Go to content
Overview
SeaBird Exploration ("the Group") provides marine seismic services for the international oil and gas industry. SeaBird Exploration Limited ("the Company") is a limited liability company incorporated in the British Virgin Islands. The Group has its operating office in Dubai, United Arab Emirates and a representative office in Oslo, Norway. SeaBird is, since April 2006, listed on the Oslo Stock Exchange.
 
The Group is a global provider of marine seismic data. The business segment comprises activities on 2D and 3D seismic data, solutions for seabed acquisition of 2D, 3D and 4C/4D multimode seismic and associated products and services to the oil and gas industry. The Group specializes in high quality operations within the high end of the source vessel and 2D market, as well as in the shallow water 2D/3D market. Main focus for the Group is proprietary seismic surveys (contract seismic). The operations are monitored in geographical areas. SeaBird does not have a multi-client data library. Main success criteria for the Group are an unrelenting focus on Quality, Health, Safety and Environment (QHSE), combined with efficient collection of high quality seismic data. The Group operates a seismic fleet of four vessels with two additional vessels under conversion with expected completion during the early fourth quarter of 2006. Three more vessels are ordered for delivery in 2007, one Ocean Bottom Seismic/Source vessel, one Source/2D Vessel and one shallow water 2D/3D vessel. The source/2D vessel has already been chartered out from delivery date.
 
Seismic operations are generally weather sensitive and as a result of this, there are typically seasonal differences in the day rates and vessel utilisation. The Group strives to maximise day rates and earnings by positioning vessels in less weather sensitive areas during the less favourable seasons, such as monsoon or winter seasons in harsh areas. Furthermore, seismic operations are dependent on the political situation, market conditions of oil and gas and the number of vessels at any time available in the market. The current market situation and outlook remain strong. However, oil prices and instability in the Middle East (including Iran, Iraq and Lebanon) remain inherent risk factors.
 
 
Basis for preparation of financial statements
The interim financial report is prepared in accordance with the International Accounting Standard 34 (IAS 34) "Interim Financial Reporting". A general description of the Group, and the principal accounting policies applied in the preparation of these consolidated and condensed interim financial statements, are presented in the Consolidated Financial Statements for 2005. These Interim Financial Statements should be read in conjunction with the Consolidated Financial Statements for the year ended 31 December 2005 as they provide an update of previously reported information. The accounting policies used and the presentation of the Interim Financial Statements are consistent with those used in the Consolidated Financial Statements for 2005 unless otherwise stated.
 
The presentation of the Interim Financial Statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and disclosure of contingent liabilities at the date of the Interim Financial Statements. If, in the future, such estimates and assumptions, which are based on management's best judgement at the date of the Interim Financial Statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change.
 
The Group's auditors have carried out a limited review of the Q3-06 figures in accordance with International Standards on Review Engagements (ISRE 2410).
 
Highlights
The Group has continued their aggressive investment plans. In Q3-06 the Group has announced the purchase of two additional vessels to be delivered and converted in early Q2-07.
 
In Q3-06 the Group has completed the conversion process of the two vessels the Hawk Explorer and the Osprey Explorer. This constitutes a big challenge to the organisation in a period with increasing shortage on building capacity. The conversion of the Hawk Explorer and the Osprey Explorer has been heavily delayed and suffered project costs overruns. Both vessels are in operation in Q4-06.
 
The Group is continuously strengthening management and operating capacity in order to consolidate for further growth and for its ongoing fleet expansion program which includes the managing of two additional vessels from Q4-06 and two additional vessels from early Q2-07. Further the Group's resources are being strengthened to meet requirements as a listed company.
 
Still the Group has continued its strong growth in revenues with an increase of more than 76% year to date and 96% for the Q3-06 compared to the corresponding periods in 2005. Net profit has increased by 100% and 249% respectively.
 
Net profit for Q3-06 was USD 2,485,558, against a net profit of USD 711,220 in the corresponding quarter last year. The main reason for this is the improved net profit as a consequence of more favourable rates achieved.
 
 
Significant events
In Q3-06 the Group has announced the purchase of M/V Sentinel (TBN M/V Harrier Explorer). a DP (Dynamically Positioned) vessel, built in 1979. The vessel will be converted to a Source/Ocean Bottom Seismic ship. Total cost for the vessel, including upgrade and additional equipment, is expected to be up to USD 37 million.
 
Further the Group has acquired M/V Highland Patriot (TBN M/V Aquila Explorer). A platform supply vessel, built in 1982. The vessel will be converted to a Source/2D seismic vessel. Total cost for the vessel, including upgrade and additional equipment, is expected to be up to USD 33 Million. From delivery the vessel is contracted to Petroleum Geo-Services for 6 months with two 6 month options.

As for the two new vessels - the Hawk Explorer and the Osprey Explorer - long term contracts are in place and the vessels are on contracts from date of delivery in Q4-06. Purchase price and conversion costs on the Hawk Explorer and the Osprey Explorer are in total USD 74 millions. In Q3-06 the necessary ministry approvals were received from the Ukrainian State Enterprise "MARS" for the transfer of title of the Osprey Explorer.
The M/V Geo Mariner is contracted with Indago Petroleum until mid-October 2006 for a survey in Gulf of Oman. SeaBird has recently signed a contract for a shallow water survey at Indus Delta "A" with Oil & Gas Development Company Limited, a Pakistani Public Sector Company with a total contract value of USD 15.45 Million giving a dayrate in excess of USD 170,000. The project is expected to be completed in Q1-07.
 
