HOUSTON, Feb. 23, 2011 /PRNewswire/ -- Northern Offshore, Ltd. (Oslo Bors: NOF.OL) today reported that the financial results for the current quarter included an after-tax, non-cash charge of US$205.4 million, or US$1.32 per diluted share, due to a valuation impairment of the jackup fleet. As a result, the company reported a net loss for the three months ended December 31, 2010 of US$186.9 million, or US$1.21 per diluted share, on revenues of US$69.0 million. Excluding the impairment charge, fourth quarter 2010 net income would have been US$18.4 million, or US$0.12 per diluted share. This compares to net income of US$17.4 million, or US$0.11 per diluted share, for the fourth quarter of 2009, on revenues of US$69.2 million.
The valuation impairment was calculated in accordance with US generally accepted accounting principles, which required that the carrying value of the company's assets be adjusted to reflect their fair market value. The fair market value of the fleet was evaluated based on the most recent valuations performed on the company's assets in December 2010.
For the full year ended December 31, 2010, the net loss was US$141.1 million or US$0.91 per diluted share. Excluding the above impairment charge and a US$4.4 million maintenance charge for the floating production facility Northern Producer taken in the third quarter, the company would have reported net income of US$68.6 million, or US$0.44 per diluted share, for the full year of 2010. This compares to net income of US$78.8 million or US$0.51 per diluted share for 2009, excluding a US$3.7 million bad debt expense taken in the prior year. Revenues in 2010 were US$257.5 million, as compared to US$279.2 million reported in 2009.
Gary W. Casswell, Northern Offshore's president and CEO, commented "We are pleased with our year-end operating results and the strengthening of our balance sheet throughout the year. Our financial performance in the first quarter of 2011 should be supported by solid cash flow from the floating production facility Northern Producer and semisubmersible Energy Driller, but negatively affected by the shipyard stay for the drillship Energy Searcher. We see improvement in the Southern North Sea market and expect the financial contributions from our jackup fleet to improve as we reduce idle costs and execute new contracts."
As of February 22, 2011, the company has a strong balance sheet, with an outstanding Revolving Credit Facility balance of US$34.0 million, a cash balance of US$23.2 million and a net debt position of US$10.8 million. The Revolving Credit Facility balance at year-end 2010 was US$43.0 million, down US$32.0 million from the third quarter of 2010. Cash at year-end 2010 was US$19.0 million, of which US$12.6 million was unrestricted, leaving the company in a net debt position of US$24.0 million as of December 31, 2010.
The tariff from the floating production facility Northern Producer increased from an average of US$123,000 per day in third quarter to US$166,000 per day in the fourth quarter of 2010, reflecting increases in production volumes and higher oil prices. The company expects production and price levels to remain strong in the near term.
The drillship Energy Searcher is currently undergoing a required five-year special periodic survey and dry-docking in Singapore. The present budget for the dry-docking, which is expected to be completed in April 2011, is approximately US$21.0 million. The company is actively marketing the Energy Searcher and has several interesting leads for both short- and long-term opportunities.
Mr. Casswell concluded "Although the Northern Offshore fleet is not of the latest generation, we are optimistic that the company will be able to deliver solid results by generating operational cash flow from existing and new contracts while minimizing expenditures."
Fourth Quarter Analysis
Revenues for the three months ended December 31, 2010 were comparable to the same period of 2009. Decreases in revenue this quarter attributable to lower utilization of the jackup Energy Endeavour and drillship Energy Searcher were offset by higher utilization of the jackup Energy Enhancer and higher tariff revenue from the floating production facility Northern Producer.
Drilling and production expenses for the fourth quarter of 2010 were US$3.7 million lower compared to the same period of 2009 due to lower utilization of the fleet in the 2010 quarter. General & administrative expenses were US$1.5 million lower this quarter as compared to the prior year fourth quarter due primarily to an executive separation charge in the 2009 fourth quarter.
The information contained in this press release is preliminary and is subject to change until the release of the 2010 audited accounts as approved by the Board of Directors.
Conference Call Information
Northern Offshore, Ltd. will conduct a teleconference with security analysts at 9 a.m. CT, February 24, 2011 to discuss the company's quarterly results. Individuals wishing to participate in the teleconference should call (866) 788-0546 (in the U.S.) or (857) 350-1684 (outside the U.S.) about five to ten minutes prior to the scheduled start time and refer to participant password 30155989.
The conference call also will be accessible by logging on to the company's website at http://www.northernoffshorelimited.com/. After logging on, go to "Investor Relations" and select the conference call webcast.
About the Company
Northern Offshore, Ltd. is a Bermuda holding company which operates offshore oil and gas production and drilling vessels in various markets around the world, including the North Sea, the Indian Ocean, offshore Russia, the Mediterranean Sea and Southeast Asia. The company's fleet consists of one floating production facility and five drilling units (a drillship, a semisubmersible and three jackup drilling rigs). The company also provides rig management services, and is currently operating in this capacity on two semisubmersibles in the Caspian Sea. More information on Northern Offshore, Ltd. may be found by visiting the company's website at http://www.northernoffshorelimited.com/.
For further information, please contact: Brian Hefty at (713) 739-7686, or via email at brian.hefty@northernoffshoreltd.com NORTHERN OFFSHORE, LTD. and SUBSIDIARIES Consolidated Statements of Income (Unaudited) Three Months Ended ------------ December 31, ------------ (Thousands of US Dollars, except Q3 per share amounts) 2010 2010 2009 Revenue 71,524 69,020 69,178 Operating expenses: Drilling and production (27,258) (25,523) (29,177) Depreciation (14,698) (14,675) (15,520) General & administrative (1,445) (1,078) (2,571) Impairment loss on fixed assets - (205,361) - Bad debt - - - -------- Total operating expenses (43,401) (246,637) (47,268) ------------------------ ------- -------- ------- Operating income / (loss) 28,123 (177,617) 21,910 ------------------------- ------ -------- ------ Interest income 11 14 60 Interest expense (1,187) (1,000) (1,949) Amortization of drilling contract intangibles - - - Amortization of deferred financing fees (777) (768) (397) Other financial items 69 (292) (1,248) --------------------- ------ Total other income/(expense), net (1,884) (2,046) (3,534) --------------------------------- ------ ------ ------ Income/(loss) before taxes 26,239 (179,663) 18,376 -------------------------- ------ -------- ------ Income taxes - (expense) (3,101) (7,261) (973) ------------------------ ---- Net income/ (loss) 23,138 (186,924) 17,403 ------------------ ------ -------- ------ Earnings per share (US$) Basic 0.15 (1.21) 0.11 Diluted 0.15 (1.21) 0.11 Weighted average common shares (000's) Basic 154,437 154,474 153,327 Diluted 155,332 155,657 154,845 ------- Twelve Months Ended ------------- December 31, ------------ (Thousands of US Dollars, except per share amounts) 2010 2009 Revenue 257,488 279,169 Operating expenses: Drilling and production (104,680) (117,804) Depreciation (58,110) (62,033) General & administrative (7,213) (8,588) Impairment loss on fixed assets (205,361) - Bad debt - (3,840) -------- --- ------ Total operating expenses (375,364) (192,265) ------------------------ -------- -------- Operating income / (loss) (117,876) 86,904 ------------------------- -------- ------ Interest income 90 310 Interest expense (6,326) (10,197) Amortization of drilling contract intangibles - 5,887 Amortization of deferred financing fees (2,573) (1,587) Other financial items (560) (398) --------------------- ---- ---- Total other income/(expense), net (9,369) (5,985) --------------------------------- ------ ------ Income/(loss) before taxes (127,245) 80,919 -------------------------- -------- ------ Income taxes - (expense) (13,886) (5,860) ------------------------ ------- ------ Net income/ (loss) (141,131) 75,059 ------------------ -------- ------ Earnings per share (US$) Basic (0.91) 0.49 Diluted (0.91) 0.49 Weighted average common shares (000's) Basic 154,358 153,161 Diluted 155,848 153,797 NORTHERN OFFSHORE, LTD. and SUBSIDIARIES Consolidated Balance Sheets (Unaudited) December December (Thousands of US Dollars) 31, 2010 31, 2009 Current assets Cash and cash equivalents 12,587 79,162 Restricted cash 6,445 9,371 Account receivables, net 55,686 35,423 Prepaid expenses 4,785 6,097 Deferred financing fees 2,279 561 Deferred mobilization costs 