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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Seabright Holdings, Inc. | NYSE:SBX | NYSE | Ordinary Share |
| Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 11.11 | 0.00 | 01:00:00 |
26 February 2016, Limassol, Cyprus
2015 SUMMARY OBSERVATIONS FOR THE FOURTH QUARTER
Key highlights
Operational review
The fourth quarter was characterized by a continued weakness in oil prices and challenging market conditions for oil exploration. Oil companies have communicated significant reductions in their exploration and production budgets for 2016 and seismic tender activity has remained low and marked by substantial competition. The 2D/source market has continued to experience significant competition from multi-streamer 3D vessels. However, the active 3D fleet is now being reduced as less competitive vessels are being retired or stacked. The reduced 3D vessel capacity is expected to have a positive impact on the 2D/source market dynamic. Nevertheless, the negative market sentiment has exacerbated industry risk factors and increased the uncertainty related to timing of a market recovery.
Vessel utilization was 100% during Q4 2015, up from 86% in the previous quarter. Technical downtime for the fleet was 9% in Q4 2015, similar to Q3 2015. The current technical downtime is at an unsatisfactory level and the management is actively implementing measures aimed at improving performance. Contract surveys represented 100% of vessel capacity compared to 86% for the third quarter of 2015.
Aquila Explorer commenced production on the Mexico project during the fourth quarter. Harrier Explorer, Hawk Explorer, Northern Explorer and Osprey Explorer were in production on the Mexico Gigante project the whole quarter. Munin Explorer, Geo Pacific and Voyager Explorer remained stacked during the period.
Multi-client surveys represented 0% of vessel utilization in the quarter compared to 5% in the same quarter previous year. Multi-client revenues were $0.5 million in the period. The multi-client portfolio was impaired by $5.0 million. This includes an impairment of $2.6 million charged to the 3D multi-client survey in West Africa resulting in zero book value at 31 December 2015. Further, increased market uncertainty and reduced revenue forecasts from selected 2D multi-client surveys triggered an additional impairment of $2.4 million during the quarter.
The company continued its cost reduction effort and standard vessel operating expenses excluding fuel have been reduced by approximately 17% on a comparable basis relative to fiscal 2014, in line with the previously communicated cost savings target. Run-rate SG&A expenses have been reduced by approximately 25% relative to fiscal 2014, ahead of the savings target.
Operating costs were also reduced due to the lay-up of two chartered 3D vessels (Geo Pacific and Voyager Explorer) and one chartered 2D vessel (Munin Explorer), reduced vessel charter rates and lower crew headcount. The company will continue its review of additional savings initiatives. In addition to cost reductions, the company is actively focusing on cost flexibility measures as well as improving operational efficiency.
The company redelivered the Geo Pacific to its owners on 30 December 2015. SeaBird has unsuccessfully tried to redeliver the Kondor Explorer to its owners since the end of the bareboat charter in February 2014. Subsequent to quarter closing, SeaBird's contractual obligations related to the Kondor Explorer were terminated.
Net non-recurring cost of sales in the quarter amounted to $2.7 million, which mainly relates to a $3.7 million charge for Munin Explorer onerous lease contract partly offset by a $1.0 million cost reversal for the Kondor Explorer. Furthermore, the company booked $1.0 million in non-recurring charges related to doubtful debts and end of service benefits in the period reported under selling, general and administrative expenses.
Capital expenditures were $0.5 million during the quarter, which is in line with the lower spending estimates communicated earlier in the year.
Lost time injury frequency (LTIF) rate for the quarter was zero. The company continued to focus on maintenance of its high standards in health, safety, security, environment and quality (HSSEQ).
Regional review
North and South America (NSA) continued to be the most active region during the fourth quarter. NSA revenues of $26.6 million represented 98% of total revenues for the quarter. Sales in this region increased as Aquila Explorer joined the rest of the active fleet on the Mexico Gigante survey.
Sales in Europe, Africa and the Middle East (EAME) was $0.02 million during the quarter while sales in Asia Pacific (APAC) amounted to $0.5 million (2% of total revenues for the quarter). No SeaBird vessels worked in either APAC nor EAME during the quarter, and revenues recorded in these regions represented multi-client sales.
Outlook
Global seismic demand continued to be weak in the fourth quarter and there are no signs of market improvement. Oil industry spending is anticipated to remain depressed through 2016 and the seismic sector is expected to remain under pressure as a result.
The Mexico Gigante project continues to represent the main part of the company's current backlog. A significant portion of the company's fleet is expected to be employed on the Mexico Gigante project into the second half of 2016 assuming the full project size of approximately 186,000 kilometers is to be completed. The company has submitted proposals for source vessel and 2D contracts for both oil companies and other seismic industry market players. While there are a number of opportunities under review, contracting has generally been delayed due to permitting, prefunding and/or budget concerns. The current market uncertainty makes it difficult to predict the level of contract coverage that is possible to obtain beyond the company's current firm backlog.
Financial review
Financial comparison
All figures below relate to continuing operations unless otherwise stated. For discontinued operations, see note 1. The company reports a net loss of $6.5 million for Q4 2015 (net loss of $71.2 million in the same period in 2014).
Revenues were $27.1 million in Q4 2015 ($28.1 million).
Cost of sales was $18.2 million in Q4 2015 ($40.1 million). The decrease is predominantly due to fewer vessels in operation and provisions taken in Q4 2014 for laid-up vessels.
