BW Offshore: Q3 2014 - Interim consolidated financial information

  • EBITDA of USD 120.3 million
  • Stable operations with an uptime of 99.5%
  • Petróleo Nautipa acquisition completed in October
  • Contract extension for FPSO Berge Helene in October
  • Dividend payment of USD 0.03 per share

Operating revenues for Q3 2014 amounted to USD 248.5 million, a decrease of USD 71.3 million compared to USD 319.8 million in Q2 2014.

EBITDA for Q3 2014 amounted to USD 120.3 million, a decrease of USD 62.8 million compared to USD 183.1 million in the previous quarter. Operating profit for the quarter amounted to USD 64.1 million compared to USD 130.1 million in the previous quarter.

Net profit amounted to USD 40.4 million compared to USD 101.2 million in the previous quarter.

Main changes compared to last quarter was the recognition of the early termination fee for Azurite in the second quarter (USD 70 million). The third quarter has further seen slightly higher revenues as well as higher operating expenses due to the incorporation of 100% of FPSO Petróleo Nautipa from 1 July 2014 due to the acquisition of the remaining 50% share from Yinson Production. This investment has until 30 June 2014 been presented as a joint venture.

Further to this, as required by IFRS 3 Business Combinations, a 100% ownership has resulted in  the Company revaluating its previously held 50% to market value. This resulted in an upward adjustment of the net book value for the vessel by USD 19.7 million. This profit has been recognised as share of profit from associates. In addition the increased book value has increased the depreciation.

Operating expenses have also increased slightly due to high tender activity in the quarter.

Total equity at 30 September 2014 amounted to USD 1,207.6 million, a decrease of USD 6.3 million compared to USD 1,213.9 million at 30 June 2014. The equity ratio was 33.9% at the end of the quarter, down from 34.9% last quarter.

Net debt amounted to USD 1,577.5 million at 30 September 2014, compared to USD 1,574.1 million at 30 June 2014. Total available liquidity as of 30 September 2014 amounted to USD 372.0 million.

Net cash inflow from operating activities was USD 125.1 million compared to USD 144.5 million in the previous quarter. Net cash outflow from investing activities was USD 87.7 million compared to cash outflow of USD 37.5 million in the previous quarter. Cash outflow on investing activities is mainly related to capitalisation on the Catcher project and capital expenditures for ongoing life extension activities. Most life extension activities are either covered on a cost plus basis or reimbursed through higher day rates. Net cash outflow from financing activities was USD 49.3 million compared to cash outflow of USD 92.6 million in the previous quarter.

OPERATIONS
BW Offshore operates 18 units. The owned fleet consists of 14 FPSOs, one FSO and one VLCC tanker. All operating units experienced stable performance with an average uptime of 99.5% during the third quarter.

The Company operates the FPSO Peregrino for Statoil and Sinochem on the Peregrino oil field offshore Brazil.

The Company also operates the FPSO P-63 owned by Petrobras and Chevron on the Papa Terra field offshore Brazil. BW Offshore will operate the FPSO for three years in a joint venture with Queiroz Galvão Óleo e Gás S.A. ("QGOG"). The operation started in November 2013.

In July BW Offshore announced that it had initiated a process for reaching a mutual agreement for either of the two owners to take over the eventual 100% ownership of Tinworth Pte. Ltd., and correspondingly, the FPSO Petróleo Nautipa. Tinworth Pte. Ltd. and the FPSO was 50/50 owned between BW Offshore and Yinson Holdings Berhad through their respectively wholly owned Norwegian subsidiaries. BW Offshore subsequently gave and offer that Yinson accepted and signed the sale and purchase agreement with Yinson to take 100% ownership of the FPSO Petróleo Nautipa, owned through Tinworth Pte. Ltd. The price paid for the remaining 50% stake in the FPSO Petróleo Nautipa is USD 49.3 million, plus approximately USD 10 million consideration for the working capital in Tinworth Pte Ltd and its subsidiary. Formal completion of the transaction was effected early in October 2014.

The termination from Murphy West Africa Limited for FDPSO Azurite was effective May 2014. The vessel is currently being marketed for new projects. The Company is being compensated for the early termination of the contract. The compensation is reflecting the value of the remaining period of the original fixed term of the contract. 

BW Offshore is currently on a short term extension contract until end of fourth quarter 2014 for FPSO Abo with Nigerian Agip Exploration Ltd, a subsidiary of ENI S.p.A. The extension has been agreed to secure operational continuity while joint work to detail a longer term program for investment and production is completed. The Company is currently performing life extension activities on the unit, which are being compensated on a reimbursable cost plus basis.

All other FPSOs and FSOs are currently on longer term contracts.

PROJECTS
On 30 April 2014 BW Offshore signed a contract with Premier Oil for a FPSO to operate on the Catcher oil field in the UK North Sea. The field is owned by Premier Oil (50% operator), Cairn Energy (30%) and MOL (20%). The firm charter period of the contract is seven years, with extension options of up to 18 years. Based on a field life of 10 years, the contract value is USD 2.3 billion including FPSO charter rate and opex.

During third quarter the project has progressed according to planned schedule. In addition to progressing on engineering and procurement activities, some construction activities have now started, including parts of the turret mooring system. BWO are and will continue to be working closely with all subcontractors to mitigate risk of any cost or schedule change to the project going forward.

The Company is also undertaking a number of modification and life extension activities on existing units. These activities are either covered on a cost plus basis or reimbursed through higher day rates.

OUTLOOK
The outlook for BW Offshore's products and services remains good due to the geographical presence, scale and competence of the Company. The demand situation for leased units remains good and is expected to remain at 10-12 awards per year in spite of the recent drop in oil price. The trend of longer front-end definition phases before projects are sanctioned is continuing. BW Offshore expects outsourcing of production to be one of the solutions and part of the current cost saving initiatives by the oil companies.

BW Offshore's cash flow from the operating units is secure and based on long term contracts with national and independent oil companies. The fleet of BW Offshore will continue to generate a steady cash flow in the time ahead. The trend of continued production outside the initially planned period is continuing. BW Offshore's expertise in maintaining production and assets over long periods is increasingly providing a sound basis for dividend payments as well as further investments in new assets.

BW Offshore intends to grow selectively and expects to see a continued improvement in the risk and reward balance for new FPSO projects. 

The Board has declared a cash dividend of USD 0.03 per share for Q3 2014.

Please see the attachments for the full quarterly report and presentation.

BW Offshore hosts a presentation of the financial results at 09:00 (CET) today at Hotel Continental in Oslo, Norway. The presentation will be given by CEO Carl K. Arnet and CFO Knut R. Sæthre. The presentation will be broadcasted via webcast, and will also be available for replay. Please visit www.bwoffshore.com for link and login details.

For further information, please contact:

Knut R. Sæthre, CFO, +47 9111 7876 (Media)
Kristian Flaten, Vice President IR and Corporate Finance, +47 9509 2322
(Investors/analysts)

About BW Offshore:
BW Offshore is a leading global provider of floating production services to the oil and gas industry. BW Offshore is the world's second largest contractor with a fleet of 14 FPSOs and 1 FSO represented in all major oil regions world-wide. The company also operates additional 2 FPSOs. BW Offshore has a long track record on project execution and operations, as well as a robust balance sheet and strong financial capabilities. In more than 30 years of operation, BW Offshore has executed 38 FPSO and FSO projects. The company is listed on the Oslo Stock Exchange. Further information is also available on www.bwoffshore.com

This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.