Q1 2015 Presentation
Contents • Highlights and material events • Segment reporting • Financial information • Summary Page 2
Group – Financial performance Q1 2015 highlights: • Operating revenue of USD 240 million • EBITDA of USD 71 million • EBITDA-margin of 29 % • EBIT of USD 34 million • Profit of USD 18 million Page 3
Highlights and material events in Q1 2015 Dividend and share buy-back program suspended - In February 2015, the Board decided to suspend the annual dividend for the financial year 2014 due to the significant weakening of market fundamentals and the re- contracting risk in the Company’s MODU segment. At the same time, the Board also decided to suspend the share buy-back program for the same reasons. Cost reduction programs - The Group has implemented a series of measures to reduce cost levels throughout the organisation: - The Group is in the process of optimising its support functions in order to provide more efficient support services. During Q1 2015, about 60 onshore employees in Norway has been laid off. - Further downsizing of the onshore organisation will be executed throughout 2015 to reduce future cost level and other cost savings initiatives are in the process of implementation. - A reorganisation of operational and technical support services has also been initiated to increase efficiency and operational performance. Page 4
Highlights and material events in Q1 2015 (cont.) MODU Deepsea Aberdeen commenced on its 7-year drilling contract with BP on 21 April 2015 on the – Quad 204 field development project West of Shetland, UK. Deepsea Metro I has secured employment for Vietgazprom for approximately 20 weeks in – Vietnam. Expected commencement is mid Q3 2015 and estimated contract value is USD 40 million. In additon there are two options for approximately 90 days each. Deepsea Metro II finalized its contract with Petrobras in Brazil mid May 2015 and will be laid-up – awaiting new employment. Drilling & Technology During Q1 2015 approximately 60 employees in the Technology business area were made – redundant following the downsizing communicated in Q4 2014 report. Odfjell Drilling was awarded the drilling engineering sub contract for the Johan Sverdrup drilling – platform topside and will be one of Aibel's major sub-contractors for their engineering, procurement and construction (EPC) contact for the Drilling Platform Topside for Johan Sverdrup in the Norwegian North Sea. The contract value is estimated to NOK 110 million. Well Services Due to the current market situation and a reduction of rigs in operation in Norway, Well Services – has downsized with approximately 30 offshore and onshore personnel in Q1 2015. Page 5
Segment reporting - Mobile Offshore Drilling Units (MODU) MODU MODU Firm MODU contract backlog at 31 March 2015 of USD 1.6 billion • Financial utilisation: • Financial Utilisation 1 Q1 15 Q1 14 FY 14 FY 13 Deepsea Stavanger 99.0% 95.1% 96.5% 87.1% Deepsea Atlantic 99.1% 91.8% 92.1% 98.7% Deepsea Bergen 2 Modern fleet of UDW and • 90.2% 98.1% 98.7% 97.9% harsh environment drilling Deepsea Metro I 3 n/a 96.7% 97.7% 98.7% units Deepsea Metro II 94.3% 64.1% 75.5% 78.7% Extensive drilling experience • Provision of integrated • Comments: • management services for drilling units 1) Financial Utilisation is measured on a monthly basis and comprises the actual recognised revenue (encompassing different hourly day rates) for all hours in a month, expressed as a percentage of the full day rate for all hours in a month. Financial Utilization, by definition, does not take into account periods of non-utilisation when the units are not under contract. 2) Deepsea Bergen’s financial utilization in Q1 2015 was negatively impacted by 8 days off -hire in connection with challenges with the subsea equipment in February 2015. 3) Deepsea Metro I was free of charter in Q1 2015. Page 6
MODU - Dayrates, contract status and options Location Current day rate Drilling unit Contract status /operator (USD/day) 1 Deepsea Angola 545,000 Stavanger BP Angola Deepsea Norway 566,371 Atlantic Statoil Deepsea UK 450,000 Aberdeen BP Exploration Deepsea Norway 350,403 @ 350k Bergen Statoil Deepsea Anchored in 2 255,000 Metro I South Africa Deepsea Brazil 3 432,598 Metro II Petrobras Deepsea Brazil 4 518,453 Guarapari Petrobras Deepsea Brazil 4 524,592 Itaoca Petrobras Deepsea Brazil 4 528,687 Siri Petrobras 2014 2015 2016 2017 2018 2019 2020 2021 2022 Contract Option Construction 1) Rates may include mix of currencies and fluctuate based on exchange rates. 2) Day rate is net of taxes 3) In addition to the day rate there is a bonus element of up to 10% linearly from 93% to 98% utilization. 4) In addition to the day rate there is a bonus element of up to 15% linearly from 93% to 98% utilization. Contract length for each of the units is 15 years from commencement of operations Page 7
Segment reporting - Platform Drilling and Technology Drilling & Technology Platform Drilling and Technology Firm contract backlog of USD 0.5 billion at 31 March 2015 • – Value of priced optional periods of USD 1.4 billion Platform Drilling contracts: • Customer Platforms Contract status • One of the leading contractors in the North Sea 7 NO platforms 1 platform drilling market • Drilling engineering services Mariner (UK) Established competence for • the latest generation Bressey (UK) technology Brage 6 UK platforms 2 5 UK platforms 3 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Contract Option 1) Grane, Heidrun, Njord, Sleipner A, Visund, Snorre A, Snorre B 2) Claymore, Clyde, Saltire, Piper, Tartan, Fulmar 3) Clair, Andrew, Bruce, Magnus, Clair Ridge Page 8
Segment reporting - Well Services BASES : EUROPE Norway United Kingdom Key figures Holland ~525 employees • Romania Services from 11 bases • Operations in more than • 20 countries BASES : ASIA Service offering Thailand Tubular runnng services • Vietnam BASES : MIDDLE EAST Drill tool rental services • Saudi Arabia Well intervention services • United Arab Emirates Turkmenistan Kurdistan BASE OPERATIONS A leader in remote operated drilling technologies 9
Market outlook Exposed to re-contracting risk in a weak drilling market over the next couple of years MODU • The drilling market has continued weakening into 2015 and we expect a weak drilling market over the next couple of years. The soft market is due to continued delivery of newbuilds and oil companies’ increased cost focus and capital discipline, resulting in an increasing number of stacked units and continued downward pressure on day rates. • Several of the Group’s drilling units are exposed to re -contracting risk in the current or near term drilling market. • Fierce competition for a limited number of contract opportunities in the market, and reduced day rates alone does not clear the current market. • The bifurcation between modern and older drilling units is expected to continue and scrapping of older units will continue. • In our opinion, the demand for modern UDW and HE units will slowly start improving throughout 2016 leading to increased utilization and a subsequent improvement in day rates. Platform Drilling and Technology • Platform drilling services is secured by medium to long-term contracts. The slowdown in the North Sea activity level has led to postponement and cancellation of development- and upgrade projects. As a result the Group has further adjusted the manning within engineering services and further cost cuts and efficiency improvement programs are in the process of being implemented. Page 10
Market outlook (cont.) Well Services • Well Services has experienced a further reduction in its activities on the Norwegian Continental Shelf (NCS) so far in 2015. This has partly been neutralised by continued growth outside the NCS. General • Due to the overall challenging market conditions, cost cutting and efficiency improvement programs have already been implemented and further programs are in the process of implementation. • In the longer term, we are of the opinion that the oil industry’s demand for drilling services will continue to be supported by the need for reserves replacement and by continued spending on exploration and field-development in the main offshore regions. The Group’s business segments will all benefit and will be well positioned for taking advantage of such future market improvements. Page 11
Earnings visibility through USD 3.6 billion order backlog Total revenue backlog per year (for firm contracts and priced option periods) 1 USD million Firm contracts USD 2.1 billion Priced options USD 1.5 billion Total backlog USD 3.6 billion Revenue backlog for Well Services, Technology and MODU Management is not included in the revenue • backlog above. 1) At 31 March 2015, includes pro- rata backlog figures in respect of Odfjell Drilling’s 40% ownership in Deep Sea Metro Ltd, but does not include any backlog for Odfjell Drilling’s share of Odfjell Galvão. Total backlog figures may not equal the sum of firm contracts and priced option periods for the year due to rounding. The Vietnam contract for Deepsea Metro I has not been included in the backlog figures above. Page 12
Financial information
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