Highlights third quarter 2007
- Consolidated revenues of USD 20.3 million, an increase of 101 % compared to Q3 2006.
- EBITDA of USD 3.7 million, compared to USD 4.0 million for Q3 2006.
- Performance for the quarter negatively affected by the previously communicated low vessel utilization of the Geo Mariner and Osprey Explorer. Furthermore, we realized a loss on sale of the Raven Explorer of around USD 1 million.
- Aquila Explorer, Munin Explorer and Harrier Explorer commenced operation in the period ultimo June to primo September, bringing total vessels in operation to eight by the end of the quarter.
- SeaBird will be able to take full benefit of the strong market in 2008 with eight vessels operational from Q4 2007 and limited exposure to uncertainty related to conversions and vessel delivery
Key financial performance figures
The SeaBird Group reported consolidated revenues of USD 20.3 million in Q3 2007, an increase of 101 % compared to Q3 2006.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") were USD 3.7 million for the quarter, compared to USD 4.0 million for Q3 2006. The Q3 2007 results from operations were below target for a variety of reasons. Osprey Explorer ended a contract at the end of July and has been in ship-yard for two months to be upgraded from a source vessel to a long offset 2D vessel. Consequently, the vessel utilization for Osprey was only 27%. Geo Mariner had no production during the third quarter, while the Raven Explorer was sold in Q3 at a loss of around USD 1 million.
Earnings before interest and taxes ("EBIT") were negative with USD 1.3 million in Q3 2007 compared to 3.0 million for Q3 2006. Depreciations increased to USD 5.0 million, up from USD 1.0 million for Q3 2006, as five vessels were added in the period while Geo Mariner and Northern Explorer were revalued 31 December 2006 which also contributed to higher depreciations.
Interest expenses increased from USD 0.5 million to USD 3.6 million, in line with the increase of net interest bearing debt from USD 31.7 million by the end of Q3 2006 to USD 174.5 million by the end of Q3 2007. Other financial items for the quarter were USD 2.9 million compared to zero for Q3 2006, mainly caused by unrealized foreign exchange loss on the NOK 200 million bond loan. Net loss for Q3 2007 was USD 7.7 million, compared to a net profit of USD 2.5 million for Q3 2006.
Operational highlights Q3
Geo Mariner did a short project in the Mediterranean in May/June partly to get out of the region around East Africa before the monsoon and partly because of several potential projects coming up in the Mediterranean. However, the potential projects in the Mediterranean did not materialize and the vessel was out of production for several weeks in Q2 and the whole of Q3. The vessel did a short survey in The Arabian Gulf in October. Subsequent to that she mobilized to East Africa where she has started one of a series of contracts in East Africa giving her a contract backlog until March/April 2008. Utilization is still below target for Q4, while the backlog for Q1 2008 is satisfactory. The data from the Seychelles multi-client survey carried out in March/April 2007 is now processed and being marketed. Feedback from the market is positive, but the sales process has been slower than expected and anticipated sales from this survey have now been delayed to the beginning of 2008.
Northern Explorer was fully employed throughout the quarter, mainly continuing the contract with GX Technologies ("GXT") combined with a short oil company survey in West Africa for a couple of weeks in August/September. The GXT-contract is expected to continue until around February 2008.
Osprey Explorer completed the contract with CGG Veritas in the Gulf of Mexico at the end of July. We currently experience a high demand for 2D capacity, hence we decided to take the vessel to yard in August to outfit her to full long offset 2D operating mode, including streamer and other equipment. The related capital expenditures were around USD 10 million. The previously announced letter of intent with GXT for a long term charter has not materialized in a firm contract. The vessel is now in transit to the Eastern Hemisphere to start a short survey early December. There is high tender activity in this area and we are optimistic that we will fill the contract backlog for her shortly.
Kondor Explorer continued operations for CGGVeritas on a wide-azimuth survey in the Gulf of Mexico. This contract is now extended to February 2008. A dry-docking scheduled for 2008 has, for logistic reasons, been moved forward to Q4 2007. We expect a negative EBITDA effect caused by this of around USD 1.5 million from reduced revenues under the off-hire period and maintenance cost recognized.
Hawk Explorer is on a two-year charter for Fugro ending in December 2008, with a one-year renewal option. Vessel utilization was somewhat below 95% for the vessel in the quarter caused by technical downtime on seismic equipment. Even though performance is improving, the seismic equipment continues to experience technical downtime below target in Q4 and we are considering taking the vessel out of production for a short period in Q1 2008 to do necessary improvements to the seismic equipment.
Aquila Explorer was delivered from yard 26 June 2007 and immediately started the transit to the Gulf of Mexico were she started her six months contract (with two six months options) with Petroleum Geo-Services ("PGS") as a source/2D vessel on 22 August 2007. Vessel utilization for the quarter was close to 100% from commencement of the contract with PGS and 42% for the full quarter. The total expenditure of the vessel including interest capitalization was around USD 41 million.
