HIGHLIGHTS THIRD QUARTER 2009
- A full scale test of our deep water Ocean Bottom Node ("OBN") survey was completed mid July by retrieving 42 Nodes on a location at 1700 - 2200 m water depth close to the Atlantis field. Multi-client data from this survey has been sold to several major oil companies.
- The OBN survey for BP Exploration & Production Inc. was successfully completed by the Hugin Explorer and Kondor Explorer on the Green Canyon Atlantis field in Gulf of Mexico from end of July to 21 September deploying 500 nodes in 1300-2300 m water depth.
- An additionally requested OBN test-survey was completed for BP Exploration & Production Inc end of September.
- Following an overall low utilization of 55% during Q3, SeaBird announced several new 2D contracts and all vessels employed on improved contract terms during October. Osprey Explorer is being mobilized from cold stack as from mid October 2009.
KEY FINANCIAL PERFORMANCE FIGURES
For comparisons of income and expenses between Q3 2009 and Q3 2008, it must be noted that the financing and level of operating activity for the SeaBird Group has changed considerably. The Ocean Bottom Node survey with the Hugin Explorer commenced in September 2008, and the revenue day rates on the 2D seismic and source vessels have been reduced significantly since 2008. In addition, the utilization of the 2D/Source vessels was down from about 85% in Q3 2008 to 51% in Q3 2009 following long periods of idle and lay-up of vessels.
Consolidated revenues for the SeaBird Group ("SeaBird") are reduced to USD 28.9 million in Q3 2009 from USD 45.1 million in Q2 2009, in line with reduced average utilization for all vessels to 55% in Q3 2009 compared to 80% in Q2 2009.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") were a negative USD 1.2 million in Q3 2009 compared to USD 8.9 million in Q2 2009, due to reduced revenues, partly offset by a reduction in operating expenses to USD 25.2 million in Q3 2009 from USD 29.2 million in Q2 2009. This reduction was mainly due to reduced manning, maintenance and fuel costs for idle vessels.
Selling, general and administrative ("SG&A") expenses were also reduced to USD 5.3 million from USD 7.1 million in Q2 2009, however, Q2 2009 includes USD 1.5 million write-off of bad debt.
Depreciation is now down to the same levels as previous quarters, at USD 10.8 million subsequent to a write-off of about USD 2 million of seismic equipment sold in Q2 2009.
Interest expense is reduced to USD 2.9 million in Q3 2009 from USD 3.7 million in Q2 2009, mainly due to reduced interest levels on the NOK bond debt and USD bank debt.
Other financial items for the quarter show a loss of USD 8.8 million mainly due to unrealized exchange losses on the remaining NOK 478 million bond loans caused by a 10 % change in the USD/NOK exchange rate from Q2 2009 to Q3 2009.
The income tax of USD 1.1 million in Q3 2009 refers mainly to withholding tax in various jurisdictions around the world where the SeaBird vessels have been operating.
Loss in Q3 2009 was USD 24.7 million compared to a loss in Q2 2009 of USD 4.9 million and a profit in Q3 2008 of USD 17.5 million.
Revenues were USD 120.5 million and the EBITDA USD 12 million for the nine months ended 30 September 2009. Comparable figures for 2008 were USD 154.9 million in revenues and USD 31.5 million in EBITDA, main changes explained above. Loss as of 30 September 2009 is USD 44.9 million compared to a profit of USD 20.9 million as of 30 September 2008.
Capital Expenditures (CAPEX) for Q3 2009 was USD 9.1 million, which mainly refers to manufacturing of 250 additional nodes, modifications of the 500 nodes used on the Dalia field in Angola and modification of the Hugin Explorer.
The weakened USD against NOK and Euro has in general a negative impact on the operating expenses, interest expenses and gross debt as SeaBird has significant costs in other currencies and bond loans of a total of NOK 478 million.
OPERATIONAL HIGHLIGHTS Q3 2009
The vessel utilization for all vessels operated by SeaBird Exploration for Q3 was historic low at 55%, down from 80% in Q2 2009.
Q3 2009 has been a disappointing time for SeaBird, with idle vessels awaiting survey work as the downwards market effect was felt across the summer. In SeaBird's opinion, the 2D market is beginning to see clear signs of improvement over Q4 2009 and into 2010 with the volume of bids and tenders increasing significantly, and several contracts being awarded to SeaBird in October 2009.
The Osprey Explorer has been cold stacked in Labuan throughout Q3 2009. However, the vessel left lay-up mid October, and is presently undergoing a periodical survey and dry dock in Singapore, prior to commencing a minimum 4 months assignment as source vessel in Gulf of Mexico.
Geo Mariner had a disappointing utilization of 9% in Q3 2009, after completing her last contract during June and lying idle in East Africa until commencing a short Seychelles survey in October. She is now in transit to West Africa for a 3D survey.
Hawk Explorer and Harrier Explorer have continued on their long term time charters to Fugro (ending November 2009) and PGS (ending Q4 4th Quarter 2011) with utilization of 98% and 97% respectively in Q3 2009. Following completion of the time charter with Fugro, Hawk Explorer will undergo periodical survey and dry dock.
Northern Explorer has remained idle in Singapore for the entire quarter, i.e. utilization for Q3 2009 is 0%. Crew levels were reduced to a minimum to reduce costs. The vessel has been awarded a 13 200 km 2D survey in Indonesia for a consortium of oil companies, with contingent options for up to approximately 20 000 km. Duration is expected to be 5-7 months.
Aquila Explorer completed her Far East surveys and then remained idle prior to her next firm contract commencing Q4 2009. Utilization for Q3 2009 was 20%. The vessel resumed work early October 2009 in Indonesia and is presently mobilizing to Australia for a 3,800 km 2D survey, to be followed by another 4,500 km 2D survey and a 2,200 km 2D survey, which will keep the vessel busy until March 2010.
Munin Explorer completed her East Coast India survey in June and subsequently mobilized to Ireland and Greenland with utilization for Q3 of 88%. She is now mobilizing to Gulf of Mexico for two contracts lasting till end January 2010.
The Hugin Explorer has successfully completed her full scale OBN survey on the Atlantis field for BP in Gulf of Mexico 21 September, ahead of scheduled time. She has since completed a short test survey at BP time and cost. Utilization for Q3 was 86%. The Kondor Explorer joined the Hugin Explorer on the Atlantis field survey as a source vessel. Utilization for Q3 was 97%. Both vessels are presently mobilizing to Nigeria to carry out the Agbami field survey for Star Deepwater Petroleum Limited, an affiliate of Chevron Nigeria Limited. Operations are expected to commence mid November.
LIQUIDITY AND FINANCING
Cash and cash equivalents at 30 September 2009 amounted to USD 7.6 million, compared to USD 10.1 million at the end of Q3 2008 and USD 10.6 million at the end of Q2 2009. Net cash flow from operating activities for Q3 2009 was USD 5.8 million, compared to USD 8.3 million for Q2 2009, while Q3 2008 was USD 9.1 million.
Capital expenditure was USD 9.1 million during Q3 2009. There are no further significant committed investments for the rest of 2009, except for normal maintenance type expenditures and periodical surveys and dry dock of two 2D vessels.
No instalments were paid during Q3 2009, except for USD 0.7 million on the lease of Hawk Explorer. Net interest-bearing debt increased to USD 179.1 million end of Q3 2009 from USD 169 million end of Q2 2009. Thereof USD 7.2 million was due to currency effect on the USD value of the bond loans denominated in NOK.
The NOK 200 million bond loan with maturity on 14 July 2009 was restructured and partly repaid at a discount during March and April this year through a Private Placement and new bank debt.
The banks agreed in June 2009 to defer instalments of a total of USD 14.1 million due during June - December 2009 to be added as a balloon to the last instalments in 2011-2012.
Despite the reduced revenue during Q3 2009, SeaBird has been able to comply with its financial commitments through the quarter, but has requested and received extended credit terms with various suppliers of goods and services over the last few months.
Expected improved revenues during Q4 2009 and into 2010 will mitigate this situation. However, SeaBird is also considering various alternatives to improve its liquidity reserves, where capitalizing on the OBN business is an alternative scenario.
The 2D sector of the seismic industry has shown a remarkable recovery during the last part of Q3 2009 and the beginning of Q4 2009. The number of tender invitations during the third quarter has increased steadily, and SeaBird has succeeded in securing contracts for all its vessels. The only cold stacked vessel, the Osprey Explorer, left lay-up mid October. The revenue levels for both 2D seismic surveys and source services have also increased slightly, although current levels are still far from rates experienced 12-18 months ago. SeaBird is hopeful that the 2D segment of the seismic industry has bottomed out and that we will see a slow but steady increase in volume of work and improved rates moving into 2010.
As a result of the successful operation with SeaBird's OBN survey with Hugin Explorer and Kondor Explorer, SeaBird is experiencing an enormous interest from most major oil companies operating deep water fields in West Africa, Gulf of Mexico and elsewhere. Several oil companies have expressed keen interest in using the OBN for continues repeat survey on several of their producing fields. SeaBird firmly believes this could materialize into long term engagement and justify a second OBN vessel operation shortly.
The Board of Directors and Chief Executive Officer
SeaBird Exploration Ltd
3 November 2009
The presentation and the full report with tables can be downloaded from the following links: