Northern Offshore Reports First Quarter 2015 Results

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May 20, 2015, 05:00 ET

HOUSTON, May 20, 2015 /PRNewswire/ --

Highlights
(All $ in USD)

Northern Offshore, Ltd. (Oslo Børs: NOF.OL) today reported net income for the three months ended March 31, 2015, of $5.9 million, or $0.04 per diluted share, on revenues of $44.6 million.
The Company generated adjusted EBITDA of $14.1 million in the first quarter 2015.
The semisubmersible Energy Driller concluded its three year contract with ONGC on April 18, 2015 and was moved to a stacking location in Bahrain where it will remain while the Company actively pursues marketing opportunities in the Asia Pacific Region.
The jackup Energy Endeavour concluded its drilling program with Wintershall on May 13, 2015 and has been relocated to Rotterdam, the Netherlands. The Company continues to market the unit for immediate employment.

Management Comment

Gary W. Casswell, Northern Offshore's President and CEO, commented;

"Our first quarter results exceeded our expectations due to the acceleration of the cost savings initiatives implemented by the Company. Both the semisubmersible Energy Driller and jackup Energy Endeavour successfully concluded their drilling programs and are located at their stacking locations.

Following release from its previous contract in Nigeria, the Company made a strategic relocation of the drillship Energy Searcher to the Middle East/Asia Pacific Region to pursue marketing opportunities in those areas while taking advantage of a lower cost layup location.

As we look forward, we will rely heavily on our experienced and dedicated management team to remain focused on cost control and capital discipline while continuing to market our services in a highly competitive environment. "

First Quarter Analysis

Net income for the three months ended March 31, 2015 of $5.9 million, or $0.04 per diluted share, with revenues of $44.6 million compares to net income of $10.0 million, or $0.06 per diluted share, with revenues of $49.4 million for the first quarter of 2014.

Revenues for the three months ended March 31, 2015 were $4.9 million lower than the same period in 2014, primarily related to the floating production facility Northern Producer as the tariff revenue was negatively impacted by a combination of lower production volume and decrease in the tariff rate due to the decline in the price of North Sea Brent. Drilling and production expenses for the three months ended March 31, 2015 were $1.8 million higher as compared to the same period in 2014, primarily due to an increase in operating expenses for the drillship Energy Searcher relating to the completion of its contract offshore Nigeria. Partially offsetting this increase was an overall decrease in operating expenses for the remainder of the fleet primarily due to lower labor, repair and maintenance costs.

First quarter 2015 depreciation, general and administrative expenses, interest expense, and other financial items were comparable to those of the same period in 2014.

Tariff revenues from the floating production facility Northern Producer averaged approximately $39,000 per day in the first quarter of 2015. The company expects pricing levels to remain stable and production to decrease slightly in line with the forecast decline rates.

As of today, the company has an outstanding credit facility balance of $29 million and an unrestricted cash balance of approximately $37 million.

Conference Call Information

Northern Offshore, Ltd. will conduct a teleconference with security analysts at 9 a.m. CT, May 21, 2015, to discuss the company's quarterly results. Individuals wishing to participate in the teleconference should call 1-877-703-6109 (in the U.S.) or +1-857-244-7308 (toll free or outside the U.S.) about five to ten minutes prior to the scheduled start time and refer to participant password 85572639.

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, and Southeast Asia. The company's fleet consists of four drilling units (a drillship, a semisubmersible and two jackup drilling rigs) and one floating production facility. Additionally, the company has under construction two 350' high specification jackup drilling rigs, with contract delivery in the fourth quarter of 2016 and second quarter of 2017. 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:
Paul Ravesies at (713) 739-7686 or via email at [email protected]

This announcement contains statements that reflect the company's expectations or predictions of the future. These forward-looking statements may include comments 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. 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.

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)

		Three Months Ended March 31,
*(Thousands of US Dollars, except per share amounts)*	Q4 2014	2015	2014
Revenues	77,767	44,570	49,432
Operating expenses:
Drilling and production	(52,493)	(28,782)	(26,949)
Depreciation	(8,552)	(8,605)	(8,297)
General & administrative	(1,360)	(1,697)	(2,142)
Total operating expenses	(62,405)	(39,084)	(37,388)
Operating income	15,362	5,486	12,044
Interest expense	(391)	(363)	(426)
Amortization of deferred financing fees	-	-	(121)
Other financial items	446	483	(45)
Total other expense	55	120	(592)
Income before taxes	15,417	5,606	11,452
Income taxes benefit / (expense)	(2,911)	295	(1,449)
Net income	12,506	5,901	10,003

Earnings per share (US$)
Basic	0.08	0.04	0.06
Diluted	0.08	0.04	0.06

Weighted average common shares (000's)
Basic	159,622	161,180	159,091
Diluted	159,622	161,180	159,093

