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Seabird Explorat Interim / Quarterly Report 2009
9920_rns_2010-02-26_5f4baed9-d75a-425b-adec-d2ab9460ee3f.pdf
Interim / Quarterly Report
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SeaBird Exploration
SEABIRD EXPLORATION GROUP FOURTH QUARTER 2009
SeaBird Exploration Group • Interim Results • Fourth Quarter 2009 • Page 1 of 11
SeaBird Exploration
HIGHLIGHTS FOURTH QUARTER 2009
- Following a successful completion of the Ocean Bottom Node (OBN) survey for BP by Hugin Explorer and Kondor Explorer in Gulf of Mexico end of Q3 2009, the vessels were mobilized to Nigeria, where an expected 6 months survey started 30 November for Star Deepwater Petroleum Limited, an affiliate of Chevron Nigeria Ltd.
- As a consequence of the increased number of awarded contracts to SeaBird in the 2D/3D segment and mobilization of all vessels back to work during Q4 2009, utilization of the 2D/3D vessels increased from $51\%$ to $75\%$ from Q3 to Q4 2009.
- A private placement was completed 10 November towards institutional and private investors of 54 million new shares at NOK 3.50 per share. This increased issued shares to 174,895,831. Total gross proceeds from the share issue were NOK 189 million.
| KEY FIGURES All figures in USD 1,000 | Quarter ended 31 Dec | Year ended 31 Dec | ||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Revenues | 41,116 | 60,848 | 161,625 | 215,786 |
| EBITDA | (671) | 13,387 | 11,327 | 69,465 |
| EBIT | (11,446) | (13,837) | (32,381) | 17,620 |
| EBIT excluding impairment charges | (9,738) | 2,062 | (30,673) | 33,519 |
| Profit (loss) | (16,867) | (715) | (61,771) | 20,160 |
| Earnings per share (diluted) | (0.14) | 0.19 | (0.53) | 0.22 |
| Cash flow from operations | (12,758) | 6,498 | 6,104 | 57,642 |
| CAPEX | 8,726 | 169 | 33,350 | 60,164 |
| Total assets | 426,675 | 441,368 | 426,675 | 441,368 |
| Net interest bearing debt including finance leases | 168,233 | 172,658 | 168,233 | 172,658 |
| Equity ratio | 48% | 49% | 48% | 49% |
Revenues
USD millions
EBITDA
USD millions
SeaBird Exploration Group • Interim Results • Fourth Quarter 2009 • Page 2 of 11
SeaBird Exploration
KEY FINANCIAL PERFORMANCE FIGURES
For comparisons of income and expenses between 2009 and 2008, it must be noted that the financing and level of operating activity for the SeaBird Group ("SeaBird") has changed considerably. The Ocean Bottom Node ("OBN") survey with the Hugin Explorer commenced in September 2008, and the revenue day rates on the 2D seismic and source vessels have been reduced significantly since 2008. In addition, the utilization of the 2D/3D/Source vessels was down in Q3 2009 to 51% following long periods of idle time and lay-up of vessels. The overall utilization for our 2D/3D/Source vessels in 2009 was 70% against 85% in average for 2008.
Consolidated revenues for the SeaBird Group are increased to USD 41.1 million in Q4 2009 from USD 28.9 million in Q3 2009, in line with improved utilization for all vessels to 80% in Q4 2009 compared to 55% in Q3 2009.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") were negative USD 0.7 million in Q4 2009 compared with negative USD 1.2 million in Q3 2009. More 2D vessels were generating revenues, but this was partly offset by an increase in operating expenses to USD 36.3 million in Q4 2009 from USD 25.2 million in Q3 2009. This increase was mainly due to increasing crew and maintenance cost to normal levels on vessels mobilizing from idle status to operations. In addition operating cost in Nigeria (from end November) for Hugin Explorer and Kondor Explorer is considerably higher than in the US Gulf of Mexico.
Selling, general and administrative ("SG&A") expenses remained on the same level in Q4 2009 as in Q3 2009 at USD 5.9 million.
Depreciation is on the same level as in previous quarters apart from USD 1.7 million reclassified to impairment, originally recorded under depreciation in Q2.
