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Seabird Explorat Interim / Quarterly Report 2010
9920_rns_2010-05-05_7f9f0403-14ef-46ea-bfaf-778ab5c82e26.pdf
Interim / Quarterly Report
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SeaBird Exploration
SEABIRD EXPLORATION GROUP
FIRST QUARTER 2010
SeaBird Exploration Group • Interim Results • First Quarter 2010 • Page 1 of 11
SeaBird Exploration
HIGHLIGHTS FIRST QUARTER 2010
- For the first time since Q4 2008, SeaBird is pleased to present an EBITDA of USD 20.8 million resulting in a net consolidated profit after tax for this quarter of USD 5.7 million.
- Hugin Explorer and Kondor Explorer continued the successful Ocean Bottom Node ("OBN") operation in Nigeria for Chevron with higher utilization and revenue than expected.
- OBN operation in Nigeria completed 20 April 2010 and both vessels are mobilizing to the North Sea for an expected contract currently under negotiation, in direct continuation from the previous survey.
- Several 2D/3D contracts awarded during Q1 2010, and the month of April, giving contractual backlog including client options for most of the vessels through Q3 and into Q4 2010.
| KEY FIGURES | Quarter ended 31 Mar | Year ended 31 Dec | |
|---|---|---|---|
| All figures in USD 1,000 | 2010 | 2009 | 2009 |
| Revenues | 65 980 | 46 499 | 161 625 |
| EBITDA | 20 834 | 4 255 | 11 327 |
| EBIT | 9 231 | (5 845) | (32 381) |
| EBIT excluding impairment charges | 9 231 | (5 845) | (30 673) |
| Profit (loss) | 5 663 | (15 295) | (61 771) |
| Earnings per share (diluted) | 0,03 | (0,16) | (0,53) |
| Cash flow from operations | 12 671 | 6 791 | 6 104 |
| CAPEX | 665 | 13 316 | 33 350 |
| Total assets | 424 012 | 454 866 | 426 675 |
| Net interest bearing debt including finance leases | 156 144 | 172 715 | 168 233 |
| Equity ratio | 52 % | 47 % | 48 % |
Revenues
USD millions
EBITDA
USD millions
SeaBird Exploration Group • Interim Results • First Quarter 2010 • Page 2 of 11
SeaBird Exploration
KEY FINANCIAL PERFORMANCE FIGURES
For comparisons of income and expenses between 2010 and 2009, it must be noted that changes in the operating performance of the OBN activity and the market rates for 2D have affected the revenue for the SeaBird Group considerably.
The OBN operation with Hugin Explorer did not perform as expected on its first survey during Q1 2009 and incurred significant losses. During Q1 2010, however, the OBN operation with Hugin Explorer, and Kondor Explorer as source vessel, has been very successful and generated revenues in excess of expectations, contributing to more than half of the SeaBird Group's revenue.
The revenue levels for the 2D fleet were still quite high during Q1 and into Q2 2009 in particular for the two vessels working for ONGC in India. After reaching their lowest levels in Q2-Q4 2009, revenue levels in 2010 for 2D are still considerably below earlier levels from 2008 and beginning of 2009, but are improving evidenced by contract rates that the company has achieved. Consequently, and despite a satisfactory utilization of our 2D fleet, contribution to the operating result from this part of SeaBird's activities was low in Q1 2010.
Consolidated revenues for the SeaBird Group increased to USD 66.0 million in Q1 2010 from USD 41.1 million in Q4 2009, mainly due to the full utilization of the Hugin Explorer and the Kondor Explorer, and the high quality performance shown throughout the OBN survey for Chevron in Nigeria from December 2009 to April 2010. Also the 2D fleet has contributed more to the revenue this quarter than the previous.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") were positive at USD 20.8 million in Q1 2010 against a negative EBITDA of USD 0.7 million in Q4 2009. Operating expenses increased to USD 39.7 million in Q1 2010 from USD 36.3 million in Q4 2009, mainly due to higher cost of our OBN operation in Nigeria than during the mobilization period October-November 2009 from Gulf of Mexico.
Selling, general and administrative ("SG&A") expenses are unchanged at USD 5.9 million in Q1 2010 compared to Q4 2009.
