Cash flow from operating activities amounted to USD 20.2 million (USD 8.3 million), corresponding to USD 0.59 (0.24) per share.
For the first half of the year, the operating profit was USD 37.1 million (USD 28.3 million) and the operating profit before goodwill amortisation USD 40.9 million (USD 32.2 million).
Net profit for the first half year amounted to USD 24.4 million (USD 0.9 million). Cash flow from operating activities equalled USD 37.4 million (USD -12.8 million), whereas fully diluted earnings per share and fully diluted cash flow per share were USD 0.72 (USD 0.03) and USD 1.10 (USD -0.38), respectively. Adjusted for goodwill amortisation, fully diluted earnings per share equalled USD 0.83 (USD 0.14).
Offshore Support Services
The operating profit for the second quarter amounted to USD 10.4 million (USD 9.1 million). Fleet utilisation was 79% (77%). The reason for the improvement is significantly higher earnings from MSV Regalia, partly offset by lower utilisation from Safe Scandinavia. The increase in revenues at only a marginal increase in fleet utilisation, and the corresponding increase in operating expenses, are mainly due to an extensive mobilisation of Safe Caledonia from East Timor to Africa, which to a large extent was compensated by the client.
All five rigs which are located in the Gulf of Mexico have been in regular operation throughout the second quarter. MSV Regalia has operated on the Bonga field offshore west Africa until early June, when she started mobilisation to Troll in the North Sea. Safe Caledonia went off contract in the Timor Sea in mid April, and was subsequently mobilised to west Africa to replace MSV Regalia. During mobilisation, Safe Caledonia was upgraded to DP2 (dynamic positioning class 2). Safe Scandinavia commenced the charter for BP on Unity in the British sector of the North Sea on 7 June.
Floating Production
The operating profit for the second quarter equalled USD 5.5 million (USD 3.8 million). The most important reason for the improvement is more days on hire for Abo FPSO, which commenced production on 9 April last year. In addition, the second quarter last year was subject to one-off costs of USD 0.4 million related to organisational changes, and lay-up costs relating to M/T Serene Sky, which was sold in January this year.
Drilling Services
The operating profit for the second quarter amounted to USD 2.6 million (USD 4.2 million). The decreased result is due to the light-weight rig Rubicon being off-hire throughout the second quarter this year, and a provision of USD 0.7 million in connection with the retirement of the former president.
Outlook
Within Offshore Support Services, the company has so far this year been awarded a 12-month contract for Safe Caledonia in west Africa in 2004/2005, a four-month plus 20 days contract for MSV Regalia on Visund in 2005, contracts for Safe Scandinavia on Britannia in the British sector of 18 weeks in 2005 and 16 weeks in 2006, respectively, and a five-month contract for Safe Caledonia on Buzzard in the British sector in 2006. The combined value of these contracts is USD 105 million. After this, the rig fleet is now secured a utilisation ratio of 89% in 2004, 77% in 2005, 72% in 2006, 62.5% in 2007 and about 30% in 2008.
The company maintains a positive view on the market outlook, both in the North Sea and internationally. More demand drivers, e.g. installation/modification of FPSOs and decommissioning of discarded installations, support a long-term demand for this kind of units. Another trend is that contracts are awarded well in advance of contract commencement, and that the rate level - particularly outside the Norwegian Continental Shelf - has improved. Prosafe will continue to work actively to maintain the largest and best fleet in order to serve as much as possible of the coming demand, regardless of geography, demand driver and contract duration.
Within Floating Production, operations are going well, both in terms of uptime and cost efficiency. In addition, the company has been awarded the work to upgrade FPSO Espoir Ivoirien in order to tie-in the West Espoir wellhead platform on the Espoir field in the Ivory Coast.
On the marketing side, there are indications of higher activity compared to the two preceding years, with several defined demands and tenders both in Australasia, west Africa and Brazil. The company's strategy of long-term growth remains firm. In the meantime, cost structure and operational efficiency are securing good results, also in periods without new conversion projects.
Within Drilling Services, the company has been awarded a contract from Paladin for the use of Rubicon on Montrose in the British sector. This contract will start up in the course of the fourth quarter of 2004. As a consequence of the loss of the contracts on Gullfaks, Snorre and Heidrun subsequent to the Tampen tender, the company has initiated an extensive adaptation of the cost level on all levels. The activity on Gullfaks, Snorre and Heidrun is expected to terminate under Prosafe's management in September/October.
Focus going forward will be to secure a controlled adaptation of the cost level to a lower activity level, secure continued work for Rubicon, and secure safe and profitable operations under the drilling contracts which the company still will operate on behalf of Hydro, Esso and Statoil.
