Northern Offshore Reports First Quarter 2010 Financial Results

News provided by

Northern Offshore, Ltd.

May 26, 2010, 07:09 ET

HOUSTON, May 26 /PRNewswire-FirstCall/ -- Northern Offshore, Ltd. (Oslo Bors: NOF.OL) today reported net income for the three months ended March 31, 2010 of US$23.2 million, or US$0.15 per diluted share, on revenues of US$68.1 million.  This compares to net income of US$3.6 million, or US$0.02 per diluted share, for the first quarter of 2009, on revenues of US$56.6 million.  Net income for the prior year quarter included a US$3.7 million charge to bad debt expense.  Excluding that charge, first quarter 2009 net income would have been US$7.3 million, or US$0.05 per diluted share.  

(Logo:  http://www.newscom.com/cgi-bin/prnh/20080415/LATU540LOGO)

First Quarter Analysis

Revenues for the three months ended March 31, 2010 increased US$11.5 million compared to the same period of 2009.  This increase was primarily due to revenue from the drillship Energy Searcher, which had been idle in the first quarter of the previous year, earnings from the company's management contract in the Caspian region, and tariff revenue from the floating production facility Northern Producer, which had not yet commenced production operations in the first quarter of 2009.  Partially offsetting this increase was lower utilization of the jackups Energy Exerter and Energy Enhancer, which were idle during the 2010 first quarter, and lower dayrates for the jackup Energy Endeavour.  

Drilling and production expenses for the first quarter of 2010 were US$6.3 million lower compared to the same period of 2009 due primarily to lower utilization of the jackup fleet in the 2010 quarter.  This was partially offset by higher expenses associated with the utilization of the drillship Energy Searcher.  Depreciation expense for the first quarter of 2010 was US$1.7 million lower compared to the first quarter of 2009 primarily due to the extension of the useful life of the floating production facility Northern Producer in the second quarter of 2009 and a change in the accounting estimate of the fleet's salvage value.  Amortization of drilling contract intangibles declined US$2.0 million from the previous year quarter as the intangibles were fully amortized in 2009.

Energy Searcher Update

The repairs to the drillship Energy Searcher are currently underway and are on schedule.  The company currently estimates repair costs to be approximately US$4.0 million.  Based on current work progress, the rig is expected to be back on location in Vietnam around July 1, 2010.  

Conference Call Information

Northern Offshore, Ltd. will conduct a teleconference with security analysts at 9 a.m. CT, May 27, 2010 to discuss the company's quarterly results. Individuals wishing to participate in the teleconference should call 800-901-5218 (in the U.S.) or 617-786-4511 (outside the U.S.) about five to ten minutes prior to the scheduled start time and refer to participant password 71062504.

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 deployed around the world. The company's fleet consists of one floating production facility and five drilling units (a drillship, a semisubmersible and three jackup drilling rigs). The Northern Offshore fleet operates in various markets including the North Sea, the Indian Ocean, offshore Russia, the Mediterranean Sea and Southeast Asia. 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 [email protected]

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)






Three Months Ended

March 31,

(Thousands of US Dollars, except per share amounts)

Q4 2009

2010

2009

Revenue

69,178

68,090

56,553

Operating expenses:


Drilling and production expenses

(29,177)

(22,709)

(28,993)

Depreciation

(15,520)

(14,068)

(15,773)

General & administrative expenses

(2,571)

(2,319)

(1,731)

Bad debt expense

-

-

(3,664)

Total operating expenses

(47,268)

(39,096)

(50,161)

Operating income

21,910

28,994

6,392

Interest income

60

37

90

Interest expense

(1,949)

(2,395)

(3,250)

Amortization of drilling contract intangibles

-

-

2,018

Amortization of deferred financing fees

(397)

(351)

(397)

Other financial items

(1,248)

(24)

(764)

Total other income/(expense), net

(3,534)

(2,733)

(2,303)

Income before taxes

18,376

26,261

4,089

Income taxes - (expense)/benefit

(973)

(3,081)

(469)

Net income

17,403

23,180

3,620

Earnings per share (US$)


    Basic

0.11

0.15

0.02

    Diluted

0.11

0.15

0.02

Weighted average common shares (000’s)


    Basic

153,327

154,032

153,100

    Diluted

154,845

156,116

153,100

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)



(Thousands of US Dollars)

March 31,

2010

December 31,

2009

Current assets



Cash and cash equivalents

56,900

79,162

Restricted cash

8,232

9,371

Account receivables, net

46,865

35,423

Prepaid expenses

4,426

6,097

Deferred financing fees

495

561

Deferred mobilization costs

580

601

Total current assets

117,498

131,215

Non-current assets



Property, plant & equipment, net

486,233

499,594

Restricted cash, net of current portion

6,438

6,438

Deferred mobilization cost, net of current portion

330

382

Deferred financing fees, net of current portion

192

-

Total non-current Assets

493,193

506,414

Total assets

610,691

637,629

Current liabilities

Accounts payable

28,060

12,917

Accrued expenses

22,805

21,467

Income tax payable

4,314

3,762

Current portion of debt

130,000

197,500

Deferred revenue

6,713

2,076

Total current liabilities

191,892

237,722

Non-current liabilities

Deferred revenue, net of current portion

2,232

2,396

Other long-term liabilities

1,320

6,022

Total non-current liabilities

3,552

8,418

Total liabilities

195,444

246,140

Shareholders' equity

Share capital

39,405

38,829

Additional paid-in capital

165,752

165,750

Accumulated other comprehensive loss

(6,691)