Munin Explorer was delivered from the vessel owner 1 August 2007 and immediately started to operate as a source vessel in the North Sea on a short-term contract for PGS. Subsequently, she was upgraded to operate as a long offset 2D vessel with streamer and other necessary equipment. The vessel utilization was around 95% in operation and 47% for the full quarter. She continued on a survey in the North Sea until late October. She is now mobilizing to India for the previously announced ONGC contract and is expected to commence operations in India primo December. Total investments in equipment for the vessel were around USD 18 million.
The Harrier Explorer was delivered 10 September. She had some start-up related downtime in her first month of operations and had 9 days in production until 13 October. Subsequently, she has not experienced any technical downtime. Total expenditure of the vessel was slightly above USD 50 million. The vessel is committed on a four-year firm time-charter with a two-year option to PGS as a source vessel. The vessel is currently operating in 2D mode, where the cost of additional seismic equipment and additional operating cost are covered by PGS.
SeaBird continues to strengthen the management and operating capacity across the group in line with the requirements of the fleet expansion. Subsequent to the end of the quarter, SeaBird has established a representative office in Singapore to establish a strong market presence in the Eastern Hemisphere. For Q3 2007, this has together with the weakening of the USD contributed to an increase in selling, general and administrative expenses to USD 4.3 million, from USD 1.7 million in the comparable quarter in 2006. Approximately USD 0.4 million of the cost for Q3 2007 is non-cash cost related to the employee stock option incentive plan. The weakening USD has a negative impact on both our operating expenses and capital expenditures.
SeaBird has delivered 5 converted seismic vessels over the last 12 months. With the delivery of the Hugin Explorer in 2008 we will have completed the aggressive vessel conversion program and all focus will be on operations of existing vessels.
We currently expect to take delivery of the Hugin Explorer in the beginning of Q1 2008 to start the conversion to a state of the art node vessel for our SeaBed operations. The vessel is expected to be operational early Q2 2008. Furthermore, we are investing in 500 new deep-water nodes for the SeaBed operations with projected delivery in Q4 2007. Total expected investments in nodes and vessel conversion and equipment have slightly increased, mainly caused by the weakening of the USD, and is now estimated to be in the range of USD 55-60 million.
In October 2006 the Company acquired the Raven Explorer with the intention to convert her into a shallow water 2D/3D vessel. Third party feasibility studies indicated that the converted vessel did not meet our required specifications. The vessel was sold in September with a net loss of around USD 1 million, recognized as part of other income (expense), net. This loss is partly offset by recognizing around USD 0.5 million in Q3 as other income related to realizing the value in subscription rights for shares in Global Geo Services ASA ("GGS").
Liquidity and Financing
At 30 September 2007, cash and cash equivalents amounted to USD 23.4 million, compared to USD 36.0 million at the end of the previous quarter. Net interest bearing debt was USD 174.5 million compared to USD 120.5 million at the end of the previous quarter and USD 68.2 million at the end of 2006. This increase is mainly caused by capital expenditures so far this year of USD 104 million, mainly related to our conversion program.
As previously announced, the Company has entered into a five-year secured term bank loan with a borrowing limit of USD 25 million with interest rate of LIBOR + 1.25% and an additional unsecured revolving bank credit facility of USD 25 million with interest rate of LIBOR + 1.75%. The Company had drawn USD 40 million under these facilities as of 30 September 2007. Further unsecured credit facilities of USD 20 million have been secured recently with interest rate of LIBOR + 1.50%.
SeaBird issued a bond loan of NOK 400 million in February 2007 with a 5 years maturity, with floating interest (3 month NIBOR + 4.5%). Simultaneously SeaBird entered into a financial instrument which in effect converted the loan to a USD based loan with a principal repayment obligation of USD 65 million and a floating interest rate of LIBOR + 4.75%. Subsequent to the end of the quarter, as a consequence of the inherent value of the financial instrument and the long maturity, the Company have realized the inherent value of the swap of the principal repayment generating a cash contribution of USD 4.8 million in Q4 2007, while the interest swap is kept unchanged. The principal will be hedged against USD again if and when the USD strengthens. As a consequence of this transaction the USD 4.8 million will be recognized as a realized gain in Q4 2007, while the loan in NOK and the interest swap instrument will be recognized to fair value at each period end going forward.
SeaBird expect 2008 market to be stronger than 2007 in all seismic segments. We expect the supply within our segments to increase slightly. However, the demand side is expected to more than absorb the additional capacity. SeaBird was not in a position to take full benefit of the strong market in 2007, but is now well placed to take advantage of the continuing strong market in 2008 with 8 vessels in operation for the full year and Hugin Explorer commencing operation in 2008.
We expect significant growth in revenues and earnings in the last quarter of 2007. Revenues for 2007 are expected to be in the range of USD 95-100 million for the full year, while EBITDA is expected to be in the range of USD 30-33 million. Total capital expenditure is expected to be in the range of USD 125-130 million for the full year.
The presentation and the full report with tables can be downloaded from the following links: