Main figures
(Figures in brackets refer to the corresponding period of 2006)
Operating profit for the first quarter came to USD 33.0 million (USD 31.6 million). Operating profit in Offshore Support Services increased by USD 3 million, whereas the profit in Floating Production declined by USD 0.2 million. Corporate costs increased by USD 1.4 million due to one-off costs relating to the planned relocation to Cyprus and increased provision relating to the company's share option plan.
Net profit for the first quarter amounted to USD 16.1 million (USD 30.7 million), and diluted earnings per share equalled USD 0.07 (USD 0.18). Interest expenses have increased by USD 7.2 million, which reflects the strong growth within Floating Production and the acquisition of Consafe Offshore in mid 2006. Taxes are up by USD 3.2 million reflecting the fluctuation of the USDNOK exchange rate and the related Norwegian deferred tax liability on the unrealised gain on the USD debt.
Cash flow from operating activities came to USD 42.9 million (USD 111.2 million). The company invested USD 107.1 million during the period, primarily in the on-going FPSO conversion projects.
Total assets at 31 March amounted to USD 2 217.5 million (USD 1 123.2 million), while the equity ratio increased to 50 per cent (41.4 per cent).
New dividend policy
On 29 March, the board of directors of Prosafe SE resolved to adopt a new dividend policy which will yield substantially higher dividend payments.
The new policy will yield total payments of at least NOK 5 per share in 2007 and 2008, followed by a dividend pay-out ratio of approximately 75% of net profits. The new dividend policy will not affect the company's annual investment capacity, which currently is around USD 800 million.
In line with Prosafe's stated policy to return capital to shareholders without compromising future growth opportunities, the board concluded that these developments should be immediately reflected in the capital return policy of Prosafe. The general meeting resolved on 3 May 2007 to pay a dividend of NOK 1.25 for 2006. In addition, the board will propose to distribute a special dividend of NOK 3.75 to be approved by an extraordinary general meeting following the company's relocation to Cyprus where there is no withholding tax on dividend payment.
The new dividend policy will give increased predictability, and will allow Prosafe shareholders to directly benefit from the positive momentum in Prosafe's existing FPSO and accommodation rig operations, while still allowing for strong value creating growth.
Offshore Support Services
Operating profit in the first quarter came to USD 26.4 million (USD 23.4 million). Utilisation of the rig fleet was 85 per cent (100 per cent). This improvement reflects the extended rig fleet in Offshore Support Services following the acquisition of Consafe Offshore in mid 2006, but also higher dayrates. These positive effects were partly offset by the lower utilisation ratio mainly because of planned yard stays.
All six rigs working in the Gulf of Mexico, as well as MSV Regalia which is on contract for Total offshore Angola, have been in regular operation throughout the first quarter. Safe Caledonia and Safe Scandinavia were under contracts in the UK until 1 February and mid March respectively. Safe Bristolia has been on stand-by rate during the winter season in Sakhalin.
Floating Production
Operating profit for the first quarter amounted to USD 9.3 million (USD 9.5 million). Work continued during the quarter on the conversion of FPSO Polvo and FPSO Umuroa. Both vessels have now arrived at the fields in Brazil and New Zealand, respectively.
Outlook
Offshore Support Services
In the first quarter the Safe Caledonia had an extended yard stay following a four-year period of continuous work in East Timor, Nigeria and the UK. The vessel was out of operation in February and March and was brought back into operation mid April. The vessel then started a contract for Total which will have a duration of between two and three years. Safe Scandinavia also had a short yard stay towards the end of the first quarter prior to starting at the Snorre field mid April. The vessel embarked on a programme with three contracts ensuring full utilisation until the end of the third quarter of 2008.
Safe Bristolia was recently awarded a letter of intent for an undisclosed client in the North Sea. The award introduces the vessel to the important North Sea market and opens up for interesting future opportunities. The Safe Bristolia is currently being mobilised from Korea to Sakhalin to embark on the second phase of the contract for Samsung Sakhalin. The contract at Sakhalin has been extended by another 85 days, taking the firm period for 2007 to 185 days. The vessel is expected to demobilise mid fourth quarter, and will be arriving in the North Sea in time for start up of the new contract in early March 2008.
The Safe Astoria is currently idle and is being marketed for new opportunities in several regions.
The MSV Regalia is currently working for Total in Angola. The vessel is expected to remain at the Girassol field until early in the fourth quarter, when it will return to the North Sea in time for the new contract for Aker Kværner starting January 2008.
Safe Concordia is working on a bareboat contract in the Gulf of Mexico. The firm period of the contract ends in May, however, the client has the option of extending the contract with another three months. The vessel will be mobilised to the US Gulf to start a contract at the Tahiti Spar at the start of the fourth quarter. The contract, which is for ChevronTexaco, will extend into the first quarter of 2008.
Prosafe also has five other units on contract in the Gulf of Mexico until 2008 and a jack-up, the Safe Esbjerg, contracted in Denmark until mid 2008.
The general market outlook remains strong. The activity level is gaining momentum in the established markets, which again is reflected in a steady increase in dayrates. Prosafe sees a strong market for the fleet in the coming years and expects significant improvements in earnings as new contracts are won.
Floating Production
FPSO Umuroa and FPSO Polvo arrived in the respective countries in April. The installation processes are progressing according to plan, and both vessels expect to receive first oil by the end of the second quarter.
The recent award of the contract for the FPSO for the Van Gogh field is the third conversion project awarded to Prosafe since October 2006. Engineering and procurement has commenced for the projects, and all three units are expected to be ready for first oil by the end of 2008. The two other projects currently being executed by Prosafe are the Gas FPSO for Petrobras announced in December 2006 and the Letter of Intent for an undisclosed client announced October 2006.
The projects will draw on the broad technical experience of the organisation, and will further complement the range of floating production solutions offered by Prosafe.
Following successful installation of the Umuroa and Polvo FPSOs, internal resources will be freed up and can be made available for other projects. Prosafe will continue to pursue new opportunities, and is targeting a fourth conversion project award in the second half of 2007.
Oslo, 11 May 2007
The board of directors of Prosafe SE
