Northern Offshore Reports Second Quarter and Six Month 2013 Financial Results and Declares Dividend

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Aug 14, 2013, 06:00 ET

HOUSTON, Aug. 14, 2013 /PRNewswire/ --

Highlights
(All $ in USD)

Northern Offshore, Ltd. (Oslo Bors: NOF.OL) today reported net income for the three months ended June 30, 2013, of $1.7 million, or $0.01 per diluted share, on revenues of $44.1 million.
The company generated $11.7 million of second quarter EBITDA.
The company's directors have declared a dividend of $0.05 per share, or approximately $8.2 million.

Management Comment

Gary W. Casswell, Northern Offshore's president and CEO, commented, "Second quarter earnings came in flat, as expected. Nevertheless, we are disappointed that a drilling program for the Energy Searcher has not developed as we anticipated earlier this year. The rig has just been refurbished and is ready for work. Until such time as an opportunity develops, we have reduced costs to a minimum and she will remain stacked in Singapore. The Energy Endeavour recently completed its contract with ADTI. The unit is currently undergoing its intermediate regulatory survey and we are in discussions with clients for term work in the North Sea. Our remaining units continue to perform well. The company's directors and management will continue to maintain our focus on improving the company's financial performance through strict cost control and optimizing utilization. We are currently evaluating alternatives to monetize some of the existing units and use the proceeds to invest in modern assets and support a high dividend."

Second Quarter Analysis

Net income for the three months ended June 30, 2013, was $1.7 million, or $0.01 per diluted share. This compares to net income of $2.3 million, or $0.01 per diluted share for the second quarter of 2012. Revenues for the second quarter of 2013 were $44.1 million, compared to $43.6 million for the second quarter of 2012.

For the six months ended June 30, 2013, net income was $2.7 million, or $0.02 per diluted share. For the same period in the prior year, the net loss was $11.8 million, or $0.08 per diluted share. Revenues for the first six months of 2013 were $85.5 million, compared to $71.9 million for the same period in 2012.

Revenues for the three months ended June 30, 2013, were similar to the same period of 2012, primarily because increases in dayrate revenues from the jackups Energy Enhancer and Energy Endeavour and the semisubmersible Energy Driller were offset by a decrease in revenues due to the drillship Energy Searcher being idle during the current quarter.

The tariff revenues from the Northern Producer averaged approximately $115,000 per day in the second quarter of 2013. The company expects pricing levels to remain stable and production to decrease slightly in the near term.

Depreciation expense for the second quarter of 2013 was $1.4 million lower when compared with the same period in 2012, primarily due to the disposition of the jackup Energy Exerter.

Second quarter 2013 drilling and production expenses, general and administrative expenses, interest expense, and amortization of deferred financing fees were comparable to those of the same period in 2012. Other financial items was $1.2 million higher than the same period last year, primarily due to fluctuating foreign currency exchange rates.

As of August 12, 2013, the company had an outstanding credit facility balance of $22.0 million and a cash balance of $47.2 million.

The company's directors have declared a dividend of $0.05 per share, or approximately $8.2 million. Shareholders of record with the VPS on August 30, 2013 will be entitled to receive the dividend, which will be paid on or around September 16, 2013. The shares of the company will be trading ex-dividend from August 28, 2013.

Conference Call Information

Northern Offshore, Ltd. will conduct a teleconference with security analysts at 9 a.m. CT, August 15, 2013, to discuss the company's quarterly results. Individuals wishing to participate in the teleconference should call (866) 700-6293 (in the U.S.) or (617) 213-8835 (outside the U.S.) about five to ten minutes prior to the scheduled start time and refer to participant password 17132085.

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. 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 2013	2013	2012	2013	2012
Revenues	41,413	44,116	43,626	85,530	71,864
Operating expenses:
Drilling and production	(30,079)	(29,370)	(28,981)	(59,449)	(64,123)
Depreciation	(7,937)	(7,828)	(9,251)	(15,765)	(18,649)
General & administrative	(2,011)	(2,032)	(1,718)	(4,043)	(3,629)
Total operating expenses	(40,027)	(39,230)	(39,950)	(79,257)	(86,401)
Operating income/(loss)	1,386	4,886	3,676	6,273	(14,537)
Interest expense	(395)	(384)	(664)	(780)	(1,158)
Amortization of deferred financing fees	(121)	(122)	(127)	(243)	(265)
Other financial items	469	(1,054)	179	(585)	(194)
Total other expense	(47)	(1,560)	(612)	(1,608)	(1,617)
Income/(loss) before taxes	1,339	3,326	3,064	4,665	(16,154)
Income taxes - benefit/(expense)	(275)	(1,668)	(719)	(1,943)	4,356
Net income/(loss)	1,064	1,658	2,345	2,722	(11,798)

Earnings per share (US$)
Basic	0.01	0.01	0.01	0.02	(0.08)
Diluted	0.01	0.01	0.01	0.02	(0.08)

Weighted average common shares (000's)
Basic	157,060	157,267	155,891	157,163	155,791
Diluted	157,217	157,281	155,891	157,249	155,791

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

*(Thousands of US Dollars)*	June 30, 2013	December 31, 2012
*Current assets*
Cash and cash equivalents	20,299	26,504
Accounts receivable, net	31,884	29,386
Prepaid expenses	3,383	4,099
Deferred mobilization costs	1,227	2,209
Deferred insurance premium	3,697	1,869
Other current assets	1,629	1,711
Total current assets	62,119	65,778
*Noncurrent assets*
Property, plant & equipment, net	191,247	201,077
Restricted cash, net of current portion	5,436	5,436
Noncurrent deposit/escrow account	7,581	5,198
Deferred mobilization costs, net of current portion	982	1,596
Drydock costs, net of current portion	3,975	5,093
Other noncurrent assets	977	1,748
Total noncurrent assets	210,198	220,148
Total assets	272,317	285,926
*Current liabilities*
Accounts payable	13,789	16,760
Accrued expenses	11,647	9,748
Income taxes payable	1,526	933
Current debt	22,000	22,000
Deferred revenue	-	2,062
Total current liabilities	48,962	51,503
*Shareholders' equity*
Share capital	41,018	40,122
Additional paid-in capital	172,619	170,985
Accumulated other comprehensive loss	(6,691)	(6,691)
Retained earnings	16,409	30,007
Total shareholders' equity	223,355	234,423
Total liabilities and shareholders' equity	272,317	285,926

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

	Six months ended June 30,
*(Thousands of US Dollars)*	2013	2012
Cash flows from operating activities
Net income/(loss)	2,722	(11,798)
*Adjustments to reconcile net income/(loss) to net cash*
*provided by/(used in) operating activities:*
Stock-based compensation	2,865	1,944
Depreciation	15,765	18,649
Amortization of deferred financing fees	243	265
(Gain)/loss on disposal of assets	(26)	92

*Changes in operating assets and working capital*
Accounts receivable	(2,498)	10,660
Prepaid expenses	716	(1,175)
Income taxes receivable	-	(3,985)
Deferred mobilization costs	1,596	(5,124)
Other current and noncurrent assets	1,791	(6,501)
Accounts payable	(7,496)	(9,295)
Other accrued liabilities	1,503	(1,427)
Deferred revenue	(2,062)	(3,289)
Income taxes payable	593	(2,926)
Other, net	-	343
Net cash provided by/(used in) operating activities	15,712	(13,567)

Cash flows from investing activities
Capital expenditures	(3,275)	(4,483)
Changes in restricted cash	-	2,604
Changes in noncurrent deposit/escrow account	(2,383)	(2,243)
Net cash used in investing activities	(5,658)	(4,122)

Cash flows from financing activities
Proceeds from drawdown of revolver facility	-	24,564
Debt issuance costs	-	(405)
Payment for taxes on vested shares	(335)	(585)
Dividends paid	(15,924)	(9,177)
Net cash (used in)/provided by financing activities	(16,259)	14,397

Net changes in cash and cash equivalents	(6,205)	(3,292)
Cash and cash equivalents at beginning of period	26,504	10,601
Cash and cash equivalents at end of period	20,299	7,309

Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes	253	1,719
Interest	450	1,118

Significant non-cash transactions during the period for:
Accrued capital expenditures	2,634	4,290
Accrued dividends	396	416

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, 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

Balance at December 31, 2012	160,488	40,122	170,985	(6,691)	30,007	234,423

Net income	-	-	-	-	2,722	2,722
Issuance of restricted stock	3,584	896	(896)	-	-	-
Payments for taxes on vested shares	-	-	(335)	-	-	(335)
Stock-based compensation	-	-	2,865	-	-	2,865
Common shares dividends	-	-	-	-	(16,320)	(16,320)
Balance at June 30, 2013	164,072	41,018	172,619	(6,691)	16,409	223,355

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



		Three Months Ended		Six Months Ended
		June 30,		June 30,
*(Thousands of US Dollars)*	Q1 2013	2013	2012	2013	2012

Net income/(loss) (GAAP)	1,064	1,658	2,345	2,722	(11,798)

Add Back:
Net interest expense	516	506	791	1,023	1,423
Income taxes	275	1,668	719	1,943	(4,356)
Depreciation	7,937	7,828	9,251	15,765	18,649

EBITDA (Non-GAAP)	9,792	11,660	13,106	21,453	3,918


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

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

		Three Months Ended		Six Months Ended
		June 30,		June 30,
	Q1 2013	2013	2012	2013	2012

Jackups (2)

Average rig utilization	100%	92%	50%	96%	54%
Operating days	180	167	91	347	197
Average revenue per day	105,545	115,839	99,996	110,499	80,346

Drillship (1)

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

Semisubmersible (1)

Average rig utilization	100%	100%	80%	100%	40%
Operating days	90	91	73	181	73
Average revenue per day	138,013	156,168	138,877	147,141	138,877

Total Drilling Rigs (4)

Average rig utilization	75%	71%	69%	73%	56%
Operating days	270	258	250	528	405
Average revenue per day	116,368	130,064	140,937	123,060	134,947

Floating Production Facility (1)

Days in period	90	91	91	181	182
Production days	90	91	91	181	182
Average bpd	18,273	19,109	15,137	18,693	15,531
Average tariff revenue per day	109,636	114,654	90,818	112,159	93,167
Average other revenue per day	1,406	1,390	1,393	1,398	1,393
Total average revenue per day	111,042	116,044	92,211	113,557	94,560


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.

Note 3: Energy Exerter is excluded from Q1 2012 and Q2 2012 calculation for the jackup fleet.