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Northern Offshore Reports Second Quarter and Six Month 2014 Financial Results

HOUSTON, Aug. 13, 2014 /PRNewswire/ --

Highlights
(All $ in USD)

  • Northern Offshore, Ltd. (Oslo Bors: NOF.OL) today reported net income for the three months ended June 30, 2014, of $9.3 million, or $0.06 per diluted share, on revenues of $55.5 million.
  • The company generated $20.1 million of second quarter adjusted EBITDA.
  • Energy Searcher commenced contract in Nigeria
  • 2 ½ year contract with Rosneft Oil Company announced for the Energy Endeavour
  • Rate increase for the Energy Enhancer
  • 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 were consistent with the first quarter, as expected.  With the Energy Searcher commencing its contract in Nigeria during the quarter, we now have all rigs under contract, and with increased day rates for the Energy Enhancer, we expect to see improved results in the second half of the year.  Additionally, we are excited about our recently announced contract with Rosneft, and look forward to commencement of this contract in direct continuation upon the conclusion of the program with our current client."

Mr. Casswell went on to say, "During the second quarter there have been announcements regarding further development and additional production wells in the fields that tie into the Northern Producer, which could have a significant positive implication for the company.  As a result of this information, the company will further review the various divestment alternatives available to unlock value for our shareholders from the Northern Producer, including a sale or the potential spin-off which was previously announced."

Second Quarter Analysis

Net income for the three months ended June 30, 2014, was $9.3 million, or $0.06 per diluted share.  This compares to net income of $1.7 million, or $0.01 per diluted share for the second quarter of 2013.  Revenues for the second quarter of 2014 were $55.5 million, compared to $44.1 million for the second quarter of 2013.

For the six months ended June 30, 2014, net income was $19.3 million, or $0.12 per diluted share.  For the same period in the prior year, net income was $2.7 million, or $0.02 per diluted share.  Revenues for the first six months of 2014 were $105.0 million, compared to $85.5 million for the same period in 2013.

Revenues for the three months ended June 30, 2014, were higher as compared to the same period of 2013, primarily because of increases in dayrate revenues from the drillship Energy Searcher, which commenced its contract with CAMAC during the quarter, and the jackups Energy Enhancer and Energy Endeavour, which had increases in their daily operating rates. 

The tariff revenues from the Northern Producer averaged approximately $96,000 per day in the second quarter of 2014.  The company expects pricing levels to remain stable and production to decrease in line with forecast decline rates.

Drilling and production expenses for the second quarter of 2014 were $4.2 million higher when compared with the same period in 2013, primarily due to inspection costs for the Northern Producer and higher labor, repair and maintenance costs for the jackup fleet.

Second quarter 2014 depreciation, general and administrative expenses, interest expense, amortization of deferred financing fees and other financial items were comparable to those of the same period in 2013.

As of August 8, 2014, the company had an outstanding credit facility balance of $37.0 million and a cash balance of $42.0 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 29, 2014 will be entitled to receive the dividend, which will be paid on or around September 15, 2014.  The shares of the company will be trading ex-dividend from August 27, 2014.

Conference Call Information

Northern Offshore, Ltd. will conduct a teleconference with security analysts at 9 a.m. CT, August 14, 2014, to discuss the company's quarterly results.  Individuals wishing to participate in the teleconference should call (866) 318-8614 (in the U.S.) or (617) 399-5133 (outside the U.S.) about five to ten minutes prior to the scheduled start time and refer to participant password 11492557.

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 delivery expected 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:
Brian Hefty 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

Six Months Ended

 June 30,

June 30,

(Thousands of US Dollars, except per share amounts)

Q1 2014

2014

2013

2014

2013

Revenues

49,432

55,531

44,116

104,963

85,530

Operating expenses:






Drilling and production

(26,949)

(33,526)

(29,370)

(60,477)

(59,449)

Depreciation

(8,297)

(8,296)

(7,828)

(16,592)

(15,765)

General & administrative

(2,142)

(1,910)

(2,032)

(4,052)

(4,043)

Total operating expenses

(37,388)

(43,732)

(39,230)

(81,121)

(79,257)

Operating income

12,044

11,799

4,886

23,842

6,273

Interest expense

(426)

(543)

(384)

(969)

(780)

Amortization of deferred financing fees

(121)

(40)

(122)

(161)

(243)

Other financial items

(45)

(467)

(1,054)

(512)

(585)

Total other expense

(592)

(1,050)

(1,560)

(1,642)

(1,608)

Income before taxes

11,452

10,749

3,326

22,200

4,665

Income taxes expense

(1,449)

(1,467)

(1,668)

(2,916)

(1,943)

Net income

10,003

9,282

1,658

19,284

2,722







Earnings per share (US$)






     Basic

0.06

0.06

0.01

0.12

0.02

     Diluted

0.06

0.06

0.01

0.12

0.02







Weighted average common shares (000's)






     Basic

159,091

159,270

157,267

159,181

157,163

     Diluted

159,093

159,361

157,281

159,227

157,249

 

 

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)




(Thousands of US Dollars)

