BW Offshore: Q3 2015 - Condensed interim consolidated financial information

  • EBITDA of USD 174.0 million including insurance recovery
  • Impairment USD 75 million recognised for damages on FPSO Cidade de São Mateus
  • Recovery project for FPSO Cidade de São Mateus ongoing
  • Dividend payment suspended

  
Operating revenues for Q3 2015 amounted to USD 308.7 million, an increase of USD 65.0 million compared to Q2 2015. Operating expenses amounted to USD 134.4 million, a decrease of USD 5.0 million.

EBITDA for the third quarter amounted to USD 174.0 million, an increase of USD 69 million.

Depreciation amounted to USD 64.4 million, a decrease of USD 7.6 million. Operating profit for the quarter amounted to USD 34.2 million. Net financial expenses for the quarter amounted to USD 27.2 million. Tax expense for the quarter amounted to USD 14.3 million.

Net loss amounted to USD 7.3 million compared to net profit of USD 19.6 million last quarter.

EBITDA has been increased by an insurance recoverable of USD 75 million recorded for direct damages to FPSO Cidade de São Mateus as well as loss of hire insurance recognised during the quarter. The loss of charter hire rate under the revised contract with Ithaca Energy for FPSO Athena has partially offset the increase.

Depreciations have decreased as depreciations of non-recoverable costs on BW Athena have been revised as the estimated contract period has been extended.

During third quarter 2015, the Company recorded an impairment of USD 75 million to reflect losses related to non-recoverable costs as well as direct damages to the FPSO Cidade de São Mateus.  Net financial expenses have increased mainly as a result of lower interest rates increasing net liability on hedging contracts.

Total equity at 30 September 2015 amounted to USD 1,173.2 million. The equity ratio was 32.4% at the end of the quarter.

As of 30 September 2015, the Company had USD 911.2 million in interest-bearing loans and USD 60.0 million in letters of guarantee drawn under the USD 2,400 million credit facility. The committed amount on the USD 2,400 million credit facility was USD 1,197.4 million, following scheduled reductions. Total utilised debt facilities for the company, including bond loans and other facilities was USD 1,742.2 million. Total available liquidity as of 30 September 2015 amounted to USD 314.6 million.

Net debt amounted to USD 1,630.8 million at 30 September 2015. Net cash inflow from operating activities was USD 101.2 million. Net cash outflow from investing activities was USD 150.8 million. Cash outflow on investing activities is mainly related to capitalisation on the Catcher project and capital expenditures for ongoing life extension activities. Life extension activities are generally either covered on a cost plus basis or reimbursed through higher day rates. Net cash outflow from financing activities was USD 53.4 million.

OPERATIONS
BW Offshore operates 17 units. The owned fleet consists of 14 FPSOs and one FSO. Average uptime during the third quarter was 98.3% .  Cidade de São Mateus is excluded from the average uptime until the unit recommences operations after the repair project.

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 for three years in a joint venture with Queiroz Galvão Óleo e Gás S.A. ('QGOG'). The operation started in November 2013.

The recovery project for Cidade de São Mateus continues, where the unit now has been freed of gas and condensate has been offloaded. The next significant step is to disconnect the risers and mooring lines so that the unit can be towed to a yard for repairs. As the unit is still at the field, it has been challenging to get access to make an accurate assessment of the damages, and consequentially also to decide the book value to be impaired. This impairment charge will be booked as soon as a reliable estimate can be made.

BW Offshore carries insurance cover on a fleet wide basis, for its crew and support staff, pollution and clean up and any damage to vessels. In addition, the FPSO Cidade de São Mateus is also covered by a loss of hire insurance from 12 May 2015 for a period of 12 months. The accident and its consequences will to a large extent be covered by these policies and BW Offshore is working closely with insurers and their loss adjusters in the recovery operations. Given the delay to the disconnection the unit is expected to be without rate for some time before repairs can be carried out and the unit returns to the field. The length of this period is still uncertain.

Except for Azurite that has been returned by the client before the end of the fixed contract and is marketed for new projects, all other FPSOs and FSO are on contract per the end of the quarter.

PROJECTS
The Catcher project remains within budget with expected first oil in 2017. Also during third quarter, good progress was made on engineering, procurement, and construction activities for topside, turret mooring system and hull.  

BWO has previously reported that hull activities have slipped due to the yards inability to progress the hull delivery in accordance with the contractual schedule. A mitigation plan has been implemented to minimise the impact to the overall project schedule. As of third quarter, this mitigation plan has worked well as there has been no further slippage.

At the end of the quarter 77% of the projected project cost has been committed. BW Offshore is closely monitoring progress and safety in all the project activities, ensuring that mitigating actions are implemented quickly if any deviation is detected.

The Company is 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.

DIVIDEND
The Board of Directors reaffirms the long-term dividend policy. In light of the near term reduction in industry activity levels, the board has decided to suspend dividend payments until market visibility improves.

OUTLOOK
The continued low oil price has changed the short- and medium term outlook for BW Offshore's products and services. Macro conditions for the offshore industry have significantly worsened with expected continued drop in capital expenditure.

BW Offshore still expects outsourcing of production to be a cost effective solution for oil and gas companies, but believes it is prudent to expect a prolonged downturn in orders being awarded.

The majority of BW Offshore's fleet remain on long-term contracts with national and independent oil companies. The fleet will continue to generate a healthy cash flow in the time ahead.

Redeployment of units coming off contracts will be affected by the reduced number of new developments. In the current market, BW Offshore believes it is important to maintain a strong balance sheet and liquidity.

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In connection with the earnings release, BW Offshore will hold a conference call with CEO Carl K. Arnet and CFO Knut R. Sæthre at 14:00 (CET) today. To access the call, please dial in via one of the numbers provided below:

Norway: +47 2316 2787
UK: +44 (0) 20 3427 1911
US: +1 646 254 3365
Singapore: +65 6622 1089

Conference code: 9439940

The participants will be asked for their name, company and conference code.
For details on replay alternatives, please see the separate notice on 19 November.

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For further information, please contact:

Knut R. Sæthre, CFO, +47 9111 7876

Kristian Flaten, Vice President IR and Corporate Finance, +47 9509 2322

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 production, 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.