Operating profit for the second quarter came to USD 57.4 million and net profit amounted to USD 51.9 million. The demand outlook in the high-end accommodation rig market appears positive. This should lead to high utilisation rates in the years to come, and there are reasons to be optimistic about the possibility for further positive developments in dayrates.
Financials
(Figures in brackets refer to the corresponding period of 2010)
Second quarter
Utilisation of the rig fleet was 85 per cent (87 per cent) in the second quarter. Operating profit amounted to USD 57.4 million (USD 79.7 million). This reduction is mainly due to lower utilisation and lower contribution from Safe Bristolia.
Safe Scandinavia, MSV Regalia, Safe Caledonia, Safe Esbjerg, Safe Lancia, Jasminia, Safe Hibernia, Safe Britannia and Safe Regency were fully utilised in the second quarter, while Safe Astoria was idle for the entire period.
Safe Bristolia commenced on the contract with Cotemar in mid-May. Prior to this, the rig was at yard in Poland for a five-year class survey and other maintenance work.
Since Safe Concordia was made available for the client Petrobras on 18 April, the rig had 43 days with standby day rate and 16 days with full day rate in the quarter. The rig is currently operating alongside a turret-moored FPSO offshore Brazil, and the operation is going as planned.
Net financial costs amounted to USD 6.1 million (USD 11.9 million). The main reason for this change is an increase in market value of currency forwards.
Net profit amounted to USD 51.9 million (USD 69.7 million), corresponding to diluted earnings per share of USD 0.23 (USD 0.31).
Dividend and refinancing
A revolving credit facility of USD 1 100 million has been signed with a syndicated bank group. The tenor is six years with semi-annual reductions of USD 70 million and a balloon payment of USD 260 million. The credit facility is priced at USD LIBOR plus a credit margin of 1.875 per cent.
The credit facility will be used to provide financing for fleet expansion and the current upgrading of Safe Caledonia and Safe Astoria.
Following the successful refinancing, the board of directors has resolved to adopt a new dividend policy.
The level of dividend will reflect the underlying financial development of the company, while taking account of opportunities for further value creation through profitable investments.
The new long-term dividend policy is a distribution of up to 75 per cent of the consolidated net profit paid the following year. The dividend will normally be distributed on a quarterly basis.
Based on the new dividend policy, the board of directors has resolved to declare an interim dividend equivalent to USD 0.166 per share to shareholders of record as of 5 September 2011. The shares will trade ex-dividend on 1 September 2011. The dividend will be paid in the form of NOK 0.89 per share on 15 September 2011.
Outlook
Six of Prosafe's rigs are on bareboat charters in Mexico for end-user Pemex. The six rigs have firm contracts as follows. Safe Lancia until end-December 2012, Jasminia until end-December 2012, Safe Hibernia until mid-December 2011, Safe Britannia until mid-January 2013, Safe Bristolia until end-March 2013 and Safe Regency until beginning of August 2013.
Safe Esbjerg is operating for Mærsk Oil & Gas in the Danish North Sea until end-September 2011.
Safe Caledonia is in operation at the Armada platform for BG in the UK North Sea. After completion of this project, the rig will be on hire to BG International Limited in the UK North Sea until 17 March 2012. In addition Prosafe has granted two additional one-week options. Following completion of the BG contract the rig will be taken to yard for a major upgrade.
MSV Regalia commenced operations for BP Norge in the Norwegian North Sea in mid-March, and is expected to operate until October 2011. From early November, the rig is scheduled to commence a 107-day contract at the Yme field in Norway. Following this, the rig has a six-month contract with Talisman in the UK North Sea, expected to commence in the beginning of March 2012.
Safe Scandinavia commenced a six-month contract with Statoil in early April 2011. Thereafter the rig is scheduled to start operation for BP in October 2011. In May 2012 the rig is scheduled to commence operation for ConocoPhillips in Norway, and subsequently move to the UK North Sea with a firm contract until October 2012 and options until December 2012.
Safe Concordia commenced a three-year contract with Petrobras in Brazil during the second quarter.
Safe Astoria is currently at yard in Batam, Indonesia, undergoing an upgrade, as well as the five-year special periodic survey.
Demand in the North Sea market is likely to remain strong for the coming years. The majority of the production installations are mature and require both maintenance and modifications to keep up production and ensure safe operations. Moreover, the high oil price should have a positive impact on demand related to improved oil recovery (IOR) projects, upgrades and tie-ins. Recently announced discoveries on the Norwegian Continental Shelf should contribute positively to the activity level in the long term. Accommodation rigs may play a role both in the development phase and in the production period.
The development in the Mexican market also appears positive. The bed capacity on the accommodation rigs in the area is fully utilised, which indicates a high activity level. Moreover, the state-owned oil company Pemex has indicated increasing E&P spending in the years to come. However, so far this has not resulted in increased accommodation rig requirements and at this stage the demand outlook appears stable.
In Brazil, Petrobras has secured three accommodation units on long-term contracts over the past year. With the high E&P activity level experienced offshore Brazil, the outlook for further demand increases appears good.
There are also positive signs in other parts of the world. Prosafe has experienced an increasing number of enquiries from Southeast Asia, Australia and US GoM.
In summary, the demand outlook in the high-end accommodation rig market appears positive. This should lead to high utilisation rates in the years to come, and there are reasons to be optimistic about the possibility for further positive developments in dayrates.
Risk
Prosafe's main operational risks are the day rate level and the utilisation rate of the accommodation fleet. The company's results also depend on operating costs, interest expenses and exchange rates. These risks are described in detail in the directors' report in the annual report 2010.
Statement from the board and the CEO
We confirm that, to the best of our knowledge, the financial statements for the first half year of 2011, which have been prepared in accordance with IAS 34 Interim Financial Statements as adopted by the European Union and the requirements of the Cyprus Companies Law, give a true and fair view of the company's assets, liabilities, financial position and results of operations, and that the interim management report includes a fair review of the information required under the Norwegian Securities Trading Act section 5-6 fourth paragraph and the Cyprus Companies Law.
Attachments: Q2 2011 report, Q2 2011 presentation
Larnaca, 25 August 2011
Georgina Georgiou, General Manager
Prosafe SE
For further information, please contact:
Karl Ronny Klungtvedt, Chief Executive Officer
Prosafe Management AS
Phone: +47 908 81 657
Sven Børre Larsen, Chief Financial Officer
Prosafe Management AS
Phone: +47 909 43 673
Cecilie Ouff, Finance and IR Manager
Prosafe AS
Phone: +47 991 09 467