281 601 Other current assets 419 - --- --- Total current assets 82,482 131,215 -------------------- ------ ------- Non-current assets Property, plant & equipment, net 252,397 499,594 Restricted cash, net of current portion - 6,438 Deferred mobilization cost, net of current portion - 382 Other noncurrent assets 1,677 - ----------------------- Total non-current Assets 254,074 506,414 Total assets 336,556 637,629 ------------ ------- ------- Current liabilities Accounts payable 17,528 12,917 Accrued expenses 18,616 21,467 Income tax payable 3,429 3,762 Current portion of debt 43,000 197,500 Deferred revenue 2,396 2,076 ---------------- ----- Total current liabilities 84,969 237,722 ------------------------- ------ ------- Non-current liabilities Deferred revenue, net of current portion - 2,396 Other long-term liabilities - 6,022 ----- Total non-current liabilities - 8,418 ----------------------------- --- ----- Total liabilities 84,969 246,140 ----------------- ------ ------- Shareholders' equity Share capital 39,176 38,829 Additional paid-in capital 166,632 165,750 Accumulated other comprehensive loss (6,691) (6,691) Retained earnings 52,470 193,601 ----------------- ------ ------- Total shareholders' equity 251,587 391,489 -------------------------- ------- ------- Total liabilities and shareholders' equity 336,556 637,629 --------------------- ------- ------- NORTHERN OFFSHORE, LTD. and SUBSIDIARIES Consolidated Statement of Cash Flows - (Unaudited) Twelve months ended ------------------- December 31, ------------ (Thousands of US Dollars) 2010 2009 ---- Cash flows from operating activities Net (loss) / income (141,131) 75,059 Adjustments to reconcile net income to net cash provided by operating activities: Bad debt expense - 3,840 Stock-based compensation 1,672 1,438 Depreciation 58,110 62,033 Impairment loss on fixed assets 205,361 - Amortization of drilling contract intangibles - (5,887) Amortization of deferred financing fees 2,573 1,586 Interest, net (234) (375) Changes in operating assets and working capital (Increase)/decrease in accounts receivable (6,492) 11,042 Decrease in prepaid expenses 1,312 11,358 Increase in other current assets (319) (100) Decrease in accounts payable (9,160) (3,244) Decrease in other accrued liabilities (11,668) (2,292) Decrease in deferred revenue (2,076) (20,809) Decrease in income tax payable (333) (5,367) Other, net (1,069) (733) Net cash provided by operating activities 96,546 127,549 ------------------------------ ------ ------- Cash flows from investing activities Capital expenditures (13,246) (16,371) Release of restricted cash 9,394 - Funding of restricted cash - (1,250) Proceeds from sale of equipment - 475 ------------------------------- --- --- Net cash used in investing activities (3,852) (17,146) -------------------------- ------ ------- Cash flows from financing activities Proceeds from drawdown of revolver 100,000 - Principal payment on revolver (57,000) - Payoff of bond loan (100,000) - Principal payment of bank term loan (97,500) (90,000) Deferred financing fees (4,326) - Payment for taxes on vested shares (443) - Net cash used in financing activities (159,269) (90,000) -------------------------- -------- ------- Net decrease /increase in cash and cash equivalents (66,575) 20,403 Cash and cash equivalents at beginning of period 79,162 58,759 ------ ------ Cash and cash equivalents at end of period 12,587 79,162 ====== ====== Supplemental disclosure of cash flow information Cash paid during the period for: Income taxes 14,296 4,638 Interest 4,987 10,163 ----- NORTHERN OFFSHORE, LTD. and SUBSIDIARIES Consolidated Statements of Shareholders' Equity (Unaudited) Common Additional shares Share paid-in (Thousands of US Dollars) ('000) capital capital Balance at January 1, 2009 153,124 38,281 164,860 ------- ------ ------- Net income - - - Issuance of restricted stock 2,196 548 (548) Stock-based compensation - - 1,438 --- --- ----- Balance at December 31, 2009 155,320 38,829 165,750 ------- ------ ------- Net (loss) - - - Issuance of restricted stock 1,388 347 (347) Payments for taxes on vested shares - - (443) Stock-based