Interest expense is continuing on the same level in Q4 at USD 3 million as in Q3 2009. Other financial items for the quarter of USD 1.5 million refers to unrealized loss on Exchange.
The income tax of USD 0.8 million in Q4 2009 refers mainly to withholding tax in various jurisdictions around the world where the SeaBird vessels have been operating.
Loss in Q4 2009 was USD 16.9 million compared to a loss in Q3 2009 of USD 24.7 million and a loss in Q4 2008 of USD 0.7 million.
Revenues were USD 161.6 million and the EBITDA USD 11.3 million for the full year 2009. Comparable figures for 2008 were revenues of USD 215.8 million and EBITDA of USD 69.5 million, main changes explained above. Loss for 2009 is USD 61.8 million compared to a profit of USD 20.2 million for 2008.
Capital expenditure was USD 8.7 million during Q4 2009, mainly referring to dry-docking and classification of the vessels Osprey Explorer and Hawk Explorer with USD 3.7 million and multi client USD 3.3 million. For 2009 capital cost amounted to USD 33.4 million in total, of which USD 8 million referred to acquiring seismic equipment to Aquila Explorer (initiated in 2008), 250 additional Ocean Bottom Nodes and various modification/upgrade of Hugin Explorer and Kondor USD 12 million, and USD 6 million referred to classification and dry-docking of 3 vessels, USD 3 million was spent on capital maintenance throughout the 2D fleet and USD 5 million was capitalized on multi client.
SeaBird Exploration Group • Interim Results • Fourth Quarter 2009 • Page 3 of 11
SeaBird Exploration
A weakening of USD against NOK and Euro has in general a negative impact on the operating expenses, interest expenses and gross debt as SeaBird has significant costs in other currencies and bond loans of a total of NOK 478 million.
OPERATIONAL HIGHLIGHTS Q4 2009
From a historic low utilization for the whole fleet operated by SeaBird Exploration in Q3 2009 at 55%, the utilization increased to 80% in Q4 2009 following a number of new contracts awarded to SeaBird during October and November. A proportion of this fleet time in Q4 was mobilization with lower revenue than full production.
The 2D and Source market has improved with a significantly higher volume in the tendering activity during the latter part of 2nd half of 2009, with a better balance between supply and demand. The rate levels are however still below what we experienced in 2008, partly due to some lower graded 3D vessels now competing in the 2D market. This part of SeaBird's business segment (including Geo Mariner) achieved an average utilization in Q4 2009 of 75%.
The Osprey Explorer was mobilized from cold stack mid October, and following completion of a periodical survey and dry dock in Singapore, commenced operation of a 2D survey in Indonesia beginning of December and is now working in Indian waters. Utilization Q4 was 26%.
Geo Mariner, our 3D shallow water vessel, made a short survey at the Seychelles in October. Thereafter she mobilized to Ghana to start a 3D survey beginning of December, completed 20 February 2010. The vessel is presently idle. Utilization was 75% in Q4.
Harrier Explorer continued on its long term time charter to PGS (ending 3rd Quarter 2011) with utilization of 97% in Q4 2009.
Following completion of the time charter with Fugro, Hawk Explorer completed a periodical survey and dry dock mid November, thereafter the vessel was mobilized to Gulf of Mexico to start on a 4 months contract as source vessel. Hawk's utilization was 80% including paid mobilization during the Quarter.
Following an idle period during all of Q3 2009 for Northern Explorer, a 5 weeks survey started 1st October in Indonesia. Thereafter the vessel started on a 13 000 km 2D survey plus options for a consortium of oil companies in Indonesia. This program could have duration of about 6 months. Utilization was 86% in Q4 2009.
Aquila Explorer resumed work early October 2009 in Indonesia after being idle for about two months and mobilized in December to west Australia where the vessel is expected to work for various clients in continuation through first half of 2010. Utilization in Q4 2009 was 83%.
Munin Explorer completed her surveys offshore Ireland and Greenland end of Q3 2009 and mobilized to Gulf of Mexico for a 2D survey starting mid October thereafter the vessel commenced early December as source vessel in Mexico. She is idle from 21 February 2010, but fixed from 1 June 2010 in the North Sea. Utilization was 79% in Q4.
Hugin Explorer and Kondor Explorer completed the OBN survey for BP in the Gulf of Mexico end of Q3 2009. During October and most of November the vessels mobilized to Nigeria via Las Palmas where some survey/maintenance work was carried out on Hugin Explorer, and the 250 new nodes were loaded onboard, increasing the total nodes in operation to 750.
SeaBird Exploration Group • Interim Results • Fourth Quarter 2009 • Page 4 of 11
SeaBird Exploration
The expected 6 months survey started 30 November for Star Deepwater Petroleum Limited, an affiliate of Chevron Nigeria Limited. During the first 3 months of the survey both Hugin Explorer deploying and retrieving nodes and Kondor Explorer as source (shooting) vessel have performed better than expected, and have operated without significant downtime while nodes have delivered data comfortably within the limit of tolerance. However during the mobilization period October and November mobilization fees received are much less than revenues generated during operations. This has had a negative effect on the Q4 2009 result.
LIQUIDITY AND FINANCING
Cash and cash equivalents at 31 December 2009 amounted to USD 14.5 million, compared to USD 7.6 million at the end of Q3 2009 and USD 14.9 million at the end of 2008. Net cash flow from operating activities for Q4 2009 was negative USD 12.8 million, compared to positive USD 3.8 million for Q3 2009. Q4 2008 was positive USD 6.5 million. The reduction in Q4 2009 is due to an increase in trade and other receivables of USD 10.7 million during the quarter.
During Q4 2009 instalments of USD 3.3 million were paid to banks and USD 0.7 million on the lease of Hawk Explorer. Net interest-bearing debt decreased to USD 168.2 million end of Q4 2009 from USD 179.1 million end of Q3 2009.
The NOK 200 million bond loan with maturity on 14 July 2009 was restructured and partly repaid at a discount during March and April 2009 through a Private Placement and new bank debt. Remaining balance due July 2011 is NOK 77.8 million.
The banks agreed in June 2009 to defer instalments of a total of USD 14.1 million due during June - December 2009 to be added as a balloon to the last instalments in 2011-2012.
A private placement was completed 10 November 2009 towards institutional and private investors of 54 million new shares at a price of NOK 3.50 per share. This increased number of issued shares to 174,895,831. Total gross proceeds from the share issue were NOK 189 million. A part of proceeds were used for general corporate purposes.
Due to the weak result in Q3 and Q4 2009 SeaBird was in breach of one of the covenants in the loan agreements, the Net Debt/EBITDA ratio. Waivers have been received from the banks that this does not represent a breach under the loan agreements.
At present SeaBird has about USD 12 million overdue receivables outstanding from various customers, and another USD 5-10 million equivalent tied up in local Nigerian currency. This is causing preliminary operating cash restraints for the Company. Steps have been taken to remedy this situation.
OUTLOOK
Following the increase in the number of awarded 2D contracts towards the end of 2009, there has continued to be a good volume of tenders being placed. These have in the most part been smaller tender invitations in the range of 2,000km to 7,000km and especially notable in the APAC and EAME regions. Revenue rates have increased only marginally over the last 6 months. We are however encouraged by the oil price being maintained at USD 70-80/bbl, and with the announced increased expenditures by oil companies for exploration and
SeaBird Exploration Group • Interim Results • Fourth Quarter 2009 • Page 5 of 11
SeaBird Exploration
production in 2010. Although the 2D/3D market is expected to remain soft during $1^{\text{st}}$ half 2010, we foresee $2^{\text{nd}}$ half 2010 with more optimism. SeaBird is not so exposed to overcapacity being in the 2D and 4C OBN sectors as those companies primarily operating in the 3D multi-streamer sector.
As a result of the successful operation with SeaBird's OBN survey with Hugin Explorer and Kondor Explorer, on both the BP contract in GOM and so far during the survey in Nigeria, SeaBird is experiencing increased interest from major oil companies in using OBN for both initial surveys and over time developing into repeat surveys on several shallow and deep water producing fields. Although this sector is still in its infancy compared to traditional seismic, SeaBird firmly believes this can materialize into long term engagements and is presently preparing an investment case for a second OBN vessel for 2011 operation. SeaBird has not yet secured the next contract after the present contract in Nigeria expected to be completed end of April. SeaBird has several bids under evaluation.
