Northern Offshore Reports First Quarter 2012 Results

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May 15, 2012, 07:07 ET

HOUSTON, May 15, 2012 /PRNewswire/ --

Highlights

Northern Offshore, Ltd. (Oslo Bors: NOF.OL) today reported a net loss for the three months ended March 31, 2012 of US$14.1 million, or US$0.09 per diluted share, on revenues of US$28.2 million.
The company's directors have declared a dividend of US$0.03 per share, or approximately US$5 million.
The Revolving Credit Facility increased to US$75 million.
The Energy Searcher and Energy Driller commenced new contracts.

Management Comment

Gary W. Casswell, Northern Offshore's president and CEO, commented, "As expected, we incurred a loss during the first quarter due to idle time and costs associated with the preparation of three of our five rigs for previously announced new contracts. With two of the three rigs now on contract, and the third rig anticipated to commence its new contract shortly, we expect improved cash flow for the remainder of the year. Our board of directors recently approved an increase in our credit line to provide us with financial flexibility as we emerge from this transition period, and the continuation of the dividend program is a testament to our director's confidence in the company's outlook."

First Quarter Analysis

The net loss for the three months ended March 31, 2012 of US$14.1 million, or US$0.09 per diluted share, on revenues of US$28.2 million compares to net income of US$2.4 million, or US$0.02 per diluted share, for the first quarter of 2011, on revenues of US$40.5 million.

Revenues for the three months ending March 31, 2012 were US$12.2 million lower than the same period in 2011, primarily due to lower utilization of the semisubmersible Energy Driller and a decrease in tariff revenues from the floating production facility Northern Producer due to lower production compared to the same period last year. Partially offsetting these decreases were revenues from higher utilization for the drillship Energy Searcher and the jackup Energy Endeavour as compared to the same period last year.

The tariff from the floating production facility Northern Producer averaged approximately US$96,000 per day in first quarter of 2012. The company expects pricing levels to remain stable and production to decline slightly in the near term.

Drilling and production expenses for the three months ending March 31, 2012 were US$8.7 million higher compared to the same period in 2011 primarily due to mobilization costs for the jackup Energy Exerter to move from Malta to Rotterdam; anchor chains repair costs for the floating production facility Northern Producer; and costs associated with preparing the fleet for new drilling programs.

Depreciation expense for the three months ended March 31, 2012 was US$1.5 million higher due to higher depreciable basis primarily for the drillship Energy Searcher and semisubmersible Energy Driller, when compared with the same period in 2011. First quarter 2012 general and administrative expenses, interest income and expense, amortization of financing fees and other financial items were comparable to those of the same period in 2011.

As of May 14, 2012, the company had an outstanding facility balance of US$60.0 million and a cash balance of US$23.1 million.

The company's directors have declared a dividend of US$0.03 per share, or approximately US$5 million. Shareholders of record with the VPS on May 31, 2012 will be entitled to receive the dividend, which will be paid on or around June 15, 2012. The shares of the company will be trading ex-dividend from May 29, 2012.

Conference Call Information

Northern Offshore, Ltd. will conduct a teleconference with security analysts at 9 a.m. CT, May 16, 2012 to discuss the company's quarterly results. Individuals wishing to participate in the teleconference should call (866) 713-8567 (in the U.S.) or (617) 597-5326 (outside the U.S.) about five to ten minutes prior to the scheduled start time and refer to participant password 37307107.

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 March 31,
*(Thousands of US Dollars, except per share amounts)*	Q4 2011	2012	2011
Revenues	33,938	28,238	40,452
Operating expenses:
Drilling and production	(36,280)	(35,142)	(26,423)
Depreciation	(9,141)	(9,398)	(7,944)
General & administrative	(1,043)	(1,911)	(1,752)
Total operating expenses	(46,464)	(46,451)	(36,119)
Operating income/(loss)	(12,526)	(18,213)	4,333
Interest income	6	2	6
Interest expense	(596)	(496)	(601)
Amortization of deferred financing fees	(144)	(138)	(751)
Other financial items	(811)	(373)	(71)
Total other income/(expense), net	(1,545)	(1,005)	(1,417)
Loss before taxes	(14,071)	(19,218)	2,916
Income taxes - benefit/(expense)	3,409	5,075	(481)
Net income/(loss)	(10,662)	(14,143)	2,435

Earnings per share (US$)
Basic	(0.07)	(0.09)	0.02
Diluted	(0.07)	(0.09)	0.02
Weighted average common shares (000's)
Basic	155,220	155,689	154,747
Diluted	155,220	155,689	155,258


