Q1 2020 RESULTS
Oslo, 7th of May 2020
Bjørn Petter Lindhom, CEO Anders Eimstad, CFO
Disclaimer
This quarterly presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. Such forward-looking information and statements are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Electromagnetic Geoservices ASA (EMGS) and its subsidiaries. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for the EMGS' businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time. Although Electromagnetic Geoservices ASA believes that its expectations and the information in this Report were based upon reasonable assumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this Report. Electromagnetic Geoservices ASA nor any other company within the EMGS Group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the Report, and neither Electromagnetic Geoservices ASA, any other company within the EMGS Group nor any of their directors, officers or employees will have any liability to you or any other persons resulting from your use of the information in the Report. Electromagnetic Geoservices ASA undertakes no obligation to publicly update or revise any forward-looking information or statements in the Report.
Q1 2020
Operational highlights
- Completion of acquisition work for Pemex
- Commencement of fully prefunded Martin Linge multi-client survey in Norway
- Start transit towards Norway in preparation of cold stacking the Atlantic Guardian
Financial highlights
- Revenues of USD 11.3 million
- EBITDA of USD 3.1 million
- Adjusted EBITDA negative USD 0.8 million
Subsequent events
- Credit facility reduced from USD 10 million to USD 2.5 million as part of cost reductions
- Net revenue from multi-client contract of approx. USD 1.7 million
Operations, Market and Outlook
Contract cancellations and delays
- Received notification from Pemex that no additional acquisition work would be forthcoming in the short to medium term
- BP cancelled the Mauritania and Senegal contract (approx. USD 2 million cancellation fee)
- Received notification from BP of cancellation of 2020 Canada CSEM survey plans
- Planned (H2 2020) Namibia campaign delayed
- Company does not expect to acquire additional data in 2020 after completing the Martin Linge area multi-client project
Restructuring and transition to a low-cost setup
- Cold stacking of the Atlantic Guardian
- Return of the Petrel Explorer at end of firm charter period (end May)
- Permanent personnel reductions of approximately 90% (including employees, contractors and consultants)
- Closing offices outside of Norway
- Consolidating all employees to one office (in Oslo)
Challenging financial outlook
- Preservation of liquidity key
- Initiated cost reduction process aiming at reducing quarterly cash cost to approximately USD 4 million by end 2020
- Pemex payment delays continues
- Future revenue
- Working to build 2021 NCS summer campaign
- Late sales from existing multi-client library to bridge liquidity need until the company reassumes acquisition
- Highly challenging short-term outlook Continued operation dependent on
- Timely and successful implementation of cost reductions
- Reduction of other interest and non-interest bearing liabilities
- Timely receipt of Pemex revenue
- Additional late sales
First quarter 2020 performance I Development in revenues and EBITDA
0 10 20 30 40 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Revenues Contact sales Multi-client revenues 37 11 14 27 11
Key financial metrics Quarterly development (USD million)
- Revenues
- USD 11.3 million
- Proprietary work in Mexico
- Contract termination fee of approx. USD 2 million
- Vessel utilisation of 26%
- Two vessels on charter
- EBITDA
- USD 3.1 million
- Adjusted EBITDA* of negative USD 0.8 million
*Adjusted EBITDA includes capitalised multi-client expenses and vessel and office lease expenses
9
Operational costs
Quarterly operational cost base* development (USD million)
Comments
- Operational costs base in Q1 20 of USD 12.1 million
- USD 4.2 million lower than Q4 2019
- Reverse bonus accrual (USD -1.6 million) as a result of cancellation of 2019 bonus
- Lower cost associated with lower activity level
- Target operational cost base at the end of the year is USD 4.0 million
*Cost base is defined as operational costs (charter hire etc, employee expenses, other operating expenses) plus MC investments and vessel and office lease payments presented as financial leases from 1 January 2019, restructuring charges and other extraordinary items
- Charter hire, fuel and crew expenses
- Vessel and office lease expenses
- Other operational expenses
- Employee expenses
Decrease in free cash in Q1 2020
Quarterly free cash development (USD million) Comments
- Net decrease in free cash of USD 3.7 million to USD 16.0 million
- Trade receivables decreased by USD 9.3 million to USD 14.2 million
- Continued delays in some of the payments under on-going contract for the quarter
- USD 2.8 million deposited in the pledge account related to counter guarantee
- Adjusted EBITDA of negative USD 0.8 million
Summary
- Initiated cost reduction program and transition to low-cost setup
- Building acquisition campaign for 2021
- Challenging short to medium term financial outlook, but with significantly reduced cost base and increased flexibility in the long term