Based on all vessels being back in operation during Q4 2009, a higher utilization of the 2D vessels during Q1 2010, and a better than expected performance of the OBN operation, SeaBird is expecting a substantial improvement of the EBITDA in Q1 2010 compared to the last two quarters of 2009.
The Board of Directors and Chief Executive Officer
SeaBird Exploration Ltd
25 February 2010
SeaBird Exploration Group • Interim Results • Fourth Quarter 2009 • Page 6 of 11
SeaBird Exploration
CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
| Year ended 31 December | ||
|---|---|---|
| All figures in USD 1,000 | 2009 | 2008 |
| ASSETS | ||
| Non-current assets | ||
| Property, plant and equipment | 337,794 | 343,173 |
| Multiclient Data Library | 4,791 | 82 |
| Capital work in progress | 813 | |
| Goodwill | 8,996 | 8,996 |
| Patent technology | 4,054 | 4,293 |
| Deferred tax asset | 13,875 | 11,511 |
| 369,510 | 368,868 | |
| Current assets | ||
| Inventories | 3,411 | 3,779 |
| Trade receivables | 33,403 | 30,723 |
| Other current assets | 5,399 | 16,651 |
| Due from related parties | 437 | 349 |
| Cash and cash equivalents | 14,515 | 14,883 |
| Assets classified as held-for-sale | 6,115 | |
| 57,165 | 72,500 | |
| Total assets | 426,675 | 441,368 |
| EQUITY | ||
| Shareholders equity | ||
| Paid in capital | 161,113 | 120,033 |
| Revaluation reserve | 38,049 | 43,765 |
| Currency translation reserve | 807 | (5,335) |
| Share options granted | 7,158 | 6,375 |
| Retained earnings | (3,763) | 52,293 |
| 203,365 | 217,131 | |
| LIABILITIES | ||
| Non-current liabilities | ||
| Non-current interest-bearing debt | 115,183 | 100,182 |
| Non-current portion of capital lease obligations | 19,723 | 22,504 |
| Other long-term liabilities | 594 | 892 |
| 135,500 | 123,578 | |
| Current liabilities | ||
| Trade and other payables | 39,968 | 35,804 |
| Current portion of interest-bearing debt | 45,058 | 62,355 |
| Current portion of capital lease obligations | 2,784 | 2,500 |
| 87,810 | 100,659 | |
| Total liabilities | 223,310 | 224,237 |
| Total equity and liabilities | 426,675 | 441,368 |
| Net interest-bearing debt | 168,233 | 172,658 |
SeaBird Exploration Group • Interim Results • Fourth Quarter 2009 • Page 7 of 11
SeaBird Exploration
CONSOLIDATED INTERIM STATEMENT OF INCOME
| Quarter ended 31 Dec | Year ended 31 Dec | |||
|---|---|---|---|---|
| All figures in USD 1,000 | 2009 | 2008 | 2009 | 2008 |
| Revenue | 41,116 | 60,848 | 161,625 | 215,786 |
| Charter hire and operating expenses | (36,312) | (36,249) | (125,941) | (117,654) |
| Selling, general and admin expenses | (5,922) | (11,418) | (25,374) | (29,522) |
| Other income (expenses), net | 448 | 206 | 1,017 | 855 |
| Earnings before interest, tax, depreciation and amortization EBITDA | (671) | 13,387 | 11,327 | 69,465 |
| Depreciation and Amortization | (9,067) | (11,325) | (42,000) | (35,946) |
| Impairment | (1,708) | (15,899) | (1,708) | (15,899) |
| Earnings before interest and taxes (EBIT) | (11,446) | (13,837) | (32,381) | 17,620 |
| Interest expense | (3,069) | (4,358) | (13,882) | (16,779) |
| Other financial items, net | (1,526) | 13,472 | (9,206) | 20,036 |
| Profit (loss) before income tax | (16,041) | (4,723) | (55,468) | 20,877 |
| Income tax | (826) | 4,008 | (6,303) | (717) |
| Profit (loss) | (16,867) | (715) | (61,771) | 20,160 |
| Profit (loss) attributable to: Shareholders of the parent | (16,867) | (715) | (61,771) | 20,160 |
| Earnings per share | ||||
| - basic | (0.15) | 0.20 | (0.55) | 0.23 |
| - diluted | (0.14) | 0.19 | (0.53) | 0.22 |
CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
| Quarter ended 31 Dec | Year ended 31 Dec | |||
|---|---|---|---|---|
| All figures in USD 1,000 | 2009 | 2008 | 2009 | 2008 |
| Profit (loss) | (16,867) | (715) | (61,771) | 20,160 |
| Other comprehensive income | ||||
| Net movement in currency translation reserve and other changes | 279 | (4,774) | 6,142 | (6,884) |
| Changes in revaluation reserve | (271) | |||
| Total other comprehensive income, net of ta | 279 | (4,774) | 6,142 | (7,155) |
| Total comprehensive income | (16,588) | (5,489) | (55,629) | 13,005 |
| Total comprehensive income attributable to: Shareholders of the parent | (16,588) | (5,489) | (55,629) | 13,005 |
| Total | (16,588) | (5,489) | (55,629) | 13,005 |
SeaBird Exploration Group • Interim Results • Fourth Quarter 2009 • Page 8 of 11
SeaBird Exploration
CONSOLIDATED INTERIM STATEMENT OF CHANGE IN EQUITY
| All figures in USD 1,000 | Year ended 31 Dec 2009 | Year ended 31 Dec 2008 |
|---|---|---|
| Opening Balance | 217,131 | 179,622 |
| Profit/(loss) for the year | (61,771) | 20,160 |
| Increase/(decrease) in share capital | 41,080 | 22,342 |
| Changes in revaluation reserve | - | (271) |
| Share options granted | 783 | 2,162 |
| Net movements in currency translation reserve and other changes | 6,143 | (6,884) |
| Ending Balance | 203,366 | 217,131 |
CONSOLIDATED INTERIM STATEMENT OF CASH FLOW
| Quarter ended 31 Dec | Year ended 31 Dec | |||
|---|---|---|---|---|
| All figures in USD 1,000 | 2009 | 2008 | 2009 | 2008 |
| Cash flows from operating activities | ||||
| Income before income tax | (16,041) | (4,723) | (55,468) | 20,877 |
| Adjustments for: | ||||
| Depreciation & Impairment | 10,775 | 27,224 | 43,708 | 51,845 |
| Unrealized exchange (gain) /loss | 139 | (11,766) | 7,776 | (17,725) |
| Gain from sale of PP&E | - | - | (130) | |
| Paid income tax | (2,967) | (6,860) | ||
| Impairment of/loss on investment in shares | - | - | - | - |
| Provision for employees' end of service gratuities | 6 | 470 | (298) | 734 |
| Earned on employee Stock Option Plan | 116 | 303 | 783 | 1,425 |
| (Increase)/decrease in inventories | 176 | (1,669) | 366 | (608) |
| (Increase)/decrease in trade and other receivables | (10,680) | (3,141) | 350 | 2,016 |
| (Increase)/ decrease in due from related parties | (11) | (88) | 2 | |
| Increase/(decrease) in trade and other payables | 2,762 | (200) | 11,942 | 6,066 |
| Net cash from operating activities | (12,758) | 6,498 | 6,104 | 57,642 |
| Cash flows from investing activities | ||||
| Capital expenditures | (8,726) | (169) | (33,349) | (60,164) |
| Acquisition of intangible assets and deferred taxes | - | - | - | - |
| Proceeds from sales of fixed assets | - | 623 | - | 623 |
| Increase in investments in shares | - | - | - | - |
| Net cash used in investing activities | (8,726) | 454 | (33,349) | (59,541) |
| Cash flows from financing activities | ||||
| Proceeds from issuance of ordinary shares | 32,050 | - | 41,081 | 22,342 |
| Movements in borrowings | (3,976) | (2,180) | (20,345) | (10,292) |
| Net movement in currency fluctuations | 279 | 39 | 6,143 | (6,884) |
| Net cash from financing activities | 28,353 | (2,141) | 26,879 | 5,166 |
| Net (decrease)/increase in cash and cash equivalents | 6,869 | 4,811 | (367) | 3,267 |
| Cash and cash equivalents at beginning of the period | 7,648 | 10,072 | 14,883 | 11,616 |
| Cash and cash equivalents at end of the period | 14,516 | 14,883 | 14,516 | 14,883 |
SeaBird Exploration Group • Interim Results • Fourth Quarter 2009 • Page 9 of 11
SeaBird Exploration
SELECTED NOTES AND DISCLOSURES
SeaBird Exploration Limited ("the Company" or "SBX") is a limited liability company. The process of moving from BVI to Cyprus was completed in December 2009. The address of SBX registered head office in Cyprus is 333, 28th October Street, Ariadne House, 1st floor, Limassol, Cyprus. Further, SeaBird has operating offices in Dubai (United Arab Emirates), and representative offices in Oslo and Trondheim (Norway), Houston (USA), Singapore, Rio de Janeiro (Brazil) and St Petersburg (Russia). SBX is listed on the Oslo Stock Exchange.