SG&A was $4.5 million in Q4 2015, down from $15.6 million in Q4 2014. The decrease is principally due to cost savings, significant bad debt and restructuring charges taken in Q4 2014 as well as savings related to the closing of the Dubai office and reduced onshore headcount.
Other income (expense) was $0.2 million in Q4 2015 (negative $1.0 million).
EBITDA was $4.6 million in Q4 2015 (negative $28.5 million).
Depreciation, amortization and impairment were $10.3 million in Q4 2015 ($40.1 million). This decrease is due to the significant vessel, multi-client and goodwill impairments taken in Q4 2014 partially offset by multi-client impairments charged in Q4 2015.
Financial expenses were $1.0 million in Q4 2015 (2.3 million). The decrease is largely due to reduced debt levels.
Other financial items were positive $0.1 million in Q4 2015 (positive $0.2 million).
Income tax expense was positive $0.01 million in Q4 2015 ($0.5 million).
Capital expenditures in Q4 2015 were $0.5 million ($0.1 million).
Multi-client investment was nil in Q4 2015 ($1.6 million).
Liquidity and financing
Cash and cash equivalents at the end of the period were $6.3 million ($7.0 million), of which $0.4 million was restricted in connection with deposits and tax. Net cash from operating activities was $2.4 million in Q4 2015 (negative $2.1 million).
The company has one bond loan, one secured credit facility, one unsecured note and the Hawk Explorer finance lease.
The SBX04 secured bond loan (issued as "SeaBird Exploration Finance Limited First Lien Callable Bond Issue 2015/2018") is recognized in the books at amortized cost of $26.1 million per Q4 2015 (nominal value of $29.3 million plus accrued interest of $0.2 million less fair value adjustment of $3.4 million including amortized interest). This bond has been issued in two tranches; tranche A amounting to $5.0 million and tranche B amounting to $24.3 million. The SBX04 bond tranche A is carrying an interest rate of 12.0% and Tranche B is carrying an interest rate of 6.0%. Interest is paid quarterly in arrears with first interest instalment paid on 3 June 2015. The bond matures on 3 March 2018, with principal amortizations due in quarterly instalments of $2.0 million starting at 3 June 2017. The outstanding loan balance will be paid at the maturity date. Interest paid during Q4 2015 was $0.5 million. The bond is listed on Nordic ABM, and it is traded with ticker SBEF01 PRO and SBEF02 PRO for the respective two bond tranches.
The three year secured credit facility is recognized at amortized cost of $2.1 million (initial nominal value of $2.4 million less net amortized cost of $0.3 million). Coupon interest rate is 6.0%. Interest is to be paid quarterly in arrears and the first interest amount was paid on 3 June 2015. The facility matures at 3 March 2018 with quarterly instalments of $0.2 million starting on 3 June 2017. The outstanding loan will be repaid in full at maturity. Effective interest booked for Q4 2015 was $0.1 million. Principal repayments during Q4 2015 amounted to $0.3 million and additional amounts drawn on the credit facility during the period was $0.3 million. Interest paid during Q4 2015 was $0.03 million.
The three year unsecured loan is recognized at amortized cost of $2.0 million (initial nominal value of $2.1 million less net amortized cost of $0.1 million). Coupon interest rate is 6.0%. Stated maturity date is on 1 January 2018. Interest is paid quarterly in arrears and the first payment was due on 1 April 2015. The principal will be repayable in nine equal instalments of $0.2 million commencing on 1 January 2016. Interest paid during Q4 2015 was nil.
The lease of Hawk Explorer is recognized in the books as a finance lease at $3.5 million per Q4 2015. Instalments and interest amounting to $0.6 million were paid during Q4 2015 (nil in Q4 2014).
Net interest bearing debt was $27.5 million as at the end of Q4 2015 ($95.2 million in Q4 2014).
Accrued interest on the bond loan, credit facility and the unsecured note for Q4 2015 was $0.2 million ($2.7 million).
The company was in compliance with all covenants as of 31 December 2015.
During the quarter the company completed a consolidation of shares whereby 1,000 old shares were converted into 1 new share. The total outstanding amount of common shares in the company after the share consolidation is 3,065,434. The company has also issued 884,686 warrants, convertible into 884,686 ordinary shares. The warrants are listed on the Oslo Stock Exchange with ticker SBX J.
The company's accounts have been prepared on the basis of a going concern assumption. In the view of the board of directors, the continued challenging market conditions and the company's limited working capital creates a material risk to this assumption. In the event that project performance is significantly worse than expected, contracts and other arrangements in respect of the employment of SeaBird's vessels are cancelled, or significantly delayed, new backlog cannot be secured on satisfactory rates or at all, the company would need to sell assets or raise additional financing, which may not be available at that time. Reference is made to the Going Concern section in selected notes and disclosures for further details on the financial position of the company.
Subsequent events
Subsequent to quarter closing, the company announced that Mr. Christophe Debouvry was appointed as new Chief Executive Officer of SeaBird effective from 18 January 2016. The current Chief Executive Officer, Mr. Dag Reynolds, resigned from his position with effect from 1 January 2016. Ms. Annette Malm Justad, Chairman of the Board, assumed the position of interim Chief Executive Officer from 1 January until 18 January 2016.
Subsequent to quarter closing, SeaBird's contractual obligations related to the Kondor Explorer were terminated.
The Board of Directors and
Chief Executive Officer
SeaBird Exploration Plc
25 February 2016
The fourth quarter 2015 presentation will be transmitted live at
http://www.sbexp.com/investor-relations.aspx.
This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.
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