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Fred. Olsen Energy ASA2Q 2018 results presentation
Disclaimer
This presentation has been produced by Fred. Olsen Energy ASA (the "Company") based on information which is publicly available. This presentation is for information purposes only. Further to the aforementioned, this presentation is the result of an effort of the Company to present certain information which the Company has deemed relevant in an accessible format. The presentation is not intended to contain an exhaustive overview of the Company's present or future financial condition and there are several other facts and circumstances relevant to the Company and its present and future financial condition that has not been included in the this presentation. No representation or warranty (express or implied) is made or intended to be made as to the accuracy or completeness of any or all of the information contained herein and it should not be relied upon as such. The recipient of this presentation acknowledges that it will be solely responsible for its own assessment of the information.
This presentation contains forward-looking statements. Such forward-looking statements give the Company's current expectations and projections relating to its financial condition, the market in which it operates and the future performance of the Company. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company's control that could cause the Company's actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which it will operate in the future.
Neither the Company's nor any of its affiliates (nor any department in any of those entities), nor any such person’s directors, officers, employees, advisors or representatives (collectively the "Representatives"), in any capacity, shall have any liability whatsoever arising directly or indirectly from the use of this presentation, including (but not limited to) as a result of any liability for errors, inaccuracies, omissions or misleading statements in this presentation.
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FINANCIAL RESULTS MARKET OPERATIONS SUMMARY
Income statement – key figures
(USD mill) 2Q 2018 1Q 2018 Change
Operating revenues 17,2 69,5 (52,3)Recharged income 0,1 1,9 (1,8)Total revenues 17,3 71,4 (54,1)
Operating costs (68,7) (37,7) (31,0)Recharged expenses - (1,9) 1,9 Total operating expenses (68,7) (39,6) (29,1)
Oper. result before depr. (EBITDA) (51,4) 31,8 (83,2)
Depreciation (53,4) (56,4) 3,0 Impairment (96,7) - (96,7)Operating result (EBIT) (201,5) (24,6) (176,9)
Net financial items (6,2) (18,2) 12,0 Result before tax (207,7) (42,8) (164,9)
Estimated tax 0,5 0,2 0,3 Net result (207,2) (42,6) (164,6)
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EBITDA comparison 2Q 2018 vs. 1Q 2018
Offshore Drilling Segment
(USD mill) 2Q 2018 1Q 2018 Change
Operating revenues 5,9 61,8 (55,9)Recharged income - 1,9 (1,9)Total revenues 5,9 63,7 (57,8)
Operating costs (52,1) (28,1) (24,0)Recharged expenses - (1,9) 1,9 Total operating expenses (52,1) (30,0) (22,1)
Oper. result before depr. (EBITDA) (46,2) 33,7 (79,9)
Depreciation (53,0) (55,9) 2,9 Impairment (96,7) - (96,7)
Operating result (EBIT) (195,9) (22,2) (173,7)
Engineering & Fabrication Segment
(USD mill) 2Q 2018 1Q 2018 Change
Operating revenues (external) 11,4 7,7 3,7 Inter-segment revenues - - - Total operating revenues 11,4 7,7 3,7
Operating costs (16,6) (9,6) (7,0)Oper. result before depr. (EBITDA) (5,2) (1,9) (3,3)
Depreciation (0,4) (0,5) 0,1
Operating result (EBIT) (5,6) (2,4) (3,2)
Financial Items Breakdown
(USD mill) 2Q 2018 1Q 2018 Change
Interest income 0,9 1,1 (0,2)Gains on financial instruments 0,2 0,4 (0,2)Financial income 1,1 1,5 (0,4)
Interest expenses (9,0) (8,1) (0,9)Losses on financial instruments (0,1) (0,2) 0,1 Other financial expenses (5,6) (1,8) (3,8)Financial expenses (14,7) (10,1) (4,6)
Net foreign currency loss 7,4 (9,6) 17,0
Net financial items (6,2) (18,2) 12,0
Consolidated Balance Sheet
(USD mill) 30 Jun 2018 31 Mar 2018 Change
Property, plant & equipment 886,1 1 026,8 (140,7)Other non-current assets 1,6 1,5 0,1 Total non-current assets 887,7 1 028,3 (140,6)
Other current assets 106,9 121,7 (14,8)Cash and cash equivalents 192,6 253,5 (60,9)Total current assets 299,5 375,2 (75,7)Total assets 1 187,2 1 403,5 (216,3)
Equity 344,8 552,4 (207,6)
Non-current interest bearing debt - 546,9 (546,9)Other non-current liabilities 60,5 64,3 (3,8)Total non-current liabilities 60,5 611,2 (550,7)
Current interest bearing debt 737,0 190,9 546,1 Other current liabilities 44,9 49,0 (4,1)Total current liabilities 781,9 239,9 542,0 Total equity and liabilities 1 187,2 1 403,5 (216,3)
Consolidated Cash Flow
(USD mill) 2Q 2018 1Q 2018 Change
Profit before income taxes (207,7) (42,8) (164,9)Depreciation and impairment 150,1 56,4 93,7 Interest expense 10,4 9,4 1,0 Changes in working capital 26,9 10,7 16,2 Bolette termination fee amortized - (61,7) 61,7 Unrealized loss/(gain) financial instruments (6,4) 6,5 (12,9)Cash generated from operations (26,7) (21,5) (5,2)Interest paid (8,0) (9,2) 1,2 Taxes paid (6,7) (0,8) (5,9)Net cash flow from operating activities (41,4) (31,5) (9,9)
Net investment in fixed assets (16,2) (5,6) (10,6)
Cash flow from/used in investment activities (16,2) (5,6) (10,6)
Repayments of interest bearing loans - (147,5) 147,5 Cash flow used in financing activities - (147,5) 147,5
Foreign currency (3,3) 3,1 (6,4)Net change in cash and cash equivalents (57,6) (184,6) 127,0 Cash at beginning of period 253,5 435,0 (181,5)Cash at end of period 192,6 253,5 (60,9)
Offshore drilling EBITDA and margin
Fleet status
RIG DESIGN W DEPTH LOCATION CLIENT CONTRACT STATUS DAY RATE NEXT CRS
Bolette Dolphin DS/ Gusto P10' 12 000 Tenerife Termination for convenience Termination fee USD 96 million
Blackford Dolphin SS / Aker H-3 7 000 UK BP May-October 2018 GBP 98 900 2Q 2020**Options: October- December
Belford Dolphin DS / LMG Marin 10 000 Malaysia Preserved and maintained
Bideford Dolphin SS / Aker H-3 1 500 Norway Smart stacked 4Q 2019*
Borgland Dolphin SS / Aker H-3 1 500 Norway Smart stacked 4Q 2021*
Bredford Dolphin SS / Aker H-3 1 500 Norway Preserved and maintained
Byford Dolphin SS / Aker H-3 1 500 Norway (UK compliant) Smart stacked 1Q 2022*
* Will be further postponed if further smart stacking period** Limited work remains for the renewal in 2Q 2020
MID WATER FLOATERS NORWAY
MID WATER FLOATERS UK
ULTRA- / DEEPWATER UNITS
Update on the financial position
The waiver period expired 30 June 2018 with no extension granted by the Company's financial creditors on terms acceptable to the Company
In order to preserve the liquidity reserves of the Fred. Olsen Energy group, the Company resolved to stop its service of interest and amortizations to its financial creditors with effect from 3 July 2018 at which date USD 95.5 million plus interests were due under the bank facility
The Fred. Olsen Energy group's operations will otherwise continue in their ordinary course. All suppliers and trade creditors will be paid in the ordinary course of business
Constructive discussions are continuing with the financial creditors
It is expected that a long term solution will require new equity and amendments to the Company's bank and bond facilities, including impairments of debt, in order to secure a viable financial foundation for the purpose of safeguarding the Company's position in the market
FINANCIAL RESULTS MARKET OPERATIONS SUMMARY
The positive market trend has continued during the quarter with new requests and contract fixtures mainly targeting 2019 and 2020 work
The emerging recovery has been seen in the harsh environment, and now also followed by ultra deepwater
An increased number of tenders have emerged in the UDW market, some with scopes of 1-2 years duration
Based on the fleet composition in the midwater segment, the market is expected to rebalance in 2019
Global marketFloating units
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Dayrates- worldwide
New contracts have been awarded for work in 2019 and 2020, predominantly for field development activities
Further sanctioning of field development projects are expected over the next years
This has resulted in an increase in the dayrates in the North Sea market, in particular for the field development work in 2019-2020
Exploration and appraisal activity is also expected to increase into 2019
Norwegian floater market
Source: IHS/DNB
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NameWest NavigatorBredford DolphinPolar PioneerWest VentureWest AlphaSonga DeeBorgland DolphinSonga DeltaScarabeo 5Bideford DolphinIsland InnovatorCOSLInnovatorWest HerculesScarabeo 8Deepsea BergenLeiv EirikssonDeepsea StavangerTransocean ArcticCOSLPromoterDeepsea AtlanticWest PhoenixWest MiraTransocean SpitsbergenDeepsea NordkappSonga EnduranceSonga EncourageSonga EquinoxSonga Enabler
Contract Option Idle/yard/const
2018 2019Q4Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2020
Average dayrates Norway
Several contracts have been awarded during the recent quarters
Focus has now switched to work in 2019
Blackford Dolphin commenced the contract with BP Exploration Operating Company Ltd. mid May. Duration of the firm contract is estimated until mid October
Borgland Dolphin has a safety case and is also marketed in UK
A safety case is also being prepared for Bideford Dolphin
