mosvold supply plc company presentation, london, november 7th.2007 roy mosvold, chairman, magne...
TRANSCRIPT
Mosvold Supply PlcCompany presentation, London, November 7th.2007
Roy Mosvold, Chairman, Magne Kristiansen, John Bernander
2
Content
1) Introduction
2) The assets
3) The market
4) Company set-up
5) Key financials
6) Summary
3
Investment case
Confidential
Mosvold with opportunistic approach to high-end AHTS market Mosvold Supply Plc. (Cyprus) initiated and backed by Mosvold with substantial experience and track
record from offshore drilling, supply and shipping Pure and leveraged play on high-end, large AHTS vessels Mosvold with proven track record on opportunistic approach and shareholder value creation
MOSU with attractive turnkey newbuild contracts and proven Vik Sandvik design 4x AHTS (Vik Sandvik 491 Clean Design) with total USDm 358 all-in delivered price (Oct 09, Jun 10,
Des 10 and Jul 11 delivery) vs approx USDm 440 quotes from western European yards First right of refusal on 2 additional similar vessels
Robust market outlook High-end AHTS order book balanced by strong demand (rig/FPSO/field developments), stricter
safety rules and environmental issues
Attractive payment schedule and contract terms justifying leveraged capital structure Fully funded to 2009, approx 30% of capex program funded post transaction (USDm 52 equity,
USDm 21 convertible, NOKm 185 bonds) New financing in place through fully underwritten equity issue and new convertible loan fully
subscribed by companies controlled by Arne Blystad
Significant value potential (4 vessels) Equity replacement value approx NOK 25 per share based on current newbuild quotes (fully diluted) Asset replacement quotes suggesting >100% equity return 3-yr historical average AHTS day rates yielding P/E 1.3x (fully diluted) and EV/EBITDA 3.7x
4
VS 491 CD: high capacity AHTS - State-of-the art workhorses
Main features Design: Vik Sandvik Overall length: 91 m Breadth moulded: 22 m Deadweight (7.9 m draft): 4,000 t Speed at 6.0 m draft: 17 knots Total horsepower: 28,080 Min. bollard pull: 270 t DP class: II Towing/anchor handling winch: 500 t Crane capacity: 2x 6t Fuel consumption: 13.5 t diesel per day Accommodation: 60 persons Prepared for ROV hangar
Well reputed equipment suppliers Diesel engines: MAK Thrusters: Brunvoll Towing winches: Hatlapa DP: Kongsberg
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Mosvold Supply AHTS with high-end specifications
Mosvold Supply Siem Havila Farstad Olympic
Design VS 491 CD VS 491 CD Havyard 845 UT 731 CD Aker AH05
Loa 91 91 87 87.4 94
Breadth 22 22 22 21 23
BHP (horse power) 28080 28000 23000 25000 26500
Bollard Pull 270 300 250 240 260
Winch 500t 500t 500t 500t 500t
Winch Drum Triple Triple Triple Triple Na
Deck 700 750 675 760 840
Accommodation 60 60 35 40 68
Max Speed 17 18 17 18 17
Economical Speed 13 12 12 13 Na
DP 2 2 2 2 2
Shark Jaws 2 x 350t 2x350t 2x350t Na Na
Stern Roller SWL 600t SWL 750 SWL 600 Na Na
Stern Roller Dimention ø4m,length 8m ø4m, length 8m. ø4.5m, length 6m Na Na
Towing Pins 4 x 350t 4x350t 2x300 Na Na
Deadweight 4000 4250 4000 3900 4925
Fuel 1550 1450 1550 1100 2800
Fresh Water 1090 1160 500 700 800
Mud 679 670 500 850 660
Dry Bulk 306 300 250 175 180
Rig Chain 670 680 610 670 800
Oilrec 1000 870 1000 1000 Na
FIFI Prep.II II II Na Na
Delivery Oct 09/Jun 10 May.09 May.09 May.09 Apr.09Source: Mosvold and Pareto Securities
6
Mosvold Supply to meet future requirements
New requirements focusing on environment, capacity and safety MARPOL Annex 1 Reg. 12a requires double hull protection of fuel tanks
Applicable to all vessels/newbuilding with fuel tanks of total capacity of at least 600 m3 which are ordered after Aug 2007 and delivered from Aug 2010
Oil companies starting to ask for ROV capability during critical anchoring NOX tax: NOK 15 per kilo emission. Norwegian charterers expected to require modern tonnage with
catalyzer, which may reduce emissions with 90-95% Possible requirement for contingency tension testing of anchors up to 300 tons in the North Sea
Mosvold Supply VS 491 CD Double hull construction (DnV Clean Design notation)
Safeguarding the environment from possible leakage Ships prepared for ROV Vessels with great stability and large towing and pulling capacity Vessels with light construction work capabilities Cost efficient fuel economy
Reduces emissions of greenhouse gases Cost effective solution for charterers
HYBRID propulsion system Straight shaft technology when steaming Diesel electric principles when the vessel is holding position
►The industry realized, only to late, that CD and larger vessels would be the consequence of the new requirements
Source: R. S. Platou
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Mosvold Supply Construction program
Favorable payment structure securing commitment from Batamec Shipyard 20% at contract signing 10% at key equipment delivery 70% at final delivery
Turnkey construction contract with parent company Otto Offshore Ltd., Labuan, Malaysia for 2 additional vessels Contract price USDm 167 All-in delivered price USDm 189 (incl. project development, supervision & interest)
Refund guarantee from Bangkok Bank (BBB+)
2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11
AHTS TBN 1
AHTS TBN 2
AHTS TBN 3
AHTS TBN 4
70% payment20% payment 10% payment
20% payment 10% payment 70% payment
20% payment 10% payment 70% payment
20% payment 10% payment 70% payment
8
Batamec Shipyard with relevant expertise
PT Batamec Shipyard wholly owned subsidiary of Otto Marine Pte Ltd Otto Marine Ptd Ltd started operations in 1979
Principal activities: Shipbuilding Ship repair & conversion Offshore structural engineering
Batamec is strategically located at Batam Island, Indonesia
Management comprises over 45 qualified and experienced engineers, primarily from PPL and Keppel Fels Total workforce: 2,200
Certified to ISO 9001:2000 with Lloyds Register Quality Assurance as at 25 April 2005
6 vessels successfully delivered since embarking on shipbuilding strategy Order book of 30 vessels with deliveries until 2010 Of which 10x 10,000HP AHTS
Major clients: Tidewater ESNAAD Seatrucks PETRA RK Offshore Marine Subsea (Africa Offshore Services)
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Drilling and field development driving AHTS demand- Boost in drilling activity and growing number of FPSO installations going forward- Deepwater field development boosting AHTS vessel usage
0
50
100
150
200
250
2003 2010E
General floater activity FPSO units
0
20
40
60
80
100
120
140
160
180
200
2003 2010E
Source: ODS Petrodata, Infield, Pareto estimates
Annual growth 2000-2005 vs. 2006-2010
# units # units %
+35%
+100%
10
Historical number of AHTS per rig
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5
Vessels per rig
Sources: DnB NOR Markets estimates, Clarckson and ODS - Petrodata
• The number of vessels per rig is increasing due to:
• Other demand, for instance FPSO and construction related work
• More activity on deeper water – longer distances to tow the rigs
• High day-rates for rigs: Important that lack of vessels does not slow mob/demob
Need for more vessels per rig
11
Large AHTS to be preferred going forward- Meeting new and stricter requirements from clients and authorities
Mosvold Supply VS 491 CD 22 m breadth 500 t
7º tilting
Conventional / older vessel 17 m breadth 400 t
19º tilting
12
World AHTS fleet is old (22 years avg age)- New vessels substantially larger and more capable than older vessels
Source: Clarksons / JGO Shipbrokers / Pareto estimates
0
5
10
15
20
25
30
35
40
45
50
AHTS > 10,000 BHP AHTS > 20,000 BHP
Number of newbuilds
13
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
J an Feb Mar Apr Mai J un J ul Aug Sep Oct Nov Dec
GB
P
2000 2001 2002 2003 2004 2005 2006 2007
e
Rates in the AHTS market
18,000+ bhp AHTS spot rates
Sources: DnB NOR Markets estimates, Clarckson and ODS - Petrodata
15,000+ bhp AHTS spot rates
Day-rates are improving after a slow summer season Quoted fixtures this week up to GBP 100,000 Day-rates below are for vessel with average size of approx 16,000 bhp vs Mosvold Supply's 28,000 bhp: Significant premium is fair However, vessels in the spot market has significantly lower utilization, ~65%, than those on term contracts. We expect MOSU to achieve 90% utilization Oil companies have been willing to fix new-build of the MOSU design on term contract @ ~ GBP/day 35,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
GB
P
AHTS (+18.000 bhp)
Estimated day-rates for the MOSU fleet: GBP/day 28,000
14
Consolidation opportunities ahead- Fragmented market creates room for consolidation- New, large AHTS in favor
Source: Petrodata / Platou / Farstad / Pareto
15
Investor friendly and cost-effective company set up
Mosvold Shipping Holding owned by founders, which owns 22.9% of Mosvold Supply No employees in Mosvold Supply Corporate governance in accordance with public company guidelines (incl. 30% mandatory offer threshold
prior to listing) No corporate tax (pay only local tonnage tax)
Management agreement with Mosvold Management (100% owned by Mosvold Shipping Holding ) Fixed price mgmt contract (G&A/accounting/reporting) of USD 42,500 per vessel per month
- 12 months cancellation period Mosvold management responsible for construction and building supervision at estimated cost of USDm 1.2 per vessel
(may be subcontracted to reputable technical manager) Post-delivery commercial vessel fixture commission of 1.25% USDm 2 project development costs first 2 vessels + 1% commission on shipbuilding contracts 1% commission on sale of vessel(s) or change of control in Mosvold Supply (> 30%)
Mosvold Supply Plc Cyprus
Mosvold Supply II Mosvold Supply III
100%100%
Corporate set-up:
22.9%
Mosvold Shipping Holding Limited
Cyprus
Mosvold Supply I Mosvold Supply IV
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Mosvold – an experienced shipping and offshore services group
The Mosvold family has continuously been active in shipping since 1910 .Has owned and operated vessels in many segments (tankers,dry bulk, reefers and passenger ferries. 7 VLCCs contracted late 90 ties were successfully sold to Frontline 2001.
First investment in offshore: Part ownership of semi early 80ies Acquired 3 modern J/Us from Keyes Offshore in 1989 Mosvold Shipping was IPO‘d on the Oslo Stock Exchange in 1990 Acquired 100% of Dual Drilling Co in 1990. Dual was a Dallas based worldwide drilling contractor
owning 3 J/Us and 10 platform rigs Through Dual, acquired further 3 J/Us in 1993 combined with raising new equity and listing of Dual on
NASDAQ (Mosvold Shipping retained 60% of Dual) Dual merged with Ensco in 1996 with payment in shares. All shares distributed to Mosvold
shareholders Mosvold initiated a J/U project 1H 2004 to build 2 J/U (with 4 options) at PPL Shipyard and Keppel
FELS in Singapore. The entire project sold to Awilco in 2004 and is the now the foundation of Awilco Offshore
Mosvold is managing the construction of two semi-submersible baredecks at the Russian yard Sevmash. Baredecks sold to Saipem and Sea Dragon Offshore with forward delivery
Mosvold founded Mosvold Drilling Ltd. in 2005 (2x Ultra Deep Water Drillships on order with Samsung, acquired by Sea Drill)
Mosvold founded Mosvold Jackup Ltd. in 2006 (2x 300 ft Jackups on order at MIS), sold to Sea Wolf Mosvold with innovative approach taking advantage of yard market potential, eg. MIS and Sevmash Mosvold with proven track record demonstrating opportunistic approach and shareholder value
creation
Confidential
17
Mosvold Supply capex and funding)
USDm 358 all-in/ready to operate cost Incl. capitalised interest costs
Total funding requirement of USDm 369 Incl. G&A, fees and financing costs
USDm 52 of paid-in equity USDm 32 from June 2007 USDm 20 Sep 07
USDm 21 convertible bond issue (Sep 07) Fully subscribed by companies controlled by Arne Blystad
NOKm 185 bond issue (June 07) USDm 30 additional bond financing assumed in 2009
USDm 230 of take-out debt assumed upon delivery Take-out representing approx 62% of all-in cost
Source: Mosvold Supply Plc
Total Capex and Funding 2007E 2008E 2009E 2010E 2011E CUM # 1&2 # 3&4 Leverage
Vessel Capex USDm 64 15 62 120 59 321 154 167Optional equipment " - - 1 2 2 4 1 3Project development cost " 2 - - - - 2 2 -Supervision etc " 1 2 3 3 - 9 6 3Capitalised interest cost " 4 5 7 6 1 24 9 15Total Capex " 72 22 73 131 62 360 172 188
Equity " 52 - - - - 52 32 20 14%Convertible " 21 - - - - 21 - 21 6%Bond 1 (Vessel #1 & #2) " 30 - - - (11) 19 19 - 5%Bond 2 (Vessel #3 & #4) " - - 30 - - 30 - 30 8%Take-out " - - 50 130 50 230 112 118 62%Accumulated cashflow pre delivery " (1) (0) 1 11 11 22 17 5 6%Total Funding " 103 (0) 81 141 50 374 180 194 100%Source: Mosvold Supply Ltd
Capex and Funding (4x AHTS)
Yard Turnkey Contract Price 321Supervision/site team/pre-del crew cost 5Optional equipment 4Contingency 4Capitalised interest costs 24All-in ready to operate cost 358Project devevopment cost 2SG&A/mgmt fee/legal fees/equity fee 9Total Financing Requirement 369
FundingEquity 52 Convertible bond 21 2.pr Bonds (net of USD 11m repayment) 49 1.pr Senior debt (unfunded) 230 Cash from operations to delivery of 4th vessel 22 Total Funding 374
Implied cash at delivery 5Net debt at delivery 295
18
Pro forma Mosvold Supply key figures (4x AHTS)
EV USDm 350 fully invested 2010E balance sheet
Post-deal market cap USDm 59 Approx 23% Mosvold ownership
P/E 4.3x on current Pareto 2011E estimates for similar vessels NOK 275k/d EV/EBITDA 6.9x
P/E 1.0x on 3-yr AHTS historical average NOK 450k/d EV/EBITDA 3.7x
Confidential
Mosvold Supply Plc earnings scenarios (fully invested) Pareto 11E 3yr Avg Pareto 07EDay Rates NOK/day 275,000 450,000 550,000
USD/day 48,246 78,947 96,491Utilisation 96% 96% 96%Daily opex ($10,000) ($10,000) ($10,000)No of vessels 4.0 4.0 4.0