Depreciation is slightly up from previous quarters at USD 11.6 million, mainly due to depreciation of classification and dry-docking of 3 vessels and investments in 250 more nodes, all capitalized in Q4 2009, and amortization of USD 0.4 million for multi-client library.
Interest expense is continuing on the same level in Q1 2010 at USD 3.1 million, as in Q3 and Q4 2009. Other financial income for the quarter of USD 2.2 million refers to unrealized loss on exchange, mainly on the NOK 478 million bond loans outstanding.
The income tax of USD 2.7 million in Q1 2010 refers mainly to withholding tax in various jurisdictions around the world where the SeaBird vessels have been operating. Increase from previous quarters refers mainly to the withholding tax applicable for our OBN operation in Nigeria.
Q1 2010 net profit after tax was USD 5.7 million compared to a loss in Q4 2009 of USD
SeaBird Exploration Group • Interim Results • First Quarter 2010 • Page 3 of 11
SeaBird Exploration
16.8 million and a loss in Q1 2009 of USD 15.3 million.
Capital expenditure was USD 0.7 million during Q1 2010, mainly referring to some capital cost for vessel maintenance.
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 than USD and bond loans of a total of NOK 478 million.
OPERATIONAL HIGHLIGHTS Q1 2010
The vessel utilization for all seismic vessels operated by SeaBird for Q1 2010 was 76% compared to 80% in Q4 2009 and 55% in Q3 2009.
Following 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 2 D/3D vessels in Q1 2010 was 74%. While Harrier Explorer, Northern Explorer, Hawk Explorer, Aquila Explorer and Osprey Explorer achieved utilization between 72% and 100%, Munin Explorer and Geo Mariner (shallow water 3D) had utilization of 50% and 44% respectively, due to Munin Explorer being idle from 18 February to 9 April 2010, and Geo Mariner from 15 February 2010.
Several new contracts were awarded to SeaBird during April 2010.
Aquila Explorer was awarded two additional surveys in South East Asia and one in Australia with a combined total of approximately 4,500 km. This will result in the Aquila Explorer being engaged continuously with the exception of 3-4 weeks dry-docking, through to end October 2010.
Geo Mariner has been awarded a contract for a 3D survey of approximately 350 sqkm in Cameroon commencing end April after having been idle part of Q1 2010.
With the additional contract awarded to Northern Explorer in Indonesia lasting through October, Aquila Explorer and Munin Explorer (including options) on contracts through October, Munin Explorer and Hawk Explorer with good prospects in sight after their firm period through May and finally Harrier Explorer on long term to PGS to September 2011, SeaBird is fairly satisfied with the overall contract backlog of the 2D fleet. Furthermore there are indications of an increased demand for 2D seismic and Source services over the coming months.
Hugin Explorer, with Kondor Explorer as source vessel, commenced its Nigerian OBN operation end of November 2009. The survey has progressed very satisfactorily and the contract was completed on 20 April, about one month ahead of schedule. Both vessels are presently under mobilization to the North Sea with an ETA Aberdeen about 10 May. SeaBird is in the final stage of negotiating a new contract, and believes this can be concluded in time for direct continuation of the mobilization to the North Sea. Both Hugin Explorer deploying, retrieving and maintaining the nodes and the accompanying source vessel Kondor Explorer have performed continuously throughout Q1 2010 with minimum downtime and high efficiency.
SeaBird is actively pursuing further employments for the OBN operation with Hugin Explorer and Kondor Explorer from August/September 2010, following the completion of the
SeaBird Exploration Group • Interim Results • First Quarter 2010 • Page 4 of 11
SeaBird Exploration
upcoming contract currently under negotiation. A dialog with one of the major oil companies is due to commence shortly for a new OBN survey in West Africa.
Liquidity and Financing
At 31 March 2010, cash and cash equivalents amounted to USD 15.2 million, compared to USD 14.5 million at the end of 2009, and USD 17.6 million (thereof USD 9.2 million restricted) at the end of Q1 2009.
Net cash flow from operating activities for Q1 2010 was USD 12.7 million, against negative USD 12.8 million for Q4 2009, and positive USD 6.8 million for Q1 2009. The increased net cash flow in Q1 2010 refers mainly to increased revenues and adjustment in trade receivables and payables.
During Q1 2010 instalments of USD 7.5 million were paid to banks and USD 0.7 million on the lease of Hawk Explorer. Net interest-bearing debt decreased to USD 156.1 million end of Q1 2010 from USD 168.2 million end of Q4 2009.
Due to the weak result in Q3 and Q4 2009 SeaBird was in breach of the loan agreements, the Net Debt/EBITDA ratio covenant. Waivers have been received from the banks.
There are no further significant committed investments, except normal maintenance type expenditures and certain equipment upgrades for our present fleet of vessels. However, the Management and the Board of Directors are presently evaluating an expansion of the Ocean Bottom Node operation through investing in a second OBN crew similar to the Hugin Explorer/Kondor Explorer operation.
Outlook
The 2D market continues to recover, with a reasonable volume in tenders received in Q1 2010, and supplemented by chartering out 2D vessels as source vessels to service Wide Azimuth contracts for other seismic contractors. Far East remains a good contract area for the Aquila Explorer and Northern Explorer, with constant work now booked up to their respective dry-docking periods and thereafter through to Q4 2010. For the vessels primarily working in the 2D sector SeaBird is pleased to have received close to 40,000 line kilometers of work by early April 2010. Some rates for these contracts are based on late 2009 submissions and thus are reflecting lower revenues, but for the later contracts the income is improving.
We continue to be optimistic for the 2D sector recovering in second half of 2010, and for rates to rise, although we do not expect in the short term to see again the levels of 2008 and early 2009. Oil prices have increased even further than was expected in our last report, and there is now great enthusiasm when discussing E&P expenditures with the oil companies.
We are even more optimistic about the future OBN sector, where the increased interest in this acquisition technique is opening further opportunities for the future, in new surveys, repeat surveys, and potential longer term contract employment. Due to the expected 30 days mobilization period for the Hugin Explorer and Kondor Explorer to a new contract during Q2 2010, the EBITDA will be reduced compared to Q1 2010.
SeaBird Exploration Group • Interim Results • First Quarter 2010 • Page 5 of 11
SeaBird Exploration
As mentioned previously, we have been preparing the investment case for a second OBN operation, and this will come to a final plan shortly.
The Board of Directors and Chief Executive Officer
SeaBird Exploration PLC
4 May 2010
SeaBird Exploration Group • Interim Results • First Quarter 2010 • Page 6 of 11
SeaBird Exploration
CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
| As of 31 March As of 31 Dec | |||
|---|---|---|---|
| All figures in USD 1,000 | 2010 | 2009 | 2009 |
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 327 151 | 344 476 | 337 794 |
| Multiclient Data Library | 4 391 | 82 | 4 791 |
| Capital work in progress | 1 029 | ||
| Goodwill | 8 996 | 8 996 | 8 996 |
| Patent technology | 4 035 | 4 234 | 4 054 |
| Deferred tax asset | 13 466 | 12 058 | 13 875 |
| 358 038 | 370 875 | 369 510 | |
| Current assets | |||
| Inventories | 3 073 | 2 999 | 3 411 |
| Trade receivables | 42 149 | 34 859 | 37 151 |
| Other current assets | 5 152 | 20 282 | 5 399 |
| Due from related parties | 427 | 389 | 437 |
| Cash and cash equivalents | 15 173 | 17 589 | 14 515 |
| Assets classified as held-for-sale | 7 873 | ||
| 65 974 | 83 991 | 60 913 | |
| Total assets | 424 012 | 454 866 | 430 423 |
| EQUITY | |||
| Shareholders equity | |||
| Paid in capital | 161 145 | 128 492 | 161 113 |
| Revaluation reserve | 39 005 | 42 336 | 38 050 |
| Currency translation reserve | 892 | (3 263) | 807 |
| Share options granted | 7 319 | 6 678 | 7 158 |
| Retained earnings | 10 902 | 38 427 | (3 763) |
| 219 262 | 212 670 | 203 365 | |
| LIABILITIES | |||
| Non-current liabilities | |||
| Non-current interest-bearing debt | 109 216 | 109 675 | 115 183 |
| Non-current portion of capital lease obligations | 19 585 | 21 846 | 19 723 |
| Other long-term liabilities | 553 | 795 | 594 |
| 129 354 | 132 316 | 135 500 | |
| Current liabilities | |||
| Trade and other payables | 32 880 | 51 097 | 43 716 |
| Current portion of interest-bearing debt | 39 657 | 56 215 | 45 058 |
| Current portion of capital lease obligations | 2 859 | 2 568 | 2 784 |
| 75 396 | 109 880 | 91 558 | |
| Total liabilities | 204 750 | 242 196 | 227 058 |
| Total equity and liabilities | 424 012 | 454 866 | 430 423 |
| Net interest-bearing debt | 156 144 | 172 715 | 168 233 |
SeaBird Exploration Group • Interim Results • First Quarter 2010 • Page 7 of 11
SeaBird Exploration
CONSOLIDATED INTERIM STATEMENT OF INCOME
| All figures in USD 1,000 | Quarter ended 31 Mar | Year ended 31 Dec | |
|---|---|---|---|
| 2010 | 2009 | 2009 | |
| Revenue | 65 980 | 46 499 | 161 625 |
| Charter hire and operating expenses | (39 692) | (35 245) | (125 941) |
| Selling, general and admin expenses | (5 894) | (7 063) | (25 374) |
| Other income (expenses), net | 440 | 64 | 1 017 |
| Earnings before interest, tax, depreciation and amortization EBITDA | 20 834 | 4 255 | 11 327 |
| Depreciation and Amortization | (11 603) | (10 100) | (41 999) |
| Impairment | - | (1 709) | |
| Earnings before interest and taxes (EBIT) | 9 231 | (5 845) | (32 381) |
| Interest expense | (3 137) | (4 170) | (13 882) |
| Other financial items, net | 2 232 | (3 070) | (9 205) |
| Profit (loss) before income tax | 8 326 | (13 085) | (55 468) |
| Income tax | (2 663) | (2 210) | (6 303) |
| Profit (loss) | 5 663 | (15 295) | (61 771) |
| Profit (loss) attributable to: | |||
| Shareholders of the parent company | 5 663 | (15 295) | (61 771) |
| Earnings per share | |||
| - basic | 0,03 | (0,17) | (0,41) |
| - diluted | 0,03 | (0,16) | (0,40) |
CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
| All figures in USD 1,000 | Quarter ended 31 Mar | Year ended 31 Dec | |
|---|---|---|---|
| 2010 | 2009 | 2009 | |
| Profit (loss) | 5 663 | (15 295) | (61 771) |
| Other comprehensive income | |||
| Net movement in currency translation reserve and other changes | 85 | 2 071 | 6 142 |
| Changes in revaluation reserve | 955 | ||
| Total other comprehensive income, net of tax | 1 039 | 2 071 | 6 142 |
| Total comprehensive income | 6 703 | (13 224) | (55 629) |
| Total comprehensive income attributable to: | |||
| Shareholders of the parent company | 6 703 | (13 224) | (55 629) |
| Total | 6 703 | (13 224) | (55 629) |
SeaBird Exploration Group • Interim Results • First Quarter 2010 • Page 8 of 11
SeaBird Exploration
CONSOLIDATED INTERIM STATEMENT OF CHANGE IN EQUITY
| Quarter ended 31 Mar | Year ended 31 Dec | ||
|---|---|---|---|
| All figures in USD 1,000 | 2010 | 2009 | 2009 |
| Opening Balance | 203 365 | 217 131 | 217 131 |
| Profit/(loss) for the year | 5 663 | (13 224) | (61 771) |
| Increase/(decrease) in share capital | 8 459 | 41 080 | |
| Share options granted | 161 | 304 | 783 |
| Net movements in currency translation reserve and other changes | 10 073 | - | 6142 |
| Ending Balance | 219 262 | 212 670 | 203 365 |
CONSOLIDATED INTERIM STATEMENT OF CASH FLOW
| Quarter ended 31 Mar | Year ended 31 Dec | ||
|---|---|---|---|
| All figures in USD 1,000 | 2010 | 2009 | 2009 |
| Cash flows from operating activities | |||
| Income before income tax | 8 326 | (13 085) | (55 468) |
| Adjustments for: | |||
| Depreciation & Impairment | 11 603 | 10 100 | 43 708 |
| Unrealized exchange (gain) /loss | (2 245) | 2 792 | 15 552 |
| Gain from sale of PP&E | - | - | |
| Paid income tax | - | ||
| Impairment of/loss on investment in shares | - | ||
| Provision for employees' end of service gratuities | (40) | (97) | (298) |
| Earned on employee Stock Option Plan | 161 | 304 | 783 |
| (Increase)/decrease in inventories | 339 | 780 | 368 |
| (Increase)/decrease in trade and other receivables | 7 499 | (7 768) | (8 075) |
| (Increase)/ decrease in due from related parties | (11) | (40) | (88) |
| Increase/(decrease) in trade and other payables | (12 961) | 13 805 | 7 912 |
| Net cash from operating activities | 12 671 | 6 791 | 4 394 |
| Cash flows from investing activities | |||
| Capital expenditures | (665) | (13 316) | (31 640) |
| Acquisition of intangible assets and deferred taxes | - | - | |
| Net cash used in investing activities | (665) | (13 316) | (31 640) |
| Cash flows from financing activities | |||
| Proceeds from issuance of ordinary shares | 8 459 | 41 080 | |
| Movements in borrowings | (11 433) | (1 300) | (20 345) |
| Net movement in currency fluctuations | 84 | 2 072 | 6 143 |
| Net cash from financing activities | (11 349) | 9 231 | 26 878 |
| Net (decrease)/increase in cash and cash equivalents | 657 | 2 706 | (368) |
| Cash and cash equivalents at beginning of the period | 14 515 | 14 883 | 14 883 |
| Cash and cash equivalents at end of the period | 15 172 | 17 589 | 14 515 |
SeaBird Exploration Group • Interim Results • First Quarter 2010 • Page 9 of 11
SeaBird Exploration
Selected notes and disclosures
SeaBird Exploration PLC ("the Company" or "SBX") is a limited liability company. 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 condensed interim consolidated financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements as at and for the year ended 31 December 2009.
The consolidated financial statements as at 31 March 2010 and for the year ended 31 December 2009 and quarterly reports are available at www.sbexp.com.
This unaudited interim financial report was approved by the Board of Directors 4 May 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 2009 unless otherwise stated.
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 seismic vessels 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 Q1 2010 onwards and all 2D and source vessels in continued employment into Q2 2010, impairment tests based on value in use calculations
SeaBird Exploration Group • Interim Results • First Quarter 2010 • Page 10 of 11
SeaBird Exploration
(discounted future cash-flows) made as of 31 December 2009 indicate no need for further write-down of vessels and seismic equipment in Q1 2010.
Vessel-related and seismic equipment (including nodes operation) designated for seabed operation (OBN) and office equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition.
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
Total number of shares at 31 March 2009 is equal to 31 December 2010: 174 895 831.
For share options and dilution effect, please refer to note 16 in the Annual Report 2009.
Taxes
SBX is subject to taxation in Cyprus, as are the majority of the subsidiaries, 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, 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.
Going concern
Based on the current business plan and the projected cash flow from operations, SeaBird will be dependent on agreeing with the banks to reduce instalments in the second half of 2010. The banks have been informed about potential need of postponing instalments for 2010. Similar postponement was agreed with the banks for second half of 2009. Failure to negotiate the postponement of instalments or failure to achieve its projected cash flows would, in the absence of the Group securing additional capital or loan finance, result in the Group being unable to meet its liabilities as they fall due and to continue as a going concern. In such event the Group would be unable to realise the carrying value of its property, plant and equipment, whose values on a forced sale basis may be significantly lower than their fair values, and goodwill and intangibles would be written off as their carrying values largely represent their values in use. However, the SeaBird management and Board of Directors are regularly reviewing the financial status of the company and its commitments and will evaluate alternative methods of strengthening the company's balance sheet and cash resources. Furthermore the increased revenue and improved cash flow during the first quarter 2010 is easing the restrained financial situation.
SeaBird Exploration Group • Interim Results • First Quarter 2010 • Page 11 of 11