Northern Offshore Reports First Quarter 2011 Financial Results

HOUSTON, May 18, 2011 /PRNewswire/ -- Northern Offshore, Ltd. (Oslo Bors: NOF.OL) today reported net income for the three months ended March 31, 2011 of US$2.4 million, or US$0.02 per diluted share, on revenues of US$40.5 million.  This compares to net income of US$23.2 million, or US$0.15 per diluted share, for the first quarter of 2010, on revenues of US$68.1 million.

The company's directors have approved a new US$50 million Revolving Credit and US$10 million Credit Support Facility, to be provided by Metrogas Holdings, Inc., an affiliate of the company's largest shareholder, Geveran Trading Co. Limited.  Management believes that the terms of the new facility are more favorable than the terms of the existing Credit Facility or alternative facilities available from third parties.  It is anticipated that the new facility will be in place before the end of May 2011.  Funding from the new Credit Facility will be available to pay off the existing Credit Facility, meet general working capital needs and pay future dividends.  The Credit Support Facility will be used to secure the company's letters of credit and performance bonds in conjunction with routine business.

By the end of May 2011, the company intends to make an initial drawdown of US$32 million from the new Credit Facility in order to retire the existing Credit Facility.

Subsequent and subject to both the execution of the new facility and retirement of the existing facility, and considering the current capital and liquidity requirements of the company, the company's directors intend to declare a dividend of approximately US$5.0 million, or US$0.03 per share, payable to shareholders of record as of May 31, 2011.  A separate announcement providing specific details of the proposed dividend will be released upon declaration.  The directors anticipate declarations of future dividends as permitted by future cash flow, liquidity, reserve and capital requirements, and any restrictions in the company's new Credit Facility.

Gary W. Casswell, Northern Offshore's president and CEO, commented "Northern Offshore has reached a significant milestone.  The company's net debt is below US$2 million, and our solid cash flow, new credit agreement, low net debt and good asset coverage give us the opportunity to commence dividend payments.  The initial dividend is primarily supported by cash flow from the Northern Producer.  We anticipate that dividends can be increased as the underlying marketplace improves and the company enters into new contracts for the remainder of the fleet, further improving cash flow.  Future dividend payments will be tied to free cash flow, subject to company liquidity, reserve and capital requirements, and any restrictions in our credit facility."

First Quarter Highlights

Northern Producer

The floating production facility Northern Producer remains under contract with EnQuest.  The unit continues producing in the North Sea with further field development and tie-back ongoing. The tariff from the facility increased from an average of US$166 thousand per day in the fourth quarter of 2010 to US$178 thousand per day in the first quarter of 2011.  The company expects production and price levels to remain at, or slightly above, the 2011 tariff target.

Energy Enhancer

On February 25, 2011, the jackup Energy Enhancer commenced its contract with Ithaca Energy (UK) Limited ("Ithaca"), which is estimated to be completed in early June 2011.

On January 18, 2011, the company was awarded a contract with Perenco UK Limited which is scheduled to commence immediately following the completion of the rig's current commitment with Ithaca.

Energy Endeavour

On April 19, 2011, the jackup Energy Endeavour commenced its contract with Maersk Oil and Gas for a one-year term, plus two one-year options.  

Energy Searcher

The drillship Energy Searcher recently finished its five-year special periodic survey and dry-docking in a Singapore shipyard. The project was completed within its US$21 million budget in early May 2011. The company is actively marketing the unit in the Asia-Pacific region.

First Quarter Analysis

Revenues for the three months ended March 31, 2011 were US$27.6 million lower as compared to the same period of 2010.  This decrease was primarily due to loss of revenue from the drillship Energy Searcher, which was in the shipyard undergoing required inspections, repairs, maintenance and improvements during the first quarter this year, and lower utilization and dayrates of the jackup fleet.  Partially offsetting the decrease was higher tariff revenue from the floating production facility Northern Producer.  

Drilling and production expenses for the first quarter of 2011 were US$3.7 million higher as compared to the same period of 2010 due primarily to contract start-up costs for the jackup Energy Enhancer and rig move costs for the semisubmersible Energy Driller, partially offset by lower operating expense for the jackup Energy Endeavour which was idle for the full current quarter.  Depreciation expense for the first quarter of 2011 was US$6.1 million lower than in the first quarter of 2010 due to the decrease in depreciable basis of the jackup fleet attributable to the asset impairment charge taken at year end 2010.  Interest expense was US$1.8 million lower this quarter due to lower loan principal, and income tax expense was US$2.6 million lower due to lower year-to-date pre-tax income.

As of May 17th, 2011, the company had an outstanding Revolving Credit Facility balance of US$32.0 million, a cash balance of US$30.3 million and a net debt position of US$1.7 million.

Conference Call Information

Northern Offshore, Ltd. will conduct a teleconference with security analysts at 10 a.m. CT, May 19, 2011 to discuss the company's quarterly results. Individuals wishing to participate in the teleconference should call (866) 783-2141 (in the U.S.) or (857) 350-1600 (outside the U.S.) about five to ten minutes prior to the scheduled start time and refer to participant passcode 75060436.

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 [email protected]

SOURCE Northern Offshore, Ltd.