Northern Offshore Reports Second Quarter and Six Month 2012 Financial Results and Declares Dividend

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Aug 15, 2012, 06:27 ET

HOUSTON, Aug. 15, 2012 /PRNewswire/ --

Highlights

Northern Offshore, Ltd. (Oslo Bors: NOF.OL) today reported net income for the three months ended June 30, 2012 of US$2.3 million, or US$0.01 per diluted share, on revenues of US$43.6 million.
The company's directors have increased the dividend to US$0.04 per share, or approximately US$6.5 million.
The Energy Searcher commenced operations under a new contract in Vietnam.
The Energy Driller commenced operations under a new contract in India.
The Energy Enhancer commenced operations under a new contract in Denmark.

Management Comment

Gary W. Casswell, Northern Offshore's president and CEO, commented, "We are pleased to have turned the corner from our transition period over the past several quarters. Our rig crews and shipyard teams did a professional job completing their projects and commencing new operations with the Energy Searcher, Energy Driller and Energy Enhancer. Most importantly, all of these projects were completed safely and without a recordable incident, and operational uptime on our units is meeting expectations. We expect to see improving profitability through the remainder of the year, providing greater cash flow for our shareholders, as represented by our board's increase of the quarterly dividend to US$0.04 per share."

Second Quarter Analysis

Net income for the three months ended June 30, 2012 was US$2.3 million, or US$0.01 per diluted share. This compares to net income of US$4.6 million, or US$0.03 per diluted share for the second quarter of 2011. Revenues for the second quarter of 2012 were US$43.6 million compared to US$49.9 million for the second quarter of 2011.

For the six months ended June 30, 2012, the net loss was US$11.8 million, or US$0.08 per diluted share. For the same period in the prior year, net income was US$7.0 million, or US$0.05 per diluted share. Revenues for the first six months of 2012 were US$71.9 million compared to US$90.4 million for the same period in 2011.

Revenues for the three months ended June 30, 2012 were US$6.3 million lower when compared to the same period of 2011, primarily due to a 10-day production shutdown of the floating production facility Northern Producer this quarter and the conclusion of a management services contract during 2011.

The tariff revenues from the Northern Producer averaged approximately US$91,000 per day in the second quarter of 2012. The company expects pricing levels to remain stable and production to increase in the near term.

Drilling and production expenses for the three months ended June 30, 2012 were US$2.6 million higher than the same period last year primarily due to contract start up costs. Depreciation expense for the second quarter of 2012 was US$1.1 million higher when compared with the same period in 2011 due to depreciation on additional capitalized shipyard costs for the drillship Energy Searcher and semisubmersible Energy Driller.

Second quarter 2012 general and administrative expenses, interest income and expense, and other financial items were comparable to those of the same period in 2011. Amortization of deferred financing fees was US$1.5 million lower than the same period last year primarily due to lower financing costs related to the revolving credit facility.

As of August 14, 2012, the company had an outstanding credit facility balance of US$70.0 million and a cash balance of US$25.2 million.

The company's directors have declared a dividend of US$0.04 per share, or approximately US$6.5 million. Shareholders of record with the VPS on August 31, 2012 will be entitled to receive the dividend, which will be paid on or around September 14, 2012. The shares of the company will be trading ex-dividend from August 29, 2012.

The results for the third quarter 2012 are expected to show a strong improvement in operating earnings, which will be positively influenced by a full operating quarter for the Energy Driller, Energy Searcher, and Energy Enhancer and increased production levels for the Northern Producer.

Conference Call Information

Northern Offshore, Ltd. will conduct a teleconference with security analysts at 9 a.m. CDT, August 16, 2012 to discuss the company's quarterly results. Individuals wishing to participate in the teleconference should call 800-510-0146 (in the U.S.) or 617-614-3449 (outside the U.S.) about five to ten minutes prior to the scheduled start time and refer to participant password 61074669.

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 drilling units and one production vessel in various markets around the world, including the North Sea, the Indian Ocean, the Mediterranean Sea and Southeast Asia. The company's fleet consists of five drilling units (a drillship, a semisubmersible and three jackup drilling rigs) and one floating production facility. More information on Northern Offshore, Ltd. may be found by visiting the company's website at http://www.northernoffshorelimited.com.

