Highlights third quarter 2010
SeaBird is pleased to announce a Q3 report with an EBITDA of USD 7.9 million.
The OBN operation with Hugin Explorer and Kondor Explorer was successfully completed for Chevron North Sea Limited west of Shetland well within schedule 12 August 2010. A new survey for Shell Nigeria Exploration & Production Company Limited started 15 September 2010.
SeaBird issued a NOK 120 million convertible, non-transferable loan in favour of Perestroika AS with three years maturity. The loan may be converted to shares in SeaBird, up to 23 August 2013 at NOK 3.35 per share. The loan carries an interest rate of 1%. The loan is unsecured, and is provided for general corporate purposes.
SeaBird concluded a restructuring in September of its bank debt of USD 46.9 million to a bank consortium with BN Bank as agent a new repayment profile of five years, with a balloon after two years (September 2012) and the first quarterly instalment in December 2010. The loan carries an interest rate of three months US Libor plus a margin of 4%.
KEY FINANCIAL PERFORMANCE FIGURES
For comparisons of income and expenses for the first 9 months of 2010 and 2009, it must be noted that changes in the operating performance of the OBN activity and the market rates for 2D have significantly affected the revenues for SeaBird.
The OBN operations with Hugin Explorer incurred significant losses on its first survey during Q1 and partly into Q2 2009, while the OBN operation with Hugin Explorer and Kondor Explorer as source vessel has been very successful in 2010 and generated revenues in excess of expectations in Q1 and partly in Q2, while Q3 has been less favourable, but the OBN operation is still contributing to more than half of SeaBird revenues this year.
The revenue levels and utilization for the 2D fleet were still quite high during Q1 and partly into Q2 2009 in particular for the two vessels working for ONGC in India. After reaching their lowest levels in Q3 2009, utilization improved in the first half of 2010, but has fallen during Q3 2010. Consequently, the revenue level is down in 2010 compared to 2009.
Consolidated revenues for SeaBird decreased to USD 43.2 million in Q3 2010 from USD 50.2 million in Q2 2010, mainly due to lower rate levels on the OBN operation for the Chevron Rosebank contract west of Shetlands compared to the Chevron Agbami contract in Nigeria, and one month mobilization of the vessels back to Nigeria, which is compensated less than during operations. Also the 2D fleet has contributed slightly less to the revenues this quarter than the previous quarter due to two idle vessels part of the quarter. Revenues include Multiclient sales of USD 2 million in Q3 2010, the same as in Q2 2010.
Operating expenses including bareboat charter hire increased to USD 30.1 million from USD 28.5 million in Q2 2010. OBN operating cost is up due to moving back to Nigeria where operating cost is higher than in the North Sea and the use of Munin Explorer as source with a higher bareboat charter cost than the Kondor Explorer. 2D operating cost is however down due to reduced cost for Hawk Explorer and Kondor Explorer in idle/lay-up mode. SeaBird has also performed about 3.5 vessel-months of Multiclient work during Q3 2010, and capitalized USD 3.9 million of operating costs related to this work in line with industry practice.
Selling, general and administrative ("SG&A") expenses are slightly down in Q3 2010 at 5.9 million compared to USD 6.1 million in Q2 2010.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") were USD 7.9 million in Q3 2010 compared to USD 15.7 in Q2 2010. Reduced EBITDA in Q3 2010 compared to Q2 2010 refers mainly to reduced revenues explained above.
Depreciation is down at USD 13.7 million in Q3 2010 from USD 14.9 million in the previous quarter, mainly due to reduced amortization of Multiclient library.
Interest expense at USD 2.9 million in Q3 2010 is on the same level as previous quarters.
Other financial cost of USD 8.0 million for the quarter refers mainly to unrealized loss on exchange of USD 7.9 million on the NOK 478 million bond loans and the NOK 120 million convertible loan outstanding.
The income tax of USD 3.3 million in Q3 2010 refers to withholding tax in various jurisdictions where the SeaBird vessels have been operating. This is higher than previous quarters, mainly due to high tax levels for one vessel in Mozambique completed end August.
Net loss after tax in Q3 2010 was USD 19.9 million compared to a net profit of USD 1.5 in Q2 2010, while Q3 2009 had a loss of USD 24.7 million. Net loss for the nine first months of 2010 is USD 12.7 million.
Capital expenditure was USD 4.6 million during Q3 2010, of which USD 2.8 million related to dry docking and classification of Aquila Explorer completed early September. Capex for the first 9 months 2010 amounts to USD 8.1 million.
A weakening of 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 than USD and bond loans of a total of NOK 478 million.
OPERATIONAL HIGHLIGHTS Q3 2010
The vessel utilization for the 9 seismic vessels operated by SeaBird for Q3 2010 was 66%, down from 76% in Q1 and Q2 2010.
The Ocean Bottom Node operations with the Hugin Explorer deploying, retrieving and maintaining the nodes and the accompanying source vessel have continued to perform well throughout Q3 2010 with minimum downtime at a combined utilization of 99%. The OBN contract for Chevron on the Rosebank field west of Shetland was successfully completed ahead of schedule on 12 August with 761 out of 762 nodes delivering high quality data. Kondor Explorer was used as source vessel up to 12 August when it was replaced by Munin Explorer. A new OBN survey commenced on 15 September for Shell Nigeria Exploration & Production Company Limited in Nigeria, and operations have so far been running as planned with no significant disruptions, and is expected to be completed by second half of November 2010. SeaBird is presently pursuing further OBN employments and there are opportunities that may materialize into continued employment in line with the OBNs performance since its inception in Q4 2008. Contracts have not yet been executed for these opportunities.
Utilization of the 2D/3D and Source vessels in Q3 2010 was 62%, down from 71% in Q2 2010. The main reason for the reduced utilization is that Kondor Explorer was laid up in a cold stacked mode from 12 August, Hawk Explorer has been idle but maintained in a standby mode with significantly reduced crew and cost since mid July, and Aquila Explorer was almost 5 weeks off-hire for dry docking and classification.
The rest of the fleet has performed well with Harrier Explorer on 97% utilization, Northern Explorer 81%, Osprey Explorer 76%, Geo Mariner 71% (shallow water 3D), and Munin Explorer on 71%, including the time she was source vessel for the OBN operation.
For the 2D/3D and Source fleet, the backlog has not developed as positively as expected partly due to the aftermath of the Macondo incident in GOM. While Harrier Explorer is continuing on a long term contract to PGS through August 2011, the Geo Mariner is on contract to beginning of January 2011, the Aquila Explorer to mid December 2010 and Northern Explorer to 2nd half of November 2010. The Osprey Explorer incurred an unexpected idle period from late September due to a postponement of a 2D contract offshore Madagascar. The vessel will be maintained in a standby, but off hire mode, with reduced cost, while other potential work is being pursued.
LIQUIDITY AND FINANCING
At 30 September 2010, cash and cash equivalents amounted to USD 26.3 million, compared to USD 5.6 million at the end of Q2 2010, and USD 7.6 million at the end of Q3 2009. Increased cash refers to the NOK 120 million convertible loan placed mid September 2010.
In September 2010 SeaBird concluded a renegotiation of its bank debt to a consortium of banks with BN Bank as agent to restructure the present bank debt of USD 46.9 million as of 30 June 2010 to a repayment profile of five years, with a balloon after two years (September 2012). The first quarterly instalment is in December 2010. The securities in three 2D seismic vessels are maintained, but with an added security in the Nodes and Equipment in use on the OBN vessel, the Hugin Explorer. The loan carries an interest rate of three months US Libor plus a margin of 4% per annum.
SeaBird issued a NOK 120 million convertible, non-transferable loan in favour of Perestroika AS, as lender, with three years maturity in September 2010. The Loan may be converted into 35,820,895 shares in SeaBird, at any time up to 23rd August 2013 at a price of NOK 3.35 per share. The loan carries 1% interest per annum. The interest may also be converted into shares in the company. The loan is unsecured and provided for general corporate purposes.
Net cash flow from operating activities for Q3 2010 was negative at USD 0.4 million against positive at USD 4.2 million for Q2 2010.
Instalments of USD 1.25 million were paid to banks and USD 0.7 million on the lease of Hawk Explorer during Q3 2010.
Net interest-bearing debt (includes cash and currency adjusted debt) increased to USD 159.9 million end of Q3 2010 from USD 154.9 million end of Q2 2010. However about USD 7.9 million refers to adjustment in Q3 2010 for unrealized loss on exchange on the NOK based bond debt and convertible loan.
SeaBird is in compliance with all covenants under the bonds and bank loans agreements.
There are no further significant committed investments, except normal maintenance type expenditures and certain equipment upgrades for our present fleet of vessels. However, the Management and the Board of Directors are evaluating an expansion of the Ocean Bottom Node operation through investing in a second OBN crew.
Oil prices have remained high even through the latest financial unrest, and stabilized at a level between USD 80-85 over the last few weeks.
Major oil companies and seismic companies presented very positive studies at the SEG conference in Denver in October about the advantages in using the Ocean Bottom Nodes to provide 4D/4C seismic on fields in production in deep water with congested surface and seabed area. Consequently the demand for SeaBird's OBN services is expected to increase significantly in Q1 and Q2 next year with limited capacity available in the market.
The 2D tendering activity has dropped to a low, but still steady, level compared to previous quarters, and SeaBird is vigorously pursuing relevant opportunities. As a result of the firm oil price and lower reserves, incentives are high with all oil companies to increase their exploration budgets and consequently the seismic activities in their 2011 budgets.
Due to the short term market outlook for Q4 2010 and onwards with one source vessel cold stacked and two 2D vessels presently idle, the Board of Directors are closely watching the tendering activity in this segment over the next few months for a potential write down of part of the 2D/Source fleet at year end.
Based on expected employment for the OBN operation with Hugin Explorer and Munin Explorer in continuation after the present Shell contract in Nigeria, and a continued soft 2D market, SeaBird is expecting a revenue and EBITDA level for Q4 in line with Q3 2010.
The Board of Directors and Chief Executive Officer
SeaBird Exploration PLC
2nd November 2010
This information is subject of the disclosure requirements acc. to §5-12 vphl (Norwegian Securities Trading Act)