HIGHLIGHTS SECOND QUARTER 2009
- Refinancing and partly redemption of the NOK 200 million bond loan was resolved in March with a USD 6.2 million profit recognised in April 2009, when the bondholders exercised their put option.
- Agreed on 17 June 2009 with a bank consortium, fronted by BNbank, to reduce instalments for 2nd half of 2009 by USD 14.1 million to be applied as a balloon together with last instalments in November 2011 - September 2012.
- A full scale test of our deep water Sea Bottom Node seismic was completed mid July by retrieving 42 Nodes on a location at 1700 - 2200 m water depth close to the Atlantis field, where the node seismic is now ready to commence for BP.
- The Osprey Explorer in long term lay-up from 15 June.
KEY FINANCIAL PERFORMANCE FIGURES
For comparisons of income and expenses between Q2 2009 and Q2 2008, it must be noted that the financing and level of operating activity for the SeaBird Group has changed considerably. The Sea Bottom Node seismic with the Hugin Explorer commenced in the second half of 2008, and the revenue day rates on the 2D seismic and source vessels have been reduced significantly since 2008. In addition, there is more idle time for the vessels in between contracts this year.
Consolidated revenues for the SeaBird Group "SeaBird" are on the same level in Q2 2009, at USD 45.1 million, as in Q1 2009, despite an improved utilization from 62% in Q1 2009 to 80% in Q2 2009. The main reason is that the Hugin Explorer has been under demobilisation and mobilisation during most of Q2 2009 (utilization 86%) with less than half revenue per day compared to operating day rates under the Total contract during Q1 (utilization 38%). Earnings before interest, taxes, depreciation and amortization ("EBITDA") were USD 8.9 million in Q2 2009 compared to USD 4.3 million in Q1 2009, due to reduced operating expenses from USD 35.2 million in Q1 2009 to USD 29.2 million in Q2 2009.
Operating expenses reduced by USD 6 million this quarter compared to previous quarter is partly due to reduced manning cost, maintenance and fuel consumption for vessels in standby/idle. Further, about USD 2 million related to 2008 operations was recognised in Q1 2009.
Selling, general and administrative ("SG&A") expenses were USD 7.1 million in Q2 2009, at same level as in Q1 2009. However, write off of bad debt was 0.7 million in Q1 2009 compared to USD 1.5 million in Q2 2009.
Depreciation is up by USD 2 million to USD 12.1 million in Q2 2009 compared to Q1 2009, mainly due to write-off of seismic equipment sold in Q2.
Impairment tests based on value in use calculations (discounted future cash-flows) indicate no need for further write-down of vessels and seismic equipment in Q2. The impairment tests have considered a reduction of expected revenue rates for 2D vessels over the next 2-3 years and lay-up of part of the 2D fleet through 2010.
Interest expense is reduced from USD 4.1 million in Q1 to USD 3.7 million in Q2 due to the restructuring of the NOK 200 million bond loan which was reduced by NOK 117 million (USD 17.6 million) partly financed by a new USD 5 million bank loan, effectively reducing debt by USD 12.6 million.
Other financial items for the quarter were USD 4.2 million due to a profit of USD 6.2 million for the partly redemption of the NOK 200 million bond loan, unrealized exchange loss of USD 1.3 million and realized exchange loss of USD 0.7 million. The income tax of USD 2.2 million in Q2 2009, as in Q1 2009, refers mainly to withholding tax in various jurisdictions around the world where the SeaBird vessels have been operating.
Loss for Q2 2009 was USD 4.9 million compared to a loss for Q1 2009 of USD 15.3 million and a profit in Q2 2008 of USD 11.4 million.
Revenue was USD 91.6 million and the EBITDA USD 13.1 million for the six months ended 30 June 2009. Comparable figures for 2008 were USD 98.4 million in revenue and USD 36.2 million in EBITDA, main changes explained above. Loss as of 30 June 2009 is USD 20.2 million compared with a profit of USD 3.4 million as of 30 June 2008.
Capital Expenditures (CAPEX) for Q2 2009 was USD 2.3 million while USD 13.3 million was capitalized in Q1 2009, of which USD 1.7 million refers to investments in Node modifications and node handling equipment onboard Hugin Explorer.
The relatively strong USD has in general a positive impact on our operating expenses, interest expenses and gross debt as we have significant costs in other currencies and bond loans of a total of NOK 478 million.
OPERATIONAL HIGHLIGHTS Q2 2009
The vessel utilization for the 9 seismic vessels operated by SeaBird for Q2 2009 is 80%, up from 62% in Q1 2009.
Geo Mariner had utilization of 50% after mobilizing mid March, completing a short contract offshore Mozambique end of May and thereafter lying idle in East Africa during June.
Hawk Explorer and Harrier Explorer have continued on their long term time charters to Fugro Geoteam (to end November 2009) and PGS (to October 2011) and had utilization of 95% and 100% respectively.
Osprey Explorer and Northern Explorer continued to acquire data at the East Coast of India during the quarter with exceptional acquisition results. Both vessels completed 100% of the contractual 82,000 line kilometers earlier than expected in early June. Both vessels demobilized to Singapore with utilization for the quarter of 81% and 80% respectively. Northern Explorer is currently kept active whereas Osprey Explorer underwent preparations for layup, subsequently being cold stacked in early July.
Aquila Explorer continued her surveys for Santos and subsequently TGS Nopec throughout the quarter, with utilization of 95%.
