2015 SUMMARY
OBSERVATIONS FOR THE THIRD QUARTER
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Revenues for the quarter were $23.2 million, an
increase of 2% compared to Q3 2014 and up 19% relative to Q2
2015.
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Contract revenues for the period were $23.1
million, up 41% from Q3 2014 and an increase of 23% from Q2
2015.
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Multi-client revenues were $0.1 million, down
99% from $6.3 million reported in Q3 2014 and a decrease of 88%
from $0.7 million reported in Q2 2015.
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EBITDA was $4.6 million compared to negative
$2.1 million for Q3 2014 and negative $6.5 million for Q2
2015.
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EBIT for the quarter was $0.0 million compared
to negative $11.1 million for Q3 2014 and negative $15.7 million
for Q2 2015.
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Vessel utilization for the period was 86%.
Contract surveys during the third quarter represented 86% of vessel
capacity compared to 68% during the second quarter 2015. None of
the company's vessels were utilized for multi-client surveys during
the period, similar to Q2 2015.
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Four vessels were active in operation on the
Mexico Gigante survey. Aquila Explorer is scheduled to join during
the fourth quarter.
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Zero lost time injury frequency (LTIF) in the
quarter.
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9% technical downtime in the quarter compared to
3% for Q3 2014.
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Non-recurring gain on cost of sales of
$0.9 million related to changes in estimates of lay-up provisions
for onerous long-term lease contracts. During the quarter $0.5
million bad debt costs were charged to SG&A.
Key highlights
Operational review
The third quarter was characterized by sustained
low oil prices and weak market sentiment for oil exploration.
Seismic tender activity has continued to be sluggish with intense
price competition. Furthermore, the 2D/source market has continued
to experience significant competition from multi-streamer 3D
vessels. The negative market sentiment has exacerbated industry
risk factors and increased the uncertainty related to timing of a
market recovery.
The company continued its cost reduction effort.
The office in St. Petersburg was closed at the end of the quarter.
The quarterly run-rate SG&A is in line with the cost savings
targets communicated earlier this year. Operating expenses are
reduced as a result of the stacking of vessels and the continuing
effort to execute on the savings initiatives. Capital expenditures
are in line with the lower spending estimates highlighted earlier.
In addition to cost reductions, the company is actively focusing on
cost flexibility measures as well as improving operational
efficiency.
Vessel utilization was 86% during Q3 2015, up from
68% in the previous quarter. Technical downtime for the fleet was
9%, up from 2% for Q2 2015. The increase is due to technical
start-up challenges for the vessels operating in Mexico. Q3 yard
stay represented 7% of vessel capacity. Contract surveys
represented 86% of vessel capacity compared to 68% for the second
quarter of 2015.
Aquila Explorer completed a source project in
South East Asia early in the quarter. Thereafter, the vessel
undertook scheduled maintenance before starting transit to Mexico,
where it is expected to commence production during the fourth
quarter. Harrier Explorer mobilized for the Mexico Gigante survey
and started production late in the quarter. Both Hawk Explorer and
Osprey Explorer were in production on the Mexico Gigante project
the whole quarter. Northern Explorer commenced acquisition on the
Mexico Gigante project early in the quarter. Munin Explorer
completed its long-term source contract in South America
mid-quarter after which the vessel was laid up. Geo Pacific and
Voyager remained cold-stacked during the quarter.
Multi-client surveys represented 0% of vessel
utilization in the quarter compared to 30% in the same quarter
previous year. Multi-client revenues were $0.1 million in the
period. Due to weak market sentiment and poor visibility for future
multi-client sales, the company decided to increase the minimum
amortization rate, resulting in a $0.5 million higher charge in Q3.
All multi-client assets are now classified as category two. Please
see selected notes and disclosures for further details.
During the quarter, the company's costs were
reduced. The lay-up of 3D vessels and Munin Explorer, reduced
operating expenses, lower project activity, reduced vessel charter
rates and lower crew headcount were the primary areas that
contributed to bring down costs of sales relative to 2014 and Q2
2015.
Non-recurring gain on cost of sales in the quarter
amounted to $0.9 million, which relates to changes in provision
estimates for onerous long-term lease contracts.
Lost time injury frequency (LTIF) rate for the
quarter was zero. The company continued its efforts to maintain its
high standards in the health, safety, security, environment and
quality (HSSEQ) area.
Regional review
North and South America (NSA) was the most active
region during the third quarter. NSA revenues of $22.8 million
represented 98% of total revenues for the quarter. Sales in this
region increased significantly as Harrier Explorer and Northern
Explorer joined Hawk Explorer and Osprey Explorer on the Mexico
Gigante survey.
Sales in APAC of $0.2 million accounted for 1% of
total revenues for the quarter. The revenues relate to a source
contract completed by Aquila Explorer early in the quarter.
Sales in Europe, Africa and the Middle East (EAME)
accounted for $0.2 million or 1% of total revenues. No SeaBird
vessels were working in the region during the period, and the
revenues recorded consist of multi-client late sales and management
fees.
Outlook
Global seismic demand continued to show weakness
in the third quarter and there are no signs of market improvement.
Oil industry spending is anticipated to remain sluggish through
2016 and the seismic sector is expected to remain under pressure as
a result.
A high proportion of the company's fleet is
expected to be employed on the Mexico Gigante project until
mid-2016 assuming the full project size of approximately 186,000
kilometer is to be completed. The current market uncertainty makes
it difficult to predict the level of contract coverage that is
possible to obtain beyond the company's current 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 $1.7 million for Q3 2015 (net loss of
$20.2 million in the same period in 2014).
Revenues were $23.2 million in Q3 2015 ($22.7
million).
Cost of sales was $14.5 million in Q3 2015 ($19.8
million). The decrease is predominantly due to fewer vessels in
operation as the Geo Pacific, Munin Explorer and Voyager Explorer
are laid up, lower maritime and seismic operating expenses, reduced
charter hire and lower fuel cost.
SG&A was $4.3 million in Q3 2015, down from
$5.1 million in Q3 2014. The decrease is principally due to savings
related to the closing of the Dubai office and reduced onshore
headcount partially offset by bad debt costs.
Other income (expense) was $0.1 million in Q3 2015
($0.1 million).
EBITDA was $4.6 million in Q3 2015 (negative $2.1
million).
Depreciation, amortization and impairment were
$4.6 million in Q3 2015 ($9.0 million). This decrease is largely
due to lower vessel book values, and no multi-client impairments in
the period.
Financial expenses were $1.6 million in Q3 2015
($8.1 million). The decrease is due to reduced debt levels
resulting from the recent restructuring and an accelerated finance
charge recognized in Q3 2014 as a result of the change in maturity
of the SBX03 bond loan.
Other financial items was nil in Q3 2015 ($0.3
million).
Income tax expense was $0.2 million in Q3 2015
($0.7 million).
Capital expenditures in Q3 2015 were $1.7 million
($2.0 million).
Multi-client investment was $0.1 million in Q3
2015 ($13.5 million).
Liquidity and financing
Cash and cash equivalents at the end of the period
were $5.4 million ($10.0 million), of which $0.3 million was
restricted in connection with deposits and tax. Net cash from
operating activities was $1.0 million in Q3 2015 ($14.3
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 $25.8
million per Q3 2015 (nominal value of $29.3 plus accrued interest
of $0.2 million less fair value adjustment of $3.7 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 Q3 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 $2.0 million (initial nominal value
of $2.4 million less net amortized cost of $0.4 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 Q3 2015 was $0