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

*(Thousands of US Dollars)*	March 31, 2015	December 31, 2014
*Current assets*
Cash and cash equivalents	25,990	16,604
Restricted cash	6,898	6,436
Accounts receivable, net	28,898	48,909
Prepaid expenses	4,023	3,425
Deferred mobilization costs	61	368
Deferred insurance premium	597	1,855
Other current assets	61	366
Total current assets	66,528	77,963
*Noncurrent assets*
Property, plant & equipment - existing fleet, net	146,814	155,267
Property, plant & equipment - newbuild jackups	119,270	84,924
Noncurrent deposit/escrow account	12,040	12,034
Drydock costs, net of current portion	803	1,085
Other noncurrent assets	19,240	1,154
Total noncurrent assets	298,167	254,464
Total assets	364,695	332,427
*Current liabilities*
Accounts payable	7,012	11,973
Accrued expenses	12,741	14,458
Income taxes payable	1,701	2,775
Affiliated debt	29,000	29,000
Total current liabilities	50,454	58,206
*Non-current liabilities*
Other long-term liabilities	81,435	47,793
Total liabilities	131,889	105,999

*Shareholders' equity*
Share capital	41,469	41,117
Additional paid-in capital	179,378	179,253
Accumulated other comprehensive loss	(6,691)	(6,691)
Retained earnings	18,650	12,749
Total shareholders' equity	232,806	226,428
Total liabilities and shareholders' equity	364,695	332,427

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

	Three months ended March 31,
*(Thousands of US Dollars)*	2015	2014
Cash flows from operating activities
Net income	5,901	10,003
*Adjustments to reconcile net income to net cash* provided by operating activities:
Stock-based compensation	805	1,174
Depreciation	8,605	8,297
Amortization of deferred financing fees	-	121
Gain on disposal of assets	-	(325)

*Changes in operating assets and working capital*
Accounts receivable	20,011	(4,548)
Prepaid expenses	(598)	253
Deferred mobilization costs	307	(13,829)
Other current and noncurrent assets	(17,513)	718
Accounts payable	(3,689)	1,380
Other accrued liabilities	(1,716)	(583)
Deferred revenue	-	5,785
Income taxes payable	(1,074)	450
Net cash provided by operating activities	11,039	8,896

Cash flows from investing activities
Capital expenditures - existing fleet	(153)	(529)
Capital expenditures - newbuild jackups	(704)	(17,997)
Changes in restricted cash	(462)	-
Changes in noncurrent deposit/escrow account	(6)	(1,182)
Net cash used in investing activities	(1,325)	(19,708)

Cash flows from financing activities
Proceeds from drawdown of revolver facility	-	25,000
Payment for taxes on vested shares	(328)	(844)
Dividends paid	-	(7,956)
Net changes in financing activities	(328)	16,200

Net changes in cash and cash equivalents	9,386	5,388
Cash and cash equivalents at beginning of period	16,604	19,537
Cash and cash equivalents at end of period	25,990	24,925

Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes	266	250
Interest	86	-

Significant non-cash transactions during the period for:
Accrued capital expenditures	33,642	2,850
Accrued dividends	-	204

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, 2013	163,732	40,933	175,462	(6,691)	8,665	218,369

Net income	-	-	-	-	10,003	10,003
Issuance of restricted stock	(333)	(83)	83	-	-	-
Payments for taxes on vested shares	-	-	(844)	-	-	(844)
Stock-based compensation	-	-	1,174	-	-	1,174
Common shares dividends	-	-	-	-	(8,160)	(8,160)
Balance at March 31, 2014	163,399	40,850	175,875	(6,691)	10,508	220,542

Balance at December 31, 2014	164,470	41,117	179,253	(6,691)	12,749	226,428

Net income	-	-	-	-	5,901	5,901
Issuance of restricted stock	1,407	352	(352)	-	-	-
Payments for taxes on vested shares	-	-	(328)	-	-	(328)
Stock-based compensation	-	-	805	-	-	805
Common shares dividends	-	-	-	-	-	-
Balance at March 31, 2015	165,877	41,469	179,378	(6,691)	18,650	232,806

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



		Three Months Ended
		March 31,
*(Thousands of US Dollars)*	Q4 2014	2015	2014

Net income (GAAP)	12,506	5,901	10,003

Add Back:
Net interest expense	391	363	547
Income taxes	2,911	(295)	1,449
Depreciation	8,552	8,605	8,297
Other financial items	(446)	(483)	45

Adjusted EBITDA (Non-GAAP)	23,914	14,091	20,341


Adjusted EBITDA is defined as Net Income before Interest, Taxes, Depreciation and Other Financial Items

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

		Three Months Ended
		March 31,
	Q4 2014	2015	2014

Jackups (2)

Average rig utilization	100%	100%	100%
Operating days	184	180	180
Average revenue per day	146,904	147,297	139,435

Drillship (1)

Average rig utilization	100%	2%	0%
Operating days	92	2	0
Average revenue per day	323,350	20	0

Semisubmersible (1)

Average rig utilization	100%	100%	100%
Operating days	92	90	90
Average revenue per day	166,123	159,724	172,416

Total Drilling Rigs (4)

Average rig utilization	100%	76%	75%
Operating days	368	272	270
Average revenue per day	195,820	150,475	150,536

Floating Production Facility (1)

Days in period	92	90	90
Production days	92	90	90
Average bpd	11,665	10,430	16,009
Average tariff revenue per day	60,556	38,974	96,057
Average other revenue per day	1,451	1,478	1,579
Total average revenue per day	62,007	40,452	97,636


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.

SOURCE Northern Offshore, Ltd.