compensation - - 1,672 --- --- ----- Balance at December 31, 2010 156,708 39,176 166,632 ------- ------ ------- Accumulated other comprehensive Retained (Thousands of US gain / Dollars) (loss) earnings Total Balance at January 1, 2009 (6,691) 118,542 314,992 ------ ------- ------- Net income - 75,059 75,059 Issuance of restricted stock - - - Stock-based compensation - - 1,438 --- --- ----- Balance at December 31, 2009 (6,691) 193,601 391,489 ------ ------- ------- Net (loss) - (141,131) (141,131) Issuance of restricted stock - - - Payments for taxes on vested shares - - (443) Stock-based compensation - - 1,672 --- --- ----- Balance at December 31, 2010 (6,691) 52,470 251,587 ------ ------ ------- NORTHERN OFFSHORE, LTD. and SUBSIDIARIES Reconciliation of GAAP to Non-GAAP Financial Results (Unaudited) Twelve Months Three Months Ended Ended December 31, December 31, ------------ ------------ (Thousands of US Dollars) Q3 2010 2010 2009 2010 2009 Net income / loss (GAAP) 23,138 (186,924) 17,403 (141,131) 75,059 Add Back: Net interest expense 1,953 1,754 2,286 8,809 11,474 Income taxes 3,101 7,261 973 13,886 5,860 Depreciation 14,698 14,675 15,520 58,110 62,033 Amortization - - - - (5,887) Impairment loss - 205,361 - 205,361 - Adjusted EBITDA (Non- GAAP) 42,890 42,127 36,182 145,035 148,539 ------------- ------ ------ ------ ------- ------- Adjusted EBITDA is defined as Net Income before Interest, Taxes, Depreciation, Amortization and Impairment Loss On Fixed Assets. NORTHERN OFFSHORE, LTD. and SUBSIDIARIES Operating Statistics (Unaudited) Three Months Ended December 31, ------------ Q3 2010 2010 2009 Jackups (3) Average rig utilization 33% 21% 33% Operating days 92 59 92 Average revenue per day 69,564 72,300 93,979 Drillship (1) Average rig utilization 100% 67% 100% Operating days 92 62 92 Average revenue per day 309,964 400,676 327,038 Semisubmersible (1) Average rig utilization 100% 100% 100% Operating days 92 92 92 Average revenue per day 232,004 225,776 227,922 Total Drilling Rigs (5) Average rig utilization 60% 46% 60% Operating days 276 213 276 Average revenue per day 203,844 234,174 216,313 Floating Production Facility (1) Days in period 92 92 92 Production days from April 28, 2009 92 92 92 Average bpd (from April 28th) 24,024 28,816 12,389 Average tariff revenue per day 123,203 166,374 61,111 Average other revenue per day 8,109 8,099 8,775 Total average revenue per day 131,305 174,473 69,886 Twelve Months Ended December 31, ------------ 2010 2009 Jackups (3) Average rig utilization 25% 71% Operating days 272 781 Average revenue per day 75,730 133,930 Drillship (1) Average rig utilization 92% 62% Operating days 335 227 Average revenue per day 283,193 317,148 Semisubmersible (1) Average rig utilization 100% 100% Operating days 365 365 Average revenue per day 226,371 219,993 Total Drilling Rigs (5) Average rig utilization 53% 75% Operating days 972 1,373 Average revenue per day 203,800 187,146 Floating Production Facility (1) Days in period 365 365 Production days from April 28, 2009 365 248 Average bpd (from April 28th) 22,361 12,389 Average tariff revenue per day 120,100 57,808 Average other revenue per day 8,461 13,140 Total average revenue per day 128,561 52,415 Note 1: Operating days represent actual days under contract. Note 2: Northern Producer commenced first oil on April 28, 2009. Average tariff per day is calculated based on number days in the period from commencement of first oil. From April 1 to April 27 the company received contractual dayrate of US$30,000 per day. Note 3: In Q4'10 we earned an average dayrate of US$33,578 per day for the three months ended December 31, 2010 and US$34,163 per day for the twelve months ended December 31, 2010 for provision of rig management services for two semisubmersibles in the Caspian Sea which commenced October 1, 2009. Note 4: Costs which are reimbursed by the client are included in the average revenue per day calculation.
Northern Offshore, Ltd.
CONTACT: Brian Hefty of Northern Offshore, Ltd., +1-713-739-7686,
brian.hefty@northernoffshoreltd.com
Web Site: http://www.northernoffshorelimited.com/
