Northern Offshore Reports Fourth Quarter and Preliminary Full Year 2014 Results

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Feb 18, 2015, 05:30 ET

HOUSTON, Feb. 18, 2015 /PRNewswire/ --

Highlights
(All $ in USD)

Northern Offshore, Ltd. (Oslo Bors: NOF.OL) today reported net income for the three months ended December 31, 2014, of $11.5 million, or $0.07 per diluted share, on revenues of $77.8 million.
For the full year ended December 31, 2014, net income was $35.9 million, or $0.23 per diluted share, on revenues of $246.3 million.
The Company generated adjusted EBITDA of $22.9 million in the fourth quarter and $78.3 million for the full year

Management Comment

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

"I am very pleased with the financial and operational performance delivered by our organization for the fourth quarter and the full year 2014. Our results exceeded those of each of the preceding three years. I am proud of the individual and collective efforts of everyone in the Company who contributed to this significant achievement.

Looking further down the road in 2015, we see a challenging market environment for the Company and the oil services sector generally due to the rapid decline in commodity prices and the resultant reduction in our clients' capital spending. During this period, I am confident our experienced management team will maintain our focus on capital discipline and cost control.

With respect to the dividend policy, I would note that since the Company began paying dividends in June 2011, a total of $0.64 per share or approximately $100 million has been distributed to the shareholders. However, after careful consideration of the Company's need for financial flexibility during this period of excess offshore rig supply, the Board of Directors has chosen not to declare a dividend for the previous quarter. As in the past, the future dividend policy will be reviewed by the Board on a quarterly basis."

Fourth Quarter and Year End Analysis

Net income for the three months ended December 31, 2014, was $11.5 million, or $0.07 per diluted share, on revenues of $77.8 million, compares to net income of $5.9 million, or $0.04 per diluted share on revenues of $46.8 million for the fourth quarter of 2013.

Net income for the full year ended December 31, 2014, was $35.9 million, or $0.23 per diluted share, compares to 2013 net income of $11.3 million, or $0.07 per diluted share. Revenues in 2014 were $246.3 million, as compared to $174.9 million reported in 2013.

Revenues for the three months ended December 31, 2014, were approximately $31.0 million higher than the same period of 2013, primarily due to the dayrate revenues and mobilization fees earned by the drillship Energy Searcher's contract in offshore Nigeria coupled with higher utilization and dayrate increases for the jackup fleet, partially offset by lower tariff revenues from the Northern Producer.

Tariff revenue from the floating production facility Northern Producer was lower in comparison to the prior year quarter due to a combination of production decline and lower tariff rates resulting from the fall in the price of N. Sea Brent.

Drilling and production expenses for the fourth quarter of 2014 were $25.1 million higher when compared with the same period in 2013, primarily due to the increase in operating and mobilization costs related to the drillship Energy Searcher, partially offset by lower maintenance and inspection expenditures for the floating production facility Northern Producer.

Fourth quarter 2014 depreciation, general and administrative expenses, interest expense, amortization of financing fees were comparable to those of the same period in 2013. Other financial items were $0.7 million lower than the same period last year due to favorable foreign currency exchange rates fluctuations with income taxes approximately $1 million higher due to the growth in pretax income.

As of February 17, 2015, the company had an outstanding Revolving Credit Facility balance of $29.0 million and a cash balance of $36.2 million, resulting in a net cash position of $7.2 million. The Company's accounts receivable position of $48.9 million at the end of December 31, 2014 was higher compared to the prior year balance primarily due to the Energy Searcher's contract in offshore Nigeria.

The information contained in this press release is preliminary and is subject to change until the release of the 2014 annual report when approved by the Board of Directors.

Conference Call Information

Northern Offshore, Ltd. will conduct a teleconference with security analysts at 9 a.m. CT, February 19, 2015, to discuss the company's quarterly results. Individuals wishing to participate in the teleconference should call 1-800-299-8538 (in the U.S.) or +1-617-786-2902 (toll free or outside the U.S.) about five to ten minutes prior to the scheduled start time and refer to participant password 18796116.

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, Southeast Asia and West Africa. 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 first and third quarters of 2016. 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 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.

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

		Three Months Ended December 31,		Twelve Months Ended December 31,
*(Thousands of US Dollars, except per share amounts)*	Q3 2014	2014	2013	2014	2013
Revenues	63,555	77,767	46,778	246,285	174,864
Operating expenses:
Drilling and production	(46,764)	(52,989)	(27,929)	(160,229)	(116,077)
Depreciation	(8,429)	(8,552)	(8,094)	(33,574)	(31,895)
General & administrative	(1,771)	(1,913)	(2,135)	(7,736)	(8,265)
Total operating expenses	(56,964)	(63,454)	(38,158)	(201,539)	(156,237)
Operating income	6,591	14,313	8,620	44,746	18,627
Interest expense	(556)	(391)	(365)	(1,917)	(1,513)
Amortization of deferred financing fees	-	-	(116)	(161)	(483)
Other financial items	295	446	(300)	228	(1,680)
Total other expense	(261)	55	(781)	(1,850)	(3,676)
Income before taxes	6,330	14,368	7,839	42,896	14,951
Income taxes expense	(1,141)	(2,911)	(1,934)	(6,968)	(3,647)
Net income	5,189	11,457	5,905	35,928	11,304

Earnings per share (US$)
Basic	0.03	0.07	0.04	0.23	0.07
Diluted	0.03	0.07	0.04	0.23	0.07

Weighted average common shares (000's)
Basic	159,595	159,622	157,625	159,394	157,377
Diluted	160,483	159,622	157,625	159,640	157,420

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

*(Thousands of US Dollars)*	December 31, 2014	December 31, 2013
*Current assets*
Cash and cash equivalents	16,604	19,537
Restricted cash	6,436	1,000
Accounts receivable, net	48,909	24,158
Prepaid expenses	3,425	3,508
Deferred mobilization costs	368	2,202
Deferred insurance premium	1,855	1,627
Other current assets	366	1,382
Total current assets	77,963	53,414
*Noncurrent assets*
Property, plant & equipment - existing fleet, net	155,267	180,329
Property, plant & equipment - newbuild jackups	84,924	17,829
Restricted cash, net of current portion	-	5,436
Noncurrent deposit/escrow account	12,034	9,222
Deferred mobilization costs, net of current portion	-	368
Drydock costs, net of current portion	1,085	2,859
Other noncurrent assets	1,154	1,665
Total noncurrent assets	254,464	217,708
Total assets	332,427	271,122
*Current liabilities*
Accounts payable	11,973	9,275
Accrued expenses	15,507	20,196
Income taxes payable	2,775	1,282
Affiliated debt	29,000	22,000
Total current liabilities	59,255	52,753
*Non-current liabilities*
Other long-term liabilities	47,793	-
Total liabilities	107,048	52,753

*Shareholders' equity*
Share capital	41,117	40,933
Additional paid-in capital	179,252	175,462
Accumulated other comprehensive loss	(6,691)	(6,691)
Retained earnings	11,701	8,665
Total shareholders' equity	225,379	218,369
Total liabilities and shareholders' equity	332,427	271,122

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

	Twelve months ended December 31,
*(Thousands of US Dollars)*	2014	2013
Cash flows from operating activities
Net income	35,928	11,304
*Adjustments to reconcile net income to net cash*
*provided by operating activities:*
Stock-based compensation	4,954	5,684
Depreciation	33,574	31,895
Amortization of deferred financing fees	161	483
Gain on disposal of assets	(313)	(159)

*Changes in operating assets and working capital*
Accounts receivable	(24,751)	5,228
Prepaid expenses	83	591
Deferred mobilization costs	2,202	1,235
Other current and noncurrent assets	3,009	2,236
Accounts payable	2,304	(3,940)
Other accrued liabilities	(4,709)	4,384
Deferred revenue	-	(2,062)
Income taxes payable	1,493	366
Net cash provided by operating activities	53,935	57,245