June 30, 
2014

December 31,
2013

Current assets 



Cash and cash equivalents

25,939

19,537

Restricted cash 

1,000

1,000

Accounts receivable, net

39,398

24,158

Prepaid expenses 

3,078

3,508

Deferred mobilization costs 

21,823

2,202

Deferred insurance premium

4,216

1,627

Other current assets

977

1,382

Total current assets

96,431

53,414

Noncurrent assets 



Property, plant & equipment, net

205,022

198,158

Restricted cash, net of current portion 

5,436

5,436

Noncurrent deposit/escrow account

11,044

9,222

Deferred mobilization costs, net of current portion

-

368

Drydock costs, net of current portion

1,742

2,859

Other noncurrent assets 

1,482

1,665

Total noncurrent assets

224,726

217,708

Total assets

321,157

271,122

Current liabilities



Accounts payable

16,673

9,275

Accrued expenses

19,228

20,196

Income taxes payable

2,550

1,282

Affiliated debt

47,000

22,000

Deferred revenue

12,941

-

Total current liabilities

98,392

52,753

Shareholders' equity



Share capital

41,219

40,933

Additional paid-in capital

176,676

175,462

Accumulated other comprehensive loss

(6,691)

(6,691)

Retained earnings

11,561

8,665

Total shareholders' equity

222,765

218,369

Total liabilities and shareholders' equity  

321,157

271,122

 

 

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES

Consolidated Statements of Cash Flows - (Unaudited)












Six months ended
June 30,

(Thousands of US Dollars)




2014

2013

Cash flows from operating activities





Net income




19,284

2,722

Adjustments to reconcile net income to net cash




  provided by operating activities:





Stock-based compensation 




2,425

2,865

Depreciation




16,592

15,765

Amortization of deferred financing fees



161

243

Gain on disposal of assets



(244)

(26)








Changes in operating assets and working capital




Accounts receivable



(14,996)

(2,498)

Prepaid expenses                          



430

716

Deferred mobilization costs




(19,253)

1,596

Other current and noncurrent assets



1,265

1,791

Accounts payable



4,317

(7,496)

Other accrued liabilities



(783)

1,503

Deferred revenue



12,941

(2,062)

Income taxes payable



1,268

593

Net cash provided by operating activities



23,407

15,712








Cash flows from investing activities





Capital expenditures - existing fleet



(4,309)

(3,275)

Capital expenditures - newbuild jackups



(18,393)

-

Changes in noncurrent deposit/escrow account



(1,822)

(2,383)

Net cash used in investing activities



(24,524)

(5,658)








Cash flows from financing activities





Proceeds from drawdown of revolver facility



25,000

-

Payment for taxes on vested shares



(925)

(335)

Dividends paid




(16,556)

(15,924)

Net cash provided by/(used in) financing activities


7,519

(16,259)








Net changes in cash and cash equivalents



6,402

(6,205)

Cash and cash equivalents at beginning of period



19,537

26,504

Cash and cash equivalents at end of period



25,939

20,299








Supplemental disclosure of cash flow information




Cash paid during the period for:






    Income taxes




488

253

    Interest





362

450








Significant non-cash transactions during the period for:




Accrued capital expenditures




771

2,634

Accrued dividends




(168)

396

 

 

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



-

-

-

-

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










Balance at December 31, 2013

163,732

40,933

175,462

(6,691)

8,665

218,369










Net income



-

-

-

-

19,284

19,284

Issuance of restricted stock


1,145

286

(286)

-

-

-

Payments for taxes on vested shares

-

-

(925)

-

-

(925)

Stock-based compensation 


-

-

2,425

-

-

2,425

Common shares dividends


-

-

-

-

(16,388)

(16,388)

Balance at June 30, 2014

164,877

41,219

176,676

(6,691)

11,561

222,765

 

 

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 2014

2014

2013

2014

2013







Net income (GAAP)

10,003

9,282

1,658

19,284

2,722







Add Back:






Net interest expense

547

583

506

1,130

1,023

Income taxes

1,449

1,467

1,668

2,916

1,943

Depreciation

8,297

8,296

7,828

16,592

15,765

Other financial items

45

467

1,054

512

585







Adjusted EBITDA (Non-GAAP)

20,341

20,095

12,714

40,434

22,038













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 

 Six Months Ended 




 June 30, 

 June 30, 


Q1 2014


2014

2013

2014

2013








Jackups (2)














Average rig utilization 

100%


100%

92%

100%

96%

Operating days 

180


182

167

362

347

Average revenue per day 

139,435


137,202

115,839

138,312

110,499








Drillship (1)














Average rig utilization 

0%


23%

0%

12%

0%

Operating days

0


21

0

21

0

Average revenue per day 

0


285,034

0

285,034

0








Semisubmersible (1)














Average rig utilization 

100%


100%

100%

100%

100%

Operating days

90


91

91

181

181

Average revenue per day

172,416


172,958

156,168

172,689

147,141








Total Drilling Rigs (4)














Average rig utilization 

75%


81%

71%

78%

73%

Operating days 

270


294

258

564

528

Average revenue per day 

150,536


158,730

130,064

154,807

123,060








Floating Production  Facility (1)














Days in period 

90


91

91

181

181

Production days

90


91

91

181

181

Average bpd

16,009


15,973

19,109

15,991

18,693

Average tariff revenue per day

96,057


95,836

114,654

95,946

112,159

Average other revenue per day 

1,579


1,580

1,390

1,579

1,398

Total average revenue per day 

97,636


97,416

116,044

97,525

113,557















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.

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