Northern Offshore Reports Third Quarter and Nine Month 2012 Financial Results and Declares Dividend

News provided by

Nov 14, 2012, 06:00 ET

HOUSTON, Nov. 14, 2012 /PRNewswire/ --

Highlights
(All $ in USD)

Northern Offshore, Ltd. (Oslo Bors: NOF.OL) today reported net income for the three months ended September 30, 2012 of $17.8 million, or $0.12 per diluted share, on revenues of $62.2 million.
The company's directors have increased the dividend by 25%, to $0.05 per share, which represents an annualized yield in excess of 11% at yesterday's closing stock price.
The Energy Exerter sale transaction closed on October 12, 2012.
The company repaid $38.0 million of the outstanding credit facility balance on October 17, 2012.

Management Comment

Gary W. Casswell, Northern Offshore's president and CEO, commented, "We are pleased to report improved profitability to our shareholders this quarter. The recent sale of the jackup Energy Exerter marks a turning point for our company. Our strategy going forward is to remain opportunistic with monetizing existing units and use the proceeds to support our high dividend payout and invest in modern assets. We are currently working with our board of directors in evaluating all of our alternatives to successfully execute this strategy, including the possibility of a spinoff of the Northern Producer."

Third Quarter Analysis

Net income for the three months ended September 30, 2012 was $17.8 million, or $0.12 per diluted share. This compares to net income of $0.3 million, or $0.00 per diluted share for the third quarter of 2011. Revenues for the third quarter of 2012 were $62.2 million compared to $36.8 million for the third quarter of 2011.

For the nine months ended September 30, 2012, net income was $6.0 million, or $0.04 per diluted share. For the same period in the prior year, net income was $7.3 million, or $0.05 per diluted share. Revenues for the first nine months of 2012 were $134.0 million compared to $127.2 million for the same period in 2011.

Revenues for the three months ended September 30, 2012 were $25.4 million higher when compared to the same period of 2011, primarily due to higher utilization of the drillship Energy Searcher and semisubmersible Energy Driller, and an increase in dayrate revenues for the jackups Energy Endeavour and Energy Enhancer.

The tariff revenues from the Northern Producer averaged approximately $110,000 per day in the third quarter of 2012. The company expects pricing levels and production to remain stable in the near term.

Third quarter 2012 drilling and production expenses, depreciation, general and administrative expenses, interest income and expense, amortization of deferred financing fees and other financial items were comparable to those of the same period in 2011. Income taxes were higher in the third quarter of 2012 as compared to the same period in the previous year due to higher taxable income in the 2012 quarter.

As of November 12, 2012, the company had an outstanding credit facility balance of $32.0 million and a cash balance of $52.7 million.

The company's directors have declared a dividend of $0.05 per share, or approximately $8.0 million. Shareholders of record with the VPS on November 30, 2012 will be entitled to receive the dividend, which will be paid on or around December 14, 2012. The shares of the company will be trading ex-dividend from November 28, 2012.

Conference Call Information

Northern Offshore, Ltd. will conduct a teleconference with security analysts at 9 a.m. CST, November 15, 2012 to discuss the company's quarterly results. Individuals wishing to participate in the teleconference should call 877-299-4454 (in the U.S.) or 617-597-5447 (outside the U.S.) about five to ten minutes prior to the scheduled start time and refer to participant password 29186511.

The conference call will also 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, and 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 September 30,		Nine Months Ended September 30,
*(Thousands of US Dollars, except per share amounts)*	Q2 2012	2012	2011	2012	2011
Revenues	43,626	62,173	36,806	134,036	127,183
Operating expenses:
Drilling and production	(28,981)	(26,999)	(27,229)	(91,122)	(80,042)
Depreciation	(9,251)	(8,055)	(8,907)	(26,704)	(25,026)
General & administrative	(1,718)	(1,727)	(1,465)	(5,354)	(4,755)
Total operating expenses	(39,950)	(36,781)	(37,601)	(123,180)	(109,823)
Operating income/(loss)	3,676	25,392	(795)	10,856	17,360
Interest income	2	2	9	6	22
Interest expense	(666)	(749)	(367)	(1,911)	(1,454)
Amortization of deferred financing fees	(127)	(123)	(115)	(389)	(2,448)
Other financial items	179	(295)	(195)	(489)	(598)
Total other income/(expense), net	(612)	(1,165)	(668)	(2,783)	(4,478)
Income/(loss) before taxes	3,064	24,227	(1,463)	8,073	12,882
Income taxes - benefit/(expense)	(719)	(6,383)	1,720	(2,027)	(5,604)
Net income	2,345	17,844	257	6,046	7,278

Earnings per share (US$)
Basic	0.01	0.12	0.00	0.04	0.05
Diluted	0.01	0.12	0.00	0.04	0.05
Weighted average common shares (000's)
Basic	155,891	156,046	155,098	155,875	154,951
Diluted	155,891	156,046	155,216	155,875	155,373

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

*(Thousands of US Dollars)*	September 30, 2012	December 31, 2011
*Current assets*
Cash and cash equivalents	17,961	10,601
Restricted cash	9,450	7,604
Accounts receivable, net	35,169	36,649
Prepaid expenses	3,658	2,083
Deferred mobilization costs	2,559	246
Deferred insurance premium	3,160	1,822
Assets held for sale	35,932	-
Other current assets	1,725	820
Total current assets	109,614	59,825
*Noncurrent assets*
Property, plant & equipment, net	201,000	253,740
Restricted cash, net of current portion	5,436	5,436
Noncurrent deposit/escrow account	3,624	-
Deferred mobilization costs, net of current portion	1,902	-
Drydock costs, net of current portion	5,693	4,967
Other noncurrent assets	2,061	224
Total noncurrent assets	219,716	264,367
Total assets	329,330	324,192
*Current liabilities*
Accounts payable	16,072	27,435
Accrued expenses	6,331	7,289
Income taxes payable	715	2,926
Other payable	4,450	-
Current debt	70,000	45,436
Deferred revenue	3,093	4,813
Total current liabilities	100,661	87,899
*Shareholders' equity*
Share capital	40,190	39,546
Additional paid-in capital	170,293	168,583
Accumulated other comprehensive loss	(6,691)	(6,691)
Retained earnings	24,877	34,855
Total shareholders' equity	228,669	236,293
Total liabilities and shareholders' equity	329,330	324,192

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

	Nine months ended September 30,
*(Thousands of US Dollars)*	2012	2011
Cash flows from operating activities
Net income	6,046	7,278
*Adjustments to reconcile net income to net cash* *provided by operating activities:*
Stock-based compensation	3,003	1,918
Depreciation	26,704	25,026
Amortization of deferred financing fees	389	2,448
Loss on disposal of rig assets	83	917
*Changes in operating assets and working capital*
Accounts receivable	1,480	22,999
Prepaid expenses	(1,575)	(13)
Deferred mobilization costs	(4,215)	(228)
Other current and noncurrent assets	(4,790)	(907)
Accounts payable	(12,463)	(3,436)
Other payable	4,450	-
Other accrued liabilities	(1,531)	(11,984)
Deferred revenue	(1,720)	(2,296)
Income taxes payable	(2,211)	3,311
Other, net	12	241
Net cash provided by operating activities	13,662	45,274
Cash flows from investing activities
Capital expenditures	(8,891)	(22,691)
Changes in restricted cash	(1,846)	(7,592)
Changes in noncurrent deposit/escrow account	(3,624)	-
Net cash used in investing activities	(14,361)	(30,283)
Cash flows from financing activities
Proceeds from drawdown of revolver facility	24,564	52,436
Principal payments on former revolver facility	-	(50,000)
Debt issuance costs	(405)	(911)
Payment for taxes on vested shares	(649)	(208)
Dividends paid	(15,451)	(9,313)
Net cash provided by/(used in) financing activities	8,059	(7,996)
Net changes in cash and cash equivalents	7,360	6,995
Cash and cash equivalents at beginning of period	10,601	12,587
Cash and cash equivalents at end of period	17,961	19,582

Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes	1,759	1,848
Interest	1,548	734

Significant non-cash transactions during the period for:
Accrued capital expenditures	1,440	-
Accrued dividends	573	173

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Unaudited)

*(Thousands of US Dollars)*	Common shares ('000)	Share capital	Additional paid-in capital	Accumulated other comprehensive loss	Retained earnings	Total

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

Net income	-	-	-	-	7,278	7,278
Issuance of restricted stock	1,510	378	(378)	-	-	-
Payments for taxes on vested shares	-	-	(208)	-	-	(208)
Stock-based compensation	-	-	1,918	-	-	1,918
Common shares dividends	-	-	-	-	(9,486)	(9,486)
Balance at September 30, 2011	158,218	39,554	167,964	(6,691)	50,262	251,089

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

Net income	-	-	-	-	6,046	6,046
Issuance of restricted stock	2,577	644	(644)	-	-	-
Payments for taxes on vested shares	-	-	(649)	-	-	(649)
Stock-based compensation	-	-	3,003	-	-	3,003
Common shares dividends	-	-	-	-	(16,024)	(16,024)
Balance at September 30, 2012	160,761	40,190	170,293	(6,691)	24,877	228,669

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



		Three Months Ended		Nine Months Ended
		September 30,		September 30,
*(Thousands of US Dollars)*	Q2 2012	2012	2011	2012	2011

Net income (GAAP)	2,345	17,844	257	6,046	7,278

Add Back:
Net interest expense	791	870	473	2,294	3,880
Income taxes	719	6,383	(1,720)	2,027	5,604
Depreciation	9,251	8,055	8,907	26,704	25,026

EBITDA (Non-GAAP)	13,106	33,152	7,917	37,071	41,788





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

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

		Three Months Ended		Nine Months Ended
		September 30,		September 30,
	Q2 2012	2012	2011	2012	2011

Jackups (3)

Average rig utilization	33%	67%	67%	46%	47%
Operating days	91	184	184	381	383
Average revenue per day	99,996	101,756	72,196	90,686	69,977

Drillship (1)

Average rig utilization	95%	98%	0%	82%	0%
Operating days	86	90	0	225	0
Average revenue per day	186,008	186,194	0	201,977	0

Semisubmersible (1)

Average rig utilization	80%	100%	67%	60%	89%
Operating days	73	92	62	165	243
Average revenue per day	138,877	179,229	167,638	161,376	209,157

Total Drilling Rigs (5)

Average rig utilization	55%	80%	54%	56%	46%
Operating days	250	366	246	771	626
Average revenue per day	140,937	141,994	96,251	138,292	127,586

Floating Production Facility (1)

Days in period	91	92	92	274	273
Production days	91	92	92	274	273
Average bpd	15,137	18,250	20,963	16,437	24,320
Average tariff revenue per day	90,818	109,514	125,780	98,655	145,923
Average other revenue per day	1,393	1,387	5,520	1,391	3,616
Total average revenue per day	92,211	110,901	131,300	100,046	149,539


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.