PROFORMA P&LVessel EBITDA USDm 53 96 121SG&A " (2) (2) (2) EBITDA " 51 94 119Depreciation (25yr) " (14) (14) (14)Operating profit " 37 80 104Net financials fully invested (yr1) " (23) (23) (23)Net Profit (after tax) " 14 57 81
Cash Earnings " 28 71 96Maintenance capex " (2) (2) (2)Free cash flow (pre debt amortisation) " 26 69 94Free cash flow (post debt amortisation) " 6 49 74EPS NOK 3.0 12.2 17.5
Share price NOK 12.75 12.75 12.75No of shares (fully invested) mill 26.5 26.5 26.5Market capitalisation USDm 59 59 59Net debt fully invested " 295 295 295Enterprise Value " 355 355 355EV/EBITDA 6.9 3.8 3.0 P/E 4.3 1.0 0.7 RoE (on mkt cap) 23.1 % 95.7 % 137.2 %FCF yield (post debt amortisation) 9% 23% 32%Net interest bearing debt/EBITDA 5.8x 3.1x 2.5xEBITDA/Net interest 2.2x 4.1x 5.2xSource: Pareto Securities ASA
19
Significant equity and convertible return potential
Current asset replacement cost estimated at NOKm 640 per vessel
All-in delivered price based on recent quotes Vs. approx NOKm 525 (avg) MOSU all-in
delivered cost
Mosvold fully diluted equity worth NOK 24/share on asset replacement quotes
~2x current share price
>NOK 40 share price potential based on 3-yr average earnings scenario
EBITDA USDm 94/yr on NOK 450k/d Target EV/EBITDA 5.5x Implying P/E 3.9x on target NOK 40/share
valuation
USDm 21 convertible with approx 21% ownership post conversion
5-yr, 7.0% coupon, 30% conversion premium
Mosvold Supply equity potential (fully diluted)
12.75
24
41
0
5
10
15
20
25
30
35
40
45
Issue price Repl cost 1) Earnings pot 1)
NO
K /
sh
are
Confidential
Source: Pareto Securities ASA
1) Assumption: fully diluted # of shares
20
Mosvold Supply – most leveraged play in town
Leverage (Mkt Cap/EV)
14%
20%
33%35%
39%
0%
10%
20%
30%
40%
MOSU MOSU (incl.Convertible)
REM SIOFF Peer GroupAvg
Mosvold Supply strongly leveraged 14% equity vs. committed capex 20% equity/convertible vs. committed capex 29% of committed capex financed post transaction (equity/convertible/bond)
Capital structure justified based on favourable yard payment terms and Mosvold’s proven access to additional capital MOSU fully financed to 2009 post transactions
Mosvold Supply the only pure play on high-end, large AHTS Newbuild prices still on an upward trend (squeeze on equipment suppliers)
Source: Pareto Securities ASA
Confidential
21
Investment case
Confidential
Mosvold with opportunistic approach to high-end AHTS market Mosvold Supply Plc. (Cyprus) initiated and backed by Mosvold with substantial experience and track
record from offshore drilling, supply and shipping Pure and leveraged play on high-end, large AHTS vessels Mosvold with proven track record on opportunistic approach and shareholder value creation
MOSU with attractive turnkey newbuild contracts and proven Vik Sandvik design 4x AHTS (Vik Sandvik 491 Clean Design) with total USDm 358 all-in delivered price (Oct 09, Jun 10,
Des 10 and Jul 11 delivery) vs approx USDm 440 quotes from western European yards First right of refusal on 2 additional similar vessels
Robust market outlook High-end AHTS order book balanced by strong demand (rig/FPSO/field developments), stricter
safety rules and environmental issues
Attractive payment schedule and contract terms justifying leveraged capital structure Fully funded to 2009, approx 30% of capex program funded post transaction (USDm 52 equity,
USDm 21 convertible, USDm 30 bonds) New financing in place through fully underwritten equity issue and new convertible loan fully
subscribed by companies controlled by Arne Blystad, conversion price 130% of NOK 12,75
Significant value potential (4 vessels) Equity replacement value approx NOK 25 per share based on current newbuild quotes (fully diluted) Asset replacement quotes suggesting >100% equity return 3-yr historical average AHTS day rates yielding P/E 1.3x (fully diluted) and EV/EBITDA 3.7x