Cash flows from investing activities
Capital expenditures - existing fleet	(8,700)	(9,362)
Capital expenditures - newbuild jackups	(18,816)	(17,829)
Changes in restricted cash	-	(1,000)
Changes in noncurrent deposit/escrow account	(2,812)	(4,024)
Proceeds from disposal of assets, net	313	159
Net cash used in investing activities	(30,015)	(32,056)

Cash flows from financing activities
Proceeds from drawdown of revolver facility	25,000	-
Principal payments on revolver facility	(18,000)	-
Payment for taxes on vested shares	(979)	(396)
Dividends paid	(32,874)	(31,760)
Net cash used in financing activities	(26,853)	(32,156)

Net changes in cash and cash equivalents	(2,933)	(6,967)
Cash and cash equivalents at beginning of period	19,537	26,504
Cash and cash equivalents at end of period	16,604	19,537

Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes	1,928	787
Interest	852	834

Significant non-cash transactions during the period for:
Accrued capital expenditures	48,090	1,795
Accrued dividends	19	886

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, 2012	160,488	40,122	170,985	(6,691)	30,007	234,423

Net income	-	-	-	-	11,304	11,304
Issuance of restricted stock	3,244	811	(811)	-	-	-
Payments for taxes on vested shares	-	-	(396)	-	-	(396)
Stock-based compensation	-	-	5,684	-	-	5,684
Common shares dividends	-	-	-	-	(32,646)	(32,646)
Balance at December 31, 2013	163,732	40,933	175,462	(6,691)	8,665	218,369

Balance at December 31, 2013	163,732	40,933	175,462	(6,691)	8,665	218,369

Net income	-	-	-	-	35,928	35,928
Issuance of restricted stock	738	184	(184)	-	-	-
Payments for taxes on vested shares	-	-	(979)	-	-	(979)
Stock-based compensation	-	-	4,954	-	-	4,954
Common shares dividends	-	-	-	-	(32,893)	(32,893)
Balance at December 31, 2014	164,470	41,117	179,253	(6,691)	11,700	225,379

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

		Three Months Ended		Twelve Months Ended
		December 31,		December 31,
*(Thousands of US Dollars)*	Q3 2014	2014	2013	2014	2013

Net income (GAAP)	5,189	11,457	5,905	35,928	11,304

Add Back:
Net interest expense	556	391	481	2,078	1,996
Income taxes	1,141	2,911	1,934	6,968	3,647
Depreciation	8,429	8,552	8,094	33,574	31,895
Other financial items	(295)	(446)	300	(228)	1,680

Adjusted EBITDA (Non-GAAP)	15,020	22,865	16,714	78,320	50,522


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		Twelve Months Ended
		December 31,		December 31,
	Q3 2014	2014	2013	2014	2013

Jackups (2)

Average rig utilization	100%	100%	91%	100%	87%
Operating days	184	184	167	730	637
Average revenue per day	147,504	146,904	132,046	142,794	120,586

Drillship (1)

Average rig utilization	100%	100%	0%	56%	0%
Operating days	92	92	0	205	0
Average revenue per day	147,626	323,350	0	240,563	0

Semisubmersible (1)

Average rig utilization	100%	100%	100%	100%	100%
Operating days	92	92	92	365	365
Average revenue per day	160,294	166,123	169,071	167,910	158,642

Total Drilling Rigs (4)

Average rig utilization	100%	100%	70%	89%	69%
Operating days	368	368	259	1,300	1,002
Average revenue per day	150,732	195,820	145,198	165,263	134,448

Floating Production Facility (1)

Days in period	92	92	92	365	365
Production days	92	92	92	365	365
Average bpd	14,392	11,665	16,369	14,498	18,103
Average tariff revenue per day	86,353	60,556	98,217	84,608	108,568
Average other revenue per day	1,535	1,451	1,474	1,536	1,422
Total average revenue per day	87,888	62,007	99,691	86,144	109,990


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.