As regards financing the Company has in Q3-06 issued a bond loan at Oslo Stock Exchange Alternative Bond Market (ABM) in NOK with a total limit equalling USD 30 million (NOK 200 Million) with a draw down equalling USD 24 million.(NOK 150 million).
 
The Company has carried out another private placement of 5,714,000 new shares. Paid in capital in NOK equals USD 29 million received in September 2006. Part financing of the new vessels - the Hawk Explorer, the Osprey Explorer and the Aquila Explorer has been negotiated. As regards the Hawk Explorer a finance lease agreement for USD 30 mill was entered into effective from September 06. Agreements for the two other vessels (Osprey Explorer and Aquila Explorer) were concluded in Q4-06.
 
The acquisition of SeaBed Geophysical AS is broadly commented in our Q2-06 report.  A long term process is initiated to convert a vessel tailored for SeaBed operations and at the same time updating and increasing the production capacity for SeaBed (nodes and hydraulic systems)  SeaBird strongly believes in the 4D ocean bottom technology, but is aware of that both ensuring the necessary production capacity and penetrating the market takes time and efforts. However, considerable projects are developing for 2007. SeaBed is already performing a feasibility study for nodal acquisitions for ONGC, the Indian state owned oil company as well as tendering for several other contracts.
 
 
Key Financial Performance Figures
 
For the 12 month period ended September 30, 2006, the Group reported revenues of USD 33,113,499, which is an increase of 61% compared to the corresponding 12 month period ended September 30, 2005.
 
The geographical operations of the Group are split into three different areas (in USD):
 
 
The delay in the conversion process and the delivery of the Hawk Explorer and the Osprey Explorer has a negative effect on both revenue and net profit.
 
Further the income statement reflects increased costs from strengthened management and operating capacity in order to consolidate for further growth and for its ongoing fleet expansion program.
 
 
Key Balance Sheet Items
As at September 30, 2006, total assets amounted to USD 210.3 million, which is an increase of USD 192.2 million compared to September 30, 2005. The increase is mainly explained by capitalized costs and work in progress relating to the four new vessels under conversion, two acquisitions (50% of Sana Navigation and 100% of SeaBed) during the period, revaluation of vessels and increase in cash and current assets, contributing approximately USD 90 million (excl SeaBed), USD 35 million, USD 35 million and USD 30 million respectively.
 
Total equity at September 30, 2006 is USD 110.8 million, which implies an equity/asset ratio of 52.7%. The corresponding figures at September 30, 2005 were USD 11.1 million and 61.1%. At September 30, 2006 borrowings and loans were USD 54.0 million, which mainly relate to the financial lease of the Hawk Explorer and the bond loan on the Alternative Bond Market.

Disclosures regarding Capital expenditures and business combinations are presented in Selected notes and disclosures.
 
 
Post balance sheet events
The most significant event in the month of October 2006 has been that the Company has acquired M/V Tasneem 2 (TBN M/V Raven Explorer), an Anchor Handling Tug Supply (AHTS) Vessel, built in 2006. The vessel will be converted to a Shallow water 2D/3D seismic vessel. Total cost for the vessel, including upgrade and additional equipment, is expected to be up to USD 36 million. The vessel is expected to be in full operation from Q3-07.
 
The Company has exercised the draw down of 2nd tranche of ABM bond issue equal to USD 7,7 mill (NOK 50,000,000). The drawn down funds have been received in Q4-06.
 
In Q4-06 the Group has completed the negotiations of part loan financing of the Osprey Explorer and the Aquila Explorer through a credit facility agreement with Glitnir Bank ASA for a total facility of USD 30 million, which will be drawn down in 4 tranches during Q4-06 and Q1-07.
 
M/V Osprey Explorer has been released from the yard on 20 September 2006. As per contract signed with Veritas DGC, M/V Osprey Explorer has commenced her operations on 23 October, 2006. M/V Hawk Explorer also completed her conversion and released from the yard on 31 August 2006 and commenced operations in October 2006. However, due to some technical reasons, the contract was suspended in order to rectify same. The technical issues have been addressed and the contract is expected to resume later in Q4-06.
 
M/V Geo Mariner has completed her ongoing project with Indago Petroleum in Oman and sailed for Karachi, Pakistan for a 70-90 day survey at Indus Delta "A" with Oil & Gas Development Company Limited. Total contract value of this project is estimated to be USD 15.45 million and the dayrate expected to be in excess of USD 170,000. M/V Northern Explorer has completed her long term contract with TGS Nopec Geophysical ASA in October, 2006. Thereafter, a new contract is signed for M/V Northern Explorer direct with an oil company for the operations in the Mediterranean region. Contracts are under negotiation for both vessels which are expected to secure their employment until March 2007.
 
The Group has entered into conversion contract for M/V Aquila Explorer with Singapore Technologies Marine Limited in their yard in Singapore The vessel is expected to be ready for operations in Q2-07.
 
The Group has taken delivery of M/V Harrier Explorer from the ex-Owners. Conversion of M/V Harrier Explorer is still under discussions with suitable yards.
 
The group has set up their branch in Houston (USA). The core activity of the branch will be to oversee operations in Americas and also explore further business opportunities in the Gulf of Mexico and South America.
 
In spite of the later delivery of the Hawk Explorer and Osprey Explorer, and the consequent effect on earnings and results primarily in Q3-06, the Group is pleased with the contract position for Q4-06. It is estimated that Q4-06 will show additional revenue for the period of approximately USD 18 million, bringing by year end the full year revenue to approximately USD 43 million.

Approval
These Interim Financial Statements were approved by the Board of Directors for issue on 20 November, 2006.
 
 
The presentation and the full report with tables can be downloaded from the following links: