Q3 2010: Interim consolidated financial information
· Successfully completed the voluntary exchange offer to acquire all issued and outstanding shares in Prosafe Production Limited
· Signed agreement for the sale of the APL division
· BW Offshore strengthened position as a market leader focusing on the global FPSO sector
· EBITDA of USD 79.3 million in Q3 2010, before results from associates
· Signed contract for the FPSO BW Athena (former BW Carmen) for the Athena project (UK)
· Extended the contract for the FPSO Sendje Berge (BW Offshore) for additional 24 months and the FPSO ABO (Prosafe Production) for additional 12 months
BW Offshore hosts a presentation of the financial results at 09:00 (CET) today at 'Shippingklubben` (Haakon VII gt 1, 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.
Operating revenues in Q3 2010 increased by USD 73.8 million to USD 139.0 million compared to USD 65.2 million in Q3 2009.
Increase in revenues is mainly a result of revenue recognised on the Papa Terra contract, improved operation of the BW Offshore fleet and a cash settlement of USD 32.5 million related to the Basker Manta Gummy (BMG) project.
Operating expenses increased by USD 33.5 million to USD 59.7 million compared to USD 26.2 million in Q3 2009. The increase in operating expenses is mainly a result of expenses recognised on the Papa Terra project offset by positive changes in fair market values of currency hedges of USD 6.8 million compared to USD 4.8 million in Q3 2009.
The EBITDA for the quarter increased by USD 21.6 million to USD 62.9 million compared to USD 41.3 million in Q3 2009. The BMG settlement had a positive EBITDA effect of USD 32.5 million. The EBITDA before transactions related to associates was USD 79.3 million compared to USD 39.0 million in Q3 2009.
The share of profit of associates was negative USD 16.4 million (positive USD 2.3 million) in the quarter and relates to the investments in Prosafe Production Limited (PROD). At 30 September 2010, the Company held 23.9% of the shares in PROD. Following the voluntary offer and the subsequent squeeze-out process the company now controls 100% of the shares in PROD.
The net financial result increased by USD 20.2 million to a positive USD 3.1 million compared to a net loss of USD 17.1 million in Q3 2009. The Company has hedging policies in place with the objective of reducing exposure to currency and interest rate fluctuations. The positive development in the financial items was mainly due to changes in fair market value on financial instruments of USD 6.8 million compared to a loss of USD 5.5 million in Q3 2009.
The result before tax increased by USD 43.7 to a profit of USD 52.0 million compared to a profit of USD 8.3 million in Q3 2009. The development in interest rates and foreign currency movements during the quarter had a positive impact on results of USD 13.6 million. The income tax expense increased by USD 0.5 million to USD 2.4 million compared to USD 1.9 million in Q3 2009.
Net profit was USD 49.6 million compared to USD 6.4 million in Q3 2009.
At 30 September 2010, total assets amounted to USD 2,480.2 compared to USD 2,338.0 million at 30 September 2009. The net increase of USD 142.2 million mainly relates to increased book values of vessels undergoing conversion and increased cash and deposits, offset by reduced receivables and deposits. Goodwill and intangibles mainly relate to the discontinued operations and are therefore included in "Asset of disposal group held for sale".
Total equity increased by USD 20.7 million to USD 948.6 million at 30 September 2010 compared to USD 927.9 million at 30 September 2009. The increase reflects the total comprehensive profit for the period.
Net cash flow from continuing operating activities was USD 54.2 million compared to USD 57.9 million in Q3 2009. Net cash flow from operating activities, including discontinued operations was USD 61.2 million compared to USD 72.5 million in Q3 2009. Net cash outflow from investing activities was USD 81.2 million compared to USD 84.6 million in Q3 2009. Cash flow from investing activities relates mainly to the conversion projects. Net cash inflow from financing activities was USD 42.9 million compared to USD 10.8 million in Q3 2009, mainly arising from a net drawdown of USD 50.0 million on the loan facility.
At 30 September 2010, the Company had USD 76.9 million (USD 42.4 million) in cash and deposits. Currently, the Company has drawn USD 888.8 million on the USD 1,500 million credit facility. Net debt amounted to USD 811.9 million at 30 September 2010 (USD 870.0 million).
On 13 September 2010, BW Offshore signed an agreement to sell all of its shares in APL (Advanced Production & Loading) PLC to National Oilwell Varco Norway AS for USD 500 million in cash. Completion of the sale is expected to take place before the end of the fourth quarter 2010. As a result of the agreement, the APL business has been classified as a disposal group held for sale and a discontinued operation. The sale of the APL business is not expected to result in any impairment or extraordinary costs and as such the result from the discontinued operations is presented net in one line in the Income Statement. The net result from the discontinued business in Q3 was USD 8.0 million (USD 0.1 million). At 30 September 2010, the total assets classified as held for sale amounted to USD 498.4 million.
Revenues in the quarter were USD 139.0 million (USD 65.2 million). EBITDA was USD 62.9 million (USD 41.3 million). The difference compared to Q3 2009 is mainly due to the USD 32.5 million BMG settlement, the EBITDA included from the Papa Terra project and generally improved operation of the BW Offshore fleet. The EBITDA was negatively affected by the share of loss of USD 16.4 million from the investment in PROD. Included in the Q3 2009 EBITDA was a settlement related to a terminated FPSO contract in 2007.
The FPSOs YÙUM K`AK`NÀAB, BW Cidade de São Vicente, Berge Helene and Sendje Berge experienced stable performance during the second quarter resulting in an oil process uptime of 99.8% during the period.
Cash flow from operating activities in the third quarter was USD 54.2 million (USD 57.9 million).
The FPSO BW Pioneer has now been hooked up to the buoy and should be receiving stand by day rate subject to final approval by Petrobras.
The ongoing conversion of the FPSO P-63 (the Papa Terra project) for Petrobras is continuing in line with expectations. BW Offshore's main scope relates to the marine conversion of the vessel BW Nisa. The project is accounted for as a fixed-price construction contract, causing the revenue from this project to be recognised in accordance with the "percentage of completion" (POC) accounting method. The Company is receiving milestone payments from Petrobras throughout the project period.
During the third quarter, BW Offshore signed a contract with Kangean Energy Indonesia ("KEI") for a gas FPSO to operate on the Terang Sirasun Batur ("TSB") fields in Indonesia. BW Offshore's scope includes the delivery of an FPSO, risers, umbilicals and mooring system. BW Offshore will also be responsible for the installation and operation of the unit. The charter contract is for a fixed period of 10 years, plus additional options of up to 4 years. First gas is planned for early 2012. The unit to be converted for this project is the BW Genie.
During the quarter, BW Offshore signed a contract for the FPSO BW Athena (former FPSO BW Carmen) with Ithaca Energy (UK) Ltd and partners. The FPSO will be employed on the Athena oil field in the UK sector and is expected to commence production during 2H 2011. The contract includes a fixed charter period of three years, plus options for additional five years. The FPSO will be upgraded with field specific equipment.
Discontinued operations (APL)
Revenues in the quarter were USD 54.5 million (USD 68.6 million) with an EBITDA of USD 14.9 million (USD 6.4 million). The cash flow from operating activities in the quarter was USD 7.0 million (USD 14.6 million).
Combination with Prosafe Production Public Limited (PROD)
On 13 September 2010, it was announced that PROD and BW Offshore had agreed to combine in order to create the world's second largest FPSO contractor. The combination was carried out through a voluntary offer from BW Offshore for all outstanding shares in PROD. BW Offshore currently owns 100% of PROD.
PROD is one of the world`s leading FPSO contractor with a fleet that consists of eight FPSOs, two FSOs and one VLCC candidate. The combined company will be the second largest FPSO provider in the world, having a fleet of 19 units in operation, whereof 16 are FPSOs. PROD will be consolidated and consequently the fourth quarter 2010 figures will reflect the combined company.
The combined company is believed to have the diversification, presence, financial scale and competence to play an even more significant role in the FPSO space than BW Offshore and PROD were able to do on their own. The Company expects a continued increase in the activity level during the course of 2011.
BW Offshore is fully funded for all ongoing projects. The operating cash flow from existing vessels is secure and long term, and comes from large national oil companies. Additional financial capacity is available for new projects if these should meet BW Offshore's targeted returns.
The consolidation of the PROD fleet will contribute to a significant growth in the fourth quarter 2010 EBITDA. The two new FPSO contracts for the TSB and Athena fields will further contribute to the growth in EBITDA in 2012 and beyond.
For further information, please contact:
Carl K. Arnet, CEO, +65 9630 3290
Knut R. Sæthre, CFO, +47 9111 7876
About BW Offshore:
BW Offshore is a leading global provider of floating production services to the oil and gas industry. With the acquisition of Prosafe Production in 2010, the company has become the world's second largest contractor with a fleet of 16 FPSOs and 3 FSOs represented in all major oil regions world-wide. BW Offshore has an excellent track record on project execution and operations, as well as a robust balance sheet and strong financial capabilities. In over 25 years of production, BW Offshore has successfully executed more than 30 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 acc. to §5-12 vphl (Norwegian Securities Trading Act)