Basis of presentation
The condensed interim consolidated financial statements have been prepared in accordance with the International Accounting Standard 34 "Interim Financial Reporting" (IAS 34) and the act and regulations for the Norwegian Stock Exchange.
The interim financial information was approved by the Board of Directors 25 February 2010.
Significant accounting principles, estimates and assumptions
The accounting policies used for preparation of the condensed interim consolidated financial statements are consistent with those used in the consolidated financial statements for 2008 unless otherwise stated. The condensed interim consolidated financial statements should be read together with the consolidated financial statements for year ended 31 December 2008.
The preparation of interim accounts involves the use of appraisals, estimates and assumptions influencing the application of accounting principles and recognized amounts for assets and obligations, revenues and costs. Actual results may differ from these estimates.
Segment information
All our seismic services and operations are conducted and monitored within the Group as one business segment.
Property, plant and equipment
Vessels and seismic equipment designated for source and 2D-operation are shown at fair value, based on periodic valuations by external independent valuers, less subsequent depreciation. The external independent appraisals are supported by internal value in use calculations.
These vessels and seismic equipment were last valued by external independent appraisals at 31 December 2009. The carrying amounts for the vessels and their related seismic equipment remain unchanged based on these appraisals.
Due to an improved market outlook from Q4 2009 onwards and all 2D and source vessels in continued employment into Q1 2010, impairment tests based on value in use calculations (discounted future cash-flows) indicate no need for further write-down of vessels and seismic equipment in Q4 2009.
SeaBird Exploration Group • Interim Results • Fourth Quarter 2009 • Page 10 of 11
SeaBird Exploration
Vessel and seismic equipment (including nodes operation) designated for seabed operation and office equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their cost or re-valued amounts to their residual values over their estimated useful lives, as follows:
- Seismic vessels 10 to 15 years
- Seismic equipment 8 to 15 years
- Office equipment 4 years
Share capital and share options
| Shares as at 31 December 2008 | 89 395 000 |
|---|---|
| Private placement 27 Mar 2009 | 30 900 000 |
| Repair Issue 29 April 2009 | 600 831 |
| Private placement 10 December 2009 | 54 000 000 |
| Total Number of shares as at 31 December 2009 | 174 895 831 |
For share options and dilution effect, please refer to note 16 in the Annual Report 2008.
Non-current debt
Amortized interest and borrowing costs (including arrangement fees) both relating to funds raised specially for financing of vessels and for the bond loan raised for general purposes have been capitalized previous years. No interests have been capitalized this year.
Taxes
SeaBird is subject to taxation in Cyprus where the majority of the companies are based, of which some are qualifying for the tonnage tax regime.
Due to operation on various continental shelves, SeaBird is also subject to taxation in various jurisdictions with increasingly complex tax legislation.
For the future, we expect to a larger degree to be subject to income taxes in jurisdictions of operation which will increase our income tax expense. We are also evaluating historic tax exposures related to certain projects already completed which might increase the reported tax expense.
SeaBird has subsidiaries in various countries which are subject to local taxes. Deferred tax assets constitute in all material respects the tax losses for SeaBird Technologies AS (former SeaBed Geophysical AS), acquired in June 2006, and deferred tax assets for this company is presented at nominal value as required by IAS 12 representing 28% of historic tax losses.
SeaBird Exploration Group • Interim Results • Fourth Quarter 2009 • Page 11 of 11