Munin Explorer completed her survey offshore Mozambique and subsequently mobilized to East Coast India on a survey for Fugro, with utilization of 89%.
The Hugin Explorer completed her first full scale OBN survey for Total's Dalia field in Angola in April. The vessel immediately mobilized to GoM for the Green Canyon Field survey for BP E&P Inc. scheduled to commence end July, with utilization of 86%.
Kondor Explorer had utilization of 33% due to continuing to be idle in April and May, prior to entering the mobilization phase in June and being rigged for the engagement as source/support vessel for the OBN contract for Hugin Explorer with BP E&P Inc in GoM.
With regard to the reduction in SeaBird fleet from 9 vessels to 8 following the decision to cold stack the Osprey Explorer, further reduction in operating costs will be seen across Q3 and Q4 2009. In addition, overall work force will be reduced by some 18%. Spares and equipment from the Osprey Explorer have been removed and are available as inventory to the remaining fleet vessels. In view of the very volatile 2D market at present, further decisions regarding layup of vessels may be taken after evaluation of geographical positioning and opportunities with short notice.
Liquidity and Financing
At 30 June 2009, cash and cash equivalents amounted to USD 10.6 million, compared to USD 8.9 million at the end of Q2 2008 and USD 17.6 million at the end of Q1 2009. Net cash flow from operating activities for Q2 2009 was USD 8.3 million, compared to USD 22.6 million for Q2 2008, while Q1 2009 was USD 6.8 million. For the first six months of 2009, net cash flow from operating activities was USD 15.1 million compared to USD 38.1 million for the same period in 2008.
Net down payment of debt was USD 15 million for the quarter, mainly caused by the NOK 200 million bond restructuring and some instalments. Net interest-bearing debt was USD 169 million at 30 June 2009 compared to USD 210 million at the end of Q2 2008 and USD 172.7 million at the end of 2008.
SeaBird has during 2006-2008 invested approximately USD 350 million in a significant expansion of the fleet. In Q2 2009, capital expenditure was reduced to USD 2.3 million. There are no further significant committed investments for the rest of 2009, except normal maintenance type expenditures, certain equipment upgrades and manufacturing of 250 new Nodes for the Hugin Explorer operation.
The NOK 200 million bond loan with maturity on 14 July 2009 was restructured during March and April this year through a Private Placement raising a total of NOK 61.8 million and USD 5 million in new bank debt for the purpose to partly finance the bond restructuring. A bondholders' meeting in March 2009 accepted to either:
(i) put its bonds to SeaBird for cash consideration for the bonds of 55%
(ii) continue as a bondholder, where 25% redemption at 100% of par and that the terms for the Bond Loan were amended to extend maturity with two years and removal of the negative.
46% of the bondholders exercised the put option on 27 April 2009. This refinancing transaction generated a USD 6.1 million profit in Q2 2009. The remaining balance of the NOK 200 million loan is NOK 78.7 million (net of NOK 4 million of own bonds held by SeaBird) now due 14 July 2011.
The banks agreed in June 2009 to defer instalments of a total USD 14.1 million due in second half of 2009 to be added as a balloon to the last instalment in 2011-2012.
Based on the current business plan and the projected cash flow from operations, SeaBird expects to be able to comply with its financial commitments through 2009. However, our financial situation leaves limited room for deviations from the business plan and under the present market environment a successful operation of the Sea Bottom Node seismic with the Hugin Explorer is of the outmost importance to the SeaBird Group.
With the current uncertainties in the market the total debt level is on the high side. We continue to evaluate various alternatives to improve liquidity and reduce the debt.
The market situation continues to be a concern as we have seen volume of business and revenue rates both decreasing in first half 2009. We have identified and prequalified for a considerable number of tenders and bids due out in Q3 and Q4.
In the 2D sector of the seismic industry, a significant number of vessels are now scheduled as going to layup, or sold out of the market completely. Revenue rates on SBX latest fixtures are in line with 2007 levels and this level is acceptable to maintain the operation of vessels. SeaBird is aggressively pursuing the tenders and other business opportunities coming into the market.
Our shallow water 2D/3D operation with the Geo Mariner has been affected both from a lack of survey requirements and from the monsoon season leading into Q3.
In our ocean bottom node operation, we have in July successfully completed our node test phase for BP in the Gulf of Mexico, deploying and recovering 42 nodes and downloading the data onboard. SBX is the owner of this data and has already sold MC licenses to 2 other major international oil companies with whom we are discussing future surveys for 2010 and onwards. This confirms the interest from the oil companies for the development of nodes surveys on producing fields around the world.
SeaBird along with other seismic operators will experience a reduced seismic activity level over the coming months. Consequently we have reduced operating costs in Q2, we have cold stacked one vessel, we have reduced our workforce going forward by some 18%, and we are continuing to monitor the situation closely and may further decrease our 2D operating fleet number should the market situation require such action.
We confirm that, to the best of our knowledge, the condensed set of financial statements for the first half year of 2009, which have been prepared in accordance with IAS 34 "Interim Financial Reporting", gives a true and fair view of the Company's consolidated assets, liabilities, financial position and results of operations. We also confirm that, to the best of our knowledge, the first half 2009 report includes a fair review of important events that have occurred during the first six months of the financial year and their impact on the condensed financial statements, a description of the principal risks and uncertainties for the remaining six months of the financial year, and major related parties transactions.
The Board of Directors and Chief Executive Officer
SeaBird Exploration Ltd
22 July 2009
The presentation and the full report with tables can be downloaded from the following links: