Q4 2010 and preliminary results 2010
- Q4 2010 EBITDA of USD 87.6 million excluding non-recurring items
- EBITDA from continuing operations of USD 73.6 million in the fourth quarter and USD 201.8 million for the year 2010, before results of associates and restructuring costs
- Acquisition of Prosafe Production completed
- Received payment of USD 531.5 million for the sale of the APL division
- Uptime of 98.6% after downtime on Ningaloo Vision
- Start of day rate payments for BW Pioneer under discussion
- Completed year-end fleet valuation - net impairment charges of USD 85.0 million
- Syndication of USD 2.4 billion seven year loan facility completed
- Dividend policy proposed for Annual General Meeting in May - 20-25% of EBITDA with quarterly payments
- FSO Endeavor contract extended until April 2011 (options until April 2013)
- Final contract negotiations for Bien Dong FSO in Vietnam
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.
The summary relates to the financial results of Q4 2010, please see the attached report for the preliminary results for 2010.
Operating revenues were 255.8 million, an increase of USD 198.1 million (343%) compared to USD 57.7 million in Q4 2009.
BW Offshore obtained control of Prosafe Production Ltd (PROD) on 1 October 2010. The PROD fleet has consequently been consolidated as of the fourth quarter 2010. The increase in revenue is primarily a result of the consolidation but also reflects revenue recognized on the Papa Terra contract.
Operating expenses were USD 216.9 million, an increase of USD 190.5 million compared to USD 26.4 million in Q4 2009. The increase in operating expenses is mainly a result of the consolidation of PROD, a charge of USD 14.0 million related to disputed import duties for the importation of the FPSO YÙUM K`AK`NÀAB to Mexico in 2007 and expenses recognized on the Papa Terra project. In addition the fourth quarter operating expenses includes USD 34.7 million in restructuring costs related to the acquisition of PROD. This amount includes costs related to personnel reductions, fees to external advisors, terminated office leases and other identified restructuring costs. Operating expenses excluding the restructuring costs were USD 182.2 million. Restructuring costs reported by PROD in the third quarter report are included in the USD 34.7 million expense in the consolidated fourth quarter figures.
Changes in fair market values of currency hedges was negative USD 1.4 compared to negative USD 0.1 million in Q4 2009.
EBITDA for the quarter was USD 38.9 million, an increase of USD 18.3 million (89%) compared to USD 20.6 million in Q4 2009. EBITDA for the quarter excluding restructuring costs was USD 73.6 million.
Impairment charges totaling USD 85.0 million, including a reversal of a previous impairment charge, have been taken in the fourth quarter and relate to the operating vessels and vessels under conversion.
The net financial result amounted to a loss of USD 23.5 million, an increase of USD 18.1 million compared to a net loss of USD 5.4 million in Q4 2009. The acquisition of PROD and the refinancing of BWO and PROD loan facilities resulted in restructuring costs of USD 12.7 million, which mainly consists of the expensing of capitalized costs on the existing loan facilities. These restructuring costs are included in other financial items.
The Company has hedging policies in place with the objective of reducing exposure to currency and interest rate fluctuations. The improvement in the financial items was mainly due to changes in fair market value on financial instruments of USD 9.8 million compared to a loss of USD 13.9 million in Q4 2009.
The result before tax was a loss of USD 115.1 million, a decrease of USD 116.2 million compared to a profit of USD 1.1 million in Q4 2009. The income tax expense was USD 7.2 million, an increase of USD 4.4 million compared to USD 2.8 million in Q4 2009. The increase is due to the consolidation of PROD.
Net loss before discontinued operations was USD 122.3 million compared to a loss of USD 1.7 million in Q4 2009. Net loss including discontinued operations was USD 6.6 million compared to a loss of USD 7.3 million in Q4 2009.
At 31 December 2010, total assets amounted to USD 3,670.2 million compared to USD 2,393.5 million at 31 December 2009. The net increase of USD 1,276.7 million (53%) mainly relates to the consolidation of PROD, increased book values of vessels undergoing conversion, increased cash deposits offset by the sale of APL assets and reduced receivables. Goodwill at 31 December 2010 relates to the acquisition of PROD while Goodwill at 31 December 2009 related to the acquisition of APL in 2007.
Total equity at 31 December 2010 amounted to USD 1,375.6 million, an increase of USD 454.7 million (49%) compared to USD 920.9 million at 31 December 2009. The increase is mainly due to issuing new equity related to the acquisition of PROD.
Net cash flow from continuing operating activities was USD 98.2 million compared to USD 123.4 million in Q4 2009. Net cash flow from operating activities, including discontinued operations was USD 140.1 million compared to USD 121.1 million in Q4 2009. Net cash outflow from investing activities was USD 66.8 million compared to cash outflow of USD 102.1 million in Q4 2009. Cash flow from investing activities relates mainly to the conversion projects. Net cash outflow from financing activities was USD 383.1 million compared to inflow of USD 1.7 million in Q4 2009.
At 31 December 2010, the Company had USD 228.2 million in cash and deposits, compared to USD 68.0 million in 2009. Currently, the Company has drawn USD 610.0 million on the USD 1,500 million credit facility and USD 900.0 million on the USD 1.2 billion credit facility (PROD). Net debt amounted to USD 1,401.5 million at 31 December 2010, compared to USD 849.3 million at 31 December 2009.
BW Offshore has on 29 December 2010 completed the syndication process for a USD 2.4 billion seven year senior secured credit facility. The credit facility was substantially oversubscribed by a group of 15 leading international banks. The facility will be used to refinance BW Offshore and Prosafe Production's main credit facilities, as well as to finance further growth for the Company. BW Offshore expects the loan documentation to be completed in Q1 2011.The USD 1.5 billion loan facility, (BW Offshore) and the USD 1.2 billion loan facility (PROD) is a result of the refinancing presented as current interest bearing debt at 31 December 2010.
The APL division was sold in December 2010 for gross proceeds of USD 531.5 million in cash. The final sales price is still subject to net working capital adjustments. As a result of the sale, the APL business has been classified as a discontinued operation. The net result from the discontinued business in Q4 was USD 5.8 million, compared to USD -5.6 million in Q4 2009
Including ongoing conversions, BW Offshore`s fleet now totals sixteen FPSOs, two FSOs and two conversion candidates.
All FPSOs and FSOs experienced stable performance during the fourth quarter except for the FPSO Ningaloo Vision, which was shut down for part of Q4 2010 due to leakage in the fluid swivel and one defective mooring line. Repair work has been completed, and the FPSO is now back in operation.
The FPSO BW Pioneer was hooked up to the buoy in October 2010. The FPSO should be receiving stand-by dayrates once Petrobras has approved the unit. Petrobras has still not approved the unit and BW Offshore has therefore not booked any revenue from stand-by dayrate. Petrobras and BW Offshore are still discussing the formal approval of the vessel.
BW Offshore's three ongoing FPSO conversions, P-63 (Papa Terra), BW Joko Tole (TSB) and BW Athena, are all progressing in line with expectations.
BW Joko Tole and BW Athena are regular conversion projects where capex is capitalised within vessels under conversion, while the P-63 project is accounted for as a fixed-price construction contract. Under the latter format, revenue is recognised in accordance with the "percentage of completion" (POC) accounting method. BW Offshore is receiving milestone payments from Petrobras for the P-63 throughout the project period.
BW Offshore is also performing project management and engineering services to OSX for the FPSO OSX-1. Revenue is booked on a monthly basis.
BW Offshore completed on 8 December 2010 the sale of all its shares in subsidiary APL (Advanced Production & Loading) Plc to National Oilwell Varco. The sales price has been agreed at USD 531.5 million, subject to net working capital adjustments.
BW Offshore has as an objective to generate competitive long-term total shareholder returns. This return will be achieved through sustainable growth and stable dividend payments. BW Offshore targets a payout ratio of 20-25 per cent of EBITDA over the business cycle. The payments of dividends will be evaluated and paid on a quarterly basis.
The dividend policy will be proposed by the Board of Directors to the Annual General Meeting (AGM) scheduled for May 2011.
The outlook for the energy market in general and BW Offshore's position in particular remains strong. Based on BW Offshore's diversification, presence, financial scale and competence, the Company will play a significant role in the FPSO space and continue to grow its business. BW Offshore is currently pursuing several prospective projects with expected award in 2011 and beyond, and expects a continued increase in activity level both in the short and long term.
The operating cash flow from the operating vessels is secure and based on long term contracts with large national oil companies and robust independent oil companies. BW Offshore is fully funded for all ongoing projects and additional financial capacity is available for new growth opportunities.
The consolidation of the Prosafe Production fleet will contribute to significant EBITDA growth in 2011. The run rate EBITDA will also grow significantly with the start up of the three FPSOs BW Pioneer, BW Athena and BW Joko Tole.
The integration of Prosafe Production is going well, and BW Offshore has identified synergies in several areas. Initial cost synergies will be realized from Q1 2011, while the full effect is expected from 2012 and beyond.
BW Offshore is committed to increasing shareholder returns, and will only pursue projects that meet the company's targeted returns. The revised dividend policy is an important milestone for the company's objective to achieve class leading shareholder returns based on share price performance and dividend payments.
For further information, please contact:
Knut R. Sæthre, CFO, +47 9111 7876 (Media)
Kristian Flaten, VP Finance & Investor Relations, +47 9509 2322 (Analysts/investors)
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 2 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 onwww.bwoffshore.com