This announcement contains statements that reflect the company's expectations or predictions of the future. These statements are forward-looking statements. These forward-looking statements may include statements regarding earnings guidance, capital allocation strategy, the impact of activity levels, business performance, and other market and industry conditions. The company's actual results could differ materially from those reflected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the company's regulatory filings. The company disclaims any intention or obligation to revise any forward-looking statements, including financial estimates, whether as a result of new information, future events or otherwise.

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 Operations
(Unaudited)

		Three Months Ended June 30,		Six Months Ended June 30,
*(Thousands of US Dollars, except per share amounts)*	Q1 2012	2012	2011	2012	2011
Revenues	28,238	43,626	49,925	71,864	90,377
Operating expenses:
Drilling and production	(35,142)	(28,981)	(26,389)	(64,123)	(52,812)
Depreciation	(9,398)	(9,251)	(8,175)	(18,649)	(16,119)
General & administrative	(1,911)	(1,718)	(1,538)	(3,629)	(3,290)
Total operating expenses	(46,451)	(39,950)	(36,102)	(86,401)	(72,221)
Operating income/(loss)	(18,213)	3,676	13,823	(14,537)	18,156
Interest income	2	2	7	4	13
Interest expense	(496)	(666)	(486)	(1,162)	(1,087)
Amortization of deferred financing fees	(138)	(127)	(1,582)	(265)	(2,333)
Other financial items	(373)	179	(332)	(194)	(403)
Total other income/(expense), net	(1,005)	(612)	(2,393)	(1,617)	(3,810)
Income/(loss) before taxes	(19,218)	3,064	11,430	(16,154)	14,346
Income taxes - benefit/(expense)	5,075	(719)	(6,842)	4,356	(7,323)
Net income/(loss)	(14,143)	2,345	4,588	(11,798)	7,023

Earnings per share (US$)
Basic	(0.09)	0.01	0.03	(0.08)	0.05
Diluted	(0.09)	0.01	0.03	(0.08)	0.05
Weighted average common shares (000's)
Basic	155,689	155,891	155,007	155,791	154,877
Diluted	155,689	155,891	155,645	155,791	155,451

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)

*(Thousands of US Dollars)*	June 30, 2012	December 31, 2011
*Current assets*
Cash and cash equivalents	7,309	10,601
Restricted cash	5,000	7,604
Accounts receivable, net	28,589	36,649
Prepaid expenses	3,258	2,083
Deferred mobilization costs	3,161	246
Deferred insurance premium	4,369	1,822
Income taxes benefit	3,985	-
Other current assets	1,624	820
Total current assets	57,295	59,825
*Noncurrent assets*
Property, plant & equipment, net	243,429	253,740
Restricted cash, net of current portion	5,436	5,436
Noncurrent deposit/escrow account	2,243	-
Deferred mobilization costs, net of current portion	2,209	-
Drydock costs, net of current portion	6,032	4,967
Other noncurrent assets	2,449	224
Total noncurrent assets	261,798	264,367
Total assets	319,093	324,192
*Current liabilities*
Accounts payable	22,430	27,435
Accrued expenses	6,278	7,289
Income taxes payable	-	2,926
Current debt	70,000	45,436
Deferred revenue	4,124	4,813
Total current liabilities	102,832	87,899
*Shareholders' equity*
Share capital	40,195	39,546
Additional paid-in capital	169,293	168,583
Accumulated other comprehensive loss	(6,691)	(6,691)
Retained earnings	13,464	34,855
Total shareholders' equity	216,261	236,293
Total liabilities and shareholders' equity	319,093	324,192

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES
Consolidated Statements of Cash Flows - (Unaudited)