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

*(Thousands of US Dollars)*	March 31, 2012	December 31, 2011
*Current assets*
Cash and cash equivalents	10,138	10,601
Restricted cash	-	7,604
Account receivables, net	19,208	36,649
Prepaid expenses	2,914	2,083
Deferred mobilization costs	2,376	246
Deferred insurance premium	1,504	1,822
Other current assets	4,159	820
Total current assets	40,299	59,825
*Noncurrent assets*
Property, plant & equipment, net	247,045	253,740
Restricted cash, net of current portion	10,436	5,436
Noncurrent deposit/escrow account	915	-
Deferred mobilization cost, net of current portion	2,209	-
Other noncurrent assets	5,088	5,191
Total noncurrent assets	265,693	264,367
Total assets	305,992	324,192
*Current liabilities*
Accounts payable	23,214	27,435
Accrued expenses	5,005	7,289
Income tax payable	-	2,926
Current debt	60,000	45,436
Deferred revenue	-	4,813
Total current liabilities	88,219	87,899
Total liabilities	88,219	87,899
*Shareholders' equity*
Share capital	40,115	39,546
Additional paid-in capital	168,450	168,583
Accumulated other comprehensive loss	(6,691)	(6,691)
Retained earnings	15,899	34,855
Total shareholders' equity	217,773	236,293
Total liabilities and shareholders' equity	305,992	324,192


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

	Three months ended March 31,
*(Thousands of US Dollars)*	2012	2011
Cash flows from operating activities
Net (loss)/gain	(14,143)	2,435
*Adjustments to reconcile net (loss)/gain to net cash*
*(used in)/provided by operating activities:*
Stock-based compensation	999	860
Depreciation	9,398	7,944
Amortization of deferred financing fees	138	751
(Gain)/loss on disposal of rig assets	(22)	1,176
*Changes in operating assets and working capital*
Accounts receivable	17,441	13,207
Prepaid expenses	(831)	1,211
Income tax benefits	(3,625)	-
Other current and noncurrent assets	(3,360)	(1,735)
Accounts payable	(5,910)	4,029
Other accrued liabilities	(2,284)	(6,460)
Deferred revenue	(4,813)	(164)
Income tax payable	(2,926)	(1,561)
Other, net	-	132
Net cash (used in)/provided by operating activities	(9,938)	21,825
Cash flows from investing activities
Capital expenditures	(1,402)	(1,930)
Changes in restricted cash, net	2,604	-
Changes in noncurrent deposit/escrow account	(915)	-
Net cash provided by/(used in) investing activities	287	(1,930)
Cash flows from financing activities
Proceeds from drawdown of new revolver facility	14,564	-
Principal payment on former revolver facility	-	(18,000)
Payment for taxes on vested shares	(563)	(158)
Dividends paid	(4,813)	-
Net cash provided by/(used in) financing activities	9,188	(18,158)
Net changes in cash and cash equivalents	(463)	1,737
Cash and cash equivalents at beginning of period	10,601	12,587
Cash and cash equivalents at end of period	10,138	14,324

Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes	1,126	692
Interest	-	424

Significant non-cash transactions during the period for:
Accrued capital expenditures	1,279	12,145


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, 2011	156,708	39,176	166,632	(6,691)	52,470	251,587

Net loss	-	-	-	-	(3,385)	(3,385)
Issuance of restricted stock	1,476	370	(370)	-	-	-
Payments for taxes on vested shares	-	-	(435)	-	-	(435)
Stock-based compensation	-	-	2,756	-	-	2,756
Common shares dividends	-	-	-	-	(14,230)	(14,230)

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

Net loss	-	-	-	-	(14,143)	(14,143)
Issuance of restricted stock	2,277	569	(569)	-	-	-
Payments for taxes on vested shares	-	-	(563)	-	-	(563)
Stock-based compensation	-	-	999	-	-	999
Common shares dividends	-	-	-	-	(4,813)	(4,813)

Balance at March 31, 2012	160,461	40,115	168,450	(6,691)	15,899	217,773


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



		Three Months Ended
		March 31,
*(Thousands of US Dollars)*	Q4 2011	2012	2011

Net income/(loss) (GAAP)	(10,662)	(14,143)	2,435

Add Back:
Net interest expense	734	632	1,346
Income taxes	(3,409)	(5,075)	481
Depreciation	9,141	9,398	7,944

EBITDA (Non-GAAP)	(4,196)	(9,188)	12,206





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


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

		Three Months Ended
		March 31,
	Q4 2011	2012	2011

Jackups (3)

Average rig utilization	67%	39%	13%
Operating days	184	106	35
Average revenue per day	69,695	63,477	49,588

Drillship (1)

Average rig utilization	58%	45%	0%
Operating days	53	41	0
Average revenue per day	105,306	139,459	0

Semisubmersible (1)

Average rig utilization	0%	0%	100%
Operating days	0	0	90
Average revenue per day	0	0	228,809

Total Drilling Rigs (5)

Average rig utilization	52%	32%	28%
Operating days	237	147	125
Average revenue per day	94,988	132,104	178,613

Floating Production Facility (1)

Days in period	92	91	90
Production days	92	91	90
Average bpd	21,653	15,919	29,722
Average tariff revenue per day	129,921	95,515	178,336
Average other revenue per day	(5,190)	1,393	2,649
Total average revenue per day	124,731	96,908	180,985


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.