(6,691)

Retained earnings

216,781

193,601

Total shareholders' equity

415,247

391,489

Total liabilities and shareholders' equity  

610,691

637,629

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES

Consolidated Statement of Cash Flows - (Unaudited)



Three months ended

March 31,

(Thousands of US Dollars)

2010

2009

Cash flows from operating activities

Net income

23,180

3,620

Adjustments to reconcile net income to net cash

 provided by operating activities:

Bad debt expense

-

4,703

Stock-based compensation

775

372

Depreciation

14,068

15,773

Amortization of drilling contract intangibles

-

(2,018)

Amortization of deferred financing fees

351

397

Realized gain on foreign currency

161

-

Changes in operating assets and working capital

Increase in accounts receivable

(11,597)

(17,013)

Decrease in prepaid expenses and other current assets

1,931

4,940

Increase (decrease) in accounts payable

15,166

(4,054)

Increase in other accrued liabilities

1,409

14,665

Increase in deferred revenue

4,473

1,571

Decrease in other long term liabilities

(4,701)

(9,390)

Increase (decrease) in income taxes payable

523

(2,417)

Other, net

(180)

12

Net cash provided by operating activities

45,559

11,161



Cash flows from investing activities

Capital expenditures

(707)

(3,388)

Release of restricted cash

1,151

-

Net cash provided by/ (used in) investing activities

444

(3,388)



Cash flows from financing activities

Payment for taxes on vested shares

(197)

-

Debt issuance costs

(576)

-

Principal payment of bank term loan

(67,500)

(22,500)

Net cash used in financing activities

(68,273)

(22,500)



Net decrease in cash and cash equivalents

(22,270)

(14,727)

Cash and cash equivalents at beginning of period

79,162

58,759

Effects of exchange rate changes on cash and cash equivalents

8

26

Cash and cash equivalents at end of period

56,900

44,058



Supplemental disclosure of cash flow information

Cash paid during the period for:

   Income taxes

2,514

2,808

   Interest

1,690

2,722

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

(Unaudited)











Accumulated


Common


Additional

other


shares

Share

paid-in

comprehensive

Retained


(Thousands of US Dollars)

('000)

capital

capital

loss

earnings

Total







Balance at January 1, 2009

153,124

38,281

164,860

(6,691)

118,542

314,992







Net income

-

-

-

-

75,059

75,059

Issuance of restricted stock

2,196

548

(548)

-

-

-

Stock-based compensation

-

-

1,438

-

-

1,438







Balance at December 31, 2009

155,320

38,829

165,750

(6,691)

193,601

391,489







Net income

-

-

-

-

23,180

23,180

Issuance of restricted stock

2,302

576

(576)

-

-

-

Stock-based compensation

-

-

578

-

-

578







Balance at March 31, 2010

157,622

39,405

165,752

(6,691)

216,781

415,247

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Financial Results

(Unaudited)






Three Months Ended


March 31,

(Thousands of US Dollars)

Q4 2009

2010

2009




Net Income (GAAP)

31,245

23,180

3,620




Add Back:


Net interest expense

2,629

2,709

3,557

Income taxes

2,124

3,081

469

Depreciation

14,515

14,068

15,773

Amortization

(1,850)

-

(2,018)




EBITDA (Non-GAAP)

48,663

43,038

21,401





EBITDA is defined as Net Income before Interest, Taxes, Depreciation and Amortization.

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES

Operating Statistics

(Unaudited)








Three Months Ended



March 31,

Q4 2009

2010

2009





Jackups (3)








Average rig utilization

33%

33%

86%

Operating days

92

90

233

Average revenue per day  

93,979

86,782

157,184










Drillship (1)








Average rig utilization

100%

100%

-

Operating days

92

90

-

Average revenue per day  

327,038

334,596

-










Semisubmersible (1)








Average rig utilization

100%

100%

100%

Operating days

92

90

90

Average revenue per day  

227,922

233,937

210,276





Total Drilling Rigs










Average rig utilization

60%

60%

72%

Operating days

276

270

323

Average revenue per day

216,313

218,441

171,972





Floating Production  Facility (1)








Operating days

92

90

90

Days available for tariff

92

90

-

Average bpd

12,389

11,224

-

Average tariff revenue per day

61,111

58,119

-

Average other revenue per day

8,775

8,867

10,783

Total average revenue per day

69,886

66,986

10,783










Note 1: Operating days represent actual days under contract.

Note 2: Northern Producer contract commenced March 1, 2008 with 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 Q1'10 we earned an average dayrate of US$34,249 per day 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.  

SOURCE Northern Offshore, Ltd.

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