UK floater market
Source: IHS/DNB
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NameWilHunterSedco 711Sedco 714Byford DolphinStena DonOcean GuardianCOSLProspectorTransocean 712Blackford DolphinTransocean LeaderCOSLPioneerPaul B. Loyd, Jr.WilPhoenixOcean ValiantParagon MSS1Ocean EndeavorStena SpeyDeepsea AberdeenOcean Patriot
Contract Option Idle/yard/const
2018 2019 2020Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Average dayrates UK
FINANCIAL RESULTS MARKET OPERATIONS SUMMARY
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Blackford Dolphin Setting a new standard
Smart Stacking – proven conceptRe-activation delivered as
plannedSuccessful start up for BPSmarter classification
demonstrated
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Re-activation and preparation for operation of BlackfordDolphin Delivered in less than four months
Smart stacking proven concept No surprises experienced Certificates prolonged to mid 2020
Re-activation and preparation for operation on target Executed in less than four months Total cost USD 14 million including planned
corrective maintenance
Strong and dedicated Dolphin Drilling team mobilized Predominantly former crew was rehired
Start up on time with no serious incidents
Setting a new standard in reactivation
The regulatory framework is opening up the 5 year cycle whereby class related work can be performed in different time intervals
Smarter classification optimises the timing and cost of a class renewal
The major part of the next cycle CRS completed at a total cost of USD 12 million
The remaining part planned completed offshore within 2Q 2020 for an estimated cost of USD 5 million
The next cycle certificates will expire in 2025, with next inshore inspection in 2023
Smarter classification is also being implementedfor Bideford Dolphin
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Smarter classification of Blackford Dolphin A new approach to main certificate renewal
Hull and Structure
Drilling equipment (load path)
BOP
Electric power system (main)
Propulsion
Anchoring
Offshore Cranes
Life-saving appliances
Sea inlets and discharges
Class Renewal Period 2 – Planned during operations
Class Renewal Period 1 – Undertaken during re-activation
BOP crane
Helideck
Cementing system
Bulk and mud systems
Rotational components
Anti-recoil valves
Fail-safe valves
Tensioners
Marine Riser
High operational performance - High technical condition
Fit for purpose Ready for operations
The core fleet
Bideford Dolphin
Total rebuild ‘98
Drilling & completion workhorse
Consistent top performer for Statoil
BorglandDolphin
BlackfordDolphin
Byford Dolphin
Bolette Dolphin
Total rebuild ‘99
Drilling & completion workhorse
Top performance for a variety of customers
Total rebuild ’08
High spec UK rig
Versatile, DW capable
The last 6 years with BP in UK
Mix of drilling and completion/work-over
12pts mooring
High spec. 7G UDW
Consistent top performance
Proven MPD operations
v
Norway UK
v
International
Main focus to redeploy core units in a recovering market
Bolette Dolphin targeting work in South America and West Africa
Blackford Dolphin a candidate for UK and International assignments
Bideford Dolphin primarily NCS focus
Borgland Dolphin being marketed in both NCS and UKCS
Byford Dolphin targeting UK work
Aggressively pursuing new contract opportunities
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Unit
Bolette Anadarko Continuous class during operations
Blackford Chevron Smart stacked BP
Bideford Statoil Statoil
Borgland Smart stacked
Byford Smart stacked
Belford Preserved and maintained
Bredford Preserved and maintained
Original CRS date Current CRS date if operations restarted today
Certificates prolonged 2 years
if 2 yrs smart stacked (potentially 3 years)
Firm contract Terminated for convenience Option
Class renewal survey scheduleContract schedule2017 2018 2019 2020 2021 2022
Harland & Wolff
The yard experienced increased activity during the quarter
Work has mainly been construction and assembly of substructures for offshore windfarm development as well as a number of dockings
FINANCIAL RESULTS MARKET OPERATIONS SUMMARY
Summary
Revenues were USD 17 million
EBITDA was negative USD 51 million
Profit after tax was negative USD 207 million
Financial
Operational
Smart stacking of units continues with high focus on technical condition and preparation for efficient restart
Smarter classification regime demonstrated for Blackford Dolphin, significantly reducing total CRS cost. Now also being implemented on Bideford Dolphin
MarketBlackford Dolphin commenced its contract with BP
New contract opportunities are pursued aggressively
Q&A
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