at 27 March 2018 | (1,017) | (1,017) | |
| Equity issue at 22 June 2018 | 4,658 | 4,658 | |
| Total comprehensive loss to 31 December 2018 | - | (22,864) | (22,864) |
| Dividends paid | (15,533) | (15,533) | |
| Balance as at 31 December 2018 | 198,719 | 62,671 | 261,390 |
| Equity issue at 13 March 2019 | 20,595 | 20,595 | |
| Equity issue costs at 13 March 2019 | (409) | (409) | |
| Total comprehensive loss to 30 June 2019 | - | (2,744) | (2,744) |
| Balance as at 31 March 2019 | 218,905 | 59,927 | 278,832 |
| Q2 2019 | Q2 2018 | |
|---|---|---|
| (unaudited) | (unaudited) | |
| Cash flow from operating activities | ||
| (Loss)/Profit before tax | (2,632) | 12,255 |
| Depreciation | 5,397 | 6,548 |
| Interest cost | (604) | 3,611 |
| Sharebased payment | (651) | 1,772 |
| Decrease in trade and other receivables | 1,105 | 17,169 |
| Increase in stock | - | (149) |
| Decrease in prepayments and accrued revenue | 804 | 5,884 |
| Decrease in trade and other payables | (471) | (5,413) |
| Interest paid | - | (3,092) |
| Interest received | 604 | 1,056 |
| Taxation paid | (70) | (3,262) |
| Net cash flow from operating activities | 3,482 | 36,379 |
| Cash flow from investing activities | ||
| Purchase of property, plant and equipment | (45,136) | (42,922) |
| Net cash flow from investing activities | (45,136) | (42,922) |
| Cash flow from financing activities | ||
| Proceeds from issue of share capital | 20,595 | 69,595 |
| Equity issue costs | (409) | (1,018) |
| Dividends paid | 0 | (15,533) |
| Repayment of loans | 0 | (90,000) |
| Net cash flow from financing activities | 20,186 | (36,956) |
| Net increase/(decrease) in cash and cash equivalents | (21,468) | (43,499) |
| Cash and cash equivalents at beginning of the period | 63,865 | 119,286 |
| Cash and cash equivalents at the end of the period | 42,397 | 75,787 |
These unaudited interim condensed financial statements have been prepared in accordance with IAS 34 "Interim financial reporting".
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, 2018. This interim report should be read in conjunction with the audited 2018 financial statements, which include a full description of the Group's significant accounting policies.
in USD thousands
| Semi submersible | Assets Under | Other fixtures and | ||
|---|---|---|---|---|
| drilling rigs/SPS | Construction | equipment | Total | |
| Cost | ||||
| Opening balance 1 January 2019 | 306,256 | 44,384 | 1,908 | 352,548 |
| Additions | 817 | 44,244 | 76 | 45,137 |
| Closing balance | 307,073 | 88,628 | 1,984 | 397,685 |
| Depreciation | ||||
| Opening balance 1 January 2019 | (164,382) | - | (1,404) | (165,786) |
| Depreciation charge | (5,368) | - | (28) | (5,396) |
| Accumulated depreciation per ending balance | (169,750) | - | (1,432) | (171,182) |
| Net carrying amount at end of period | 137,323 | 88,628 | 552 | 226,503 |
| 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. |
in USD thousands
Transactions with Awilhelmsen are specified as follows:
| YTD Q2 2019 | |
|---|---|
| Purchases | (276) |
| Payables | (96) |
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.
The company has restricted cash of USD 1.2 million which has been deposited in relation to the forward hedge agreements.
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 Q2 the average tax rates have been applied consistent with the prevailing average tax rate for the year.
Outstanding Capital Commitments as at the end of Quarter 2 were USD 766.7 million, of which USD 764.7 million relate to the two new build rigs.
As of 30 June 2019 total outstanding shares in the Company was 54,581,500 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
| Shares | Par value per share |
Share capital |
Share premium reserve |
|
|---|---|---|---|---|
| Share capital per 30 June 2019 | 54,581,500 | £0.0065 | 524,699 | 218,380,597 |
| Basic/diluted average number of shares, | ||||
| 1 April - 30 June | 54,581,500 | |||
| Basic/diluted average number of shares, YTD | 52,361,500 | |||
| Ranking | Shares | Ownership | ||
| AWILHELMSEN OFFSHORE AS | 20,240,814 | 37.1% |
|---|---|---|
| UBS SECURITIES LLC | 9,672,216 | 17.7% |
| AKASTOR AS | 3,049,673 | 5.6% |
| Euroclear Bank S.A./N.V. | 2,250,244 | 4.1% |
| Citibank, N.A. | 1,871,087 | 3.4% |
| VERDIPAPIRFONDET DNB NORGE (IV) | 1,495,608 | 2.7% |
| SEB PRIME SOLUTIONS SISSENER CANOP | 1,437,095 | 2.6% |
| State Street Bank and Trust Comp | 1,404,704 | 2.6% |
| Citigroup Global Markets Inc. | 1,145,321 | 2.1% |
| Svenska Handelsbanken AB | 828,969 | 1.5% |
| Bank of America, N.A. | 750,148 | 1.4% |
| KLP ALFA GLOBAL ENERGI | 574,496 | 1.1% |
| CLEARSTREAM BANKING S.A. | 570,895 | 1.0% |
| Avanza Bank AB | 549,738 | 1.0% |
| Citibank, N.A. | 534,557 | 1.0% |
| STRAWBERRY CAPITAL AS | 519,340 | 1.0% |
| MOHN | 474,827 | 0.9% |
| SUNDT AS | 472,130 | 0.9% |
| TVENGE | 450,000 | 0.8% |
| The Northern Trust Comp, London Br | 363,404 | 0.7% |
| OTHER | 5,926,234 | 10.9% |
| 54,581,500 | 100.00% |
in USD thousands
| 30.06.2019 (unaudited) |
||
|---|---|---|
| Fair value of foreign currency forward contracts | 153 | |
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 financial items in the Statement of Comprehensive Income and classified as accruals in the Statement of Financial Position.
On 13 August, Awilco Drilling received notice from Shell that they would not be exercising the remaining contract options on WilPhoenix for two abandonment wells and three exploration wells.
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