	Six months ended June 30,
*(Thousands of US Dollars)*	2012	2011
Cash flows from operating activities
Net (loss)/income	(11,798)	7,023
*Adjustments to reconcile net (loss)/income to net cash*
*(used in)/provided by operating activities:*
Stock-based compensation	1,944	1,169
Depreciation	18,649	16,119
Amortization of deferred financing fees	265	2,333
Loss on disposal of rig assets	92	878
*Changes in operating assets and working capital*
Accounts receivable	10,660	23,259
Prepaid expenses	(1,175)	(1,057)
Income taxes benefit	(3,985)	-
Deferred mobilization costs	(5,124)	247
Other current and noncurrent assets	(6,501)	(1,289)
Accounts payable	(9,295)	6,251
Other accrued liabilities	(1,427)	(12,833)
Deferred revenue	(3,289)	(1,081)
Income taxes payable	(2,926)	5,679
Other, net	343	48
Net cash (used in)/provided by operating activities	(13,567)	46,746
Cash flows from investing activities
Capital expenditures	(4,483)	(13,462)
Changes in restricted cash	2,604	(1,000)
Changes in noncurrent deposit/escrow account	(2,243)	-
Net cash used in investing activities	(4,122)	(14,462)
Cash flows from financing activities
Proceeds from drawdown of revolver facility	24,564	39,000
Principal payments on former revolver facility	-	(50,000)
Debt issuance costs	(405)	(900)
Payment for taxes on vested shares	(585)	(158)
Dividends paid	(9,177)	(4,659)
Net cash provided by/(used in) financing activities	14,397	(16,717)
Net changes in cash and cash equivalents	(3,292)	15,567
Cash and cash equivalents at beginning of period	10,601	12,587
Cash and cash equivalents at end of period	7,309	28,154

Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes	1,719	1,423
Interest	1,118	734

Significant non-cash transactions during the period for:
Accrued capital expenditures	4,290	5,920
Accrued dividends	416	75

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 December 31, 2010	156,708	39,176	166,632	(6,691)	52,470	251,587

Net income	-	-	-	-	7,023	7,023
Issuance of restricted stock	1,551	389	(389)	-	-	-
Payments for taxes on vested shares	-	-	(158)	-	-	(158)
Stock-based compensation	-	-	1,169	-	-	1,169
Common shares dividends	-	-	-	-	(4,734)	(4,734)
Balance at June 30, 2011	158,259	39,565	167,254	(6,691)	54,759	254,887

Balance at December 31, 2011	158,184	39,546	168,583	(6,691)	34,855	236,293

Net loss	-	-	-	-	(11,798)	(11,798)
Issuance of restricted stock	2,595	649	(649)	-	-	-
Payments for taxes on vested shares	-	-	(585)	-	-	(585)
Stock-based compensation	-	-	1,944	-	-	1,944
Common shares dividends	-	-	-	-	(9,593)	(9,593)
Balance at June 30, 2012	160,779	40,195	169,293	(6,691)	13,464	216,261

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Results
(Unaudited)



		Three Months Ended June 30,		Six Months Ended June 30,
		Three Months Ended June 30,		Six Months Ended June 30,
*(Thousands of US Dollars)*	Q1 2012	2012	2011	2012	2011

Net income/(loss) (GAAP)	(14,143)	2,345	4,588	(11,798)	7,023

Add Back:
Net interest expense	632	791	2,061	1,423	3,407
Income taxes	(5,075)	719	6,842	(4,356)	7,323
Depreciation	9,398	9,251	8,175	18,649	16,119

EBITDA (Non-GAAP)	(9,188)	13,106	21,666	3,918	33,872



EBITDA is defined as Net Income/(loss) before Interest, Taxes and Depreciation

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES
Operating Statistics
(Unaudited)

		Three Months Ended June 30,		Six Months Ended June 30,
		Three Months Ended June 30,		Six Months Ended June 30,
	Q1 2012	2012	2011	2012	2011

Jackups (3)

Average rig utilization	39%	33%	60%	36%	37%
Operating days	106	91	164	197	199
Average revenue per day	63,477	99,996	71,839	80,346	67,926

Drillship (1)

Average rig utilization	45%	95%	0%	74%	0%
Operating days	41	86	0	135	0
Average revenue per day	139,459	186,008	0	212,500	0

Semisubmersible (1)

Average rig utilization	0%	80%	100%	40%	100%
Operating days	0	73	91	73	181
Average revenue per day	0	138,877	218,007	138,877	223,378

Total Drilling Rigs (5)

Average rig utilization	32%	55%	56%	45%	42%
Operating days	147	250	255	405	380
Average revenue per day	132,104	140,937	132,801	134,947	147,871

Floating Production Facility (1)

Days in period	91	91	91	182	181
Production days	91	91	91	182	181
Average bpd	15,919	15,137	22,372	15,531	26,027
Average tariff revenue per day	95,515	90,818	134,230	93,167	156,161
Average other revenue per day	1,393	1,393	2,646	1,393	2,648
Total average revenue per day	96,908	92,211	136,876	94,560	158,809


Note 1: Operating days represent actual days under contract.

Note 2: Costs which are reimbursed by the client are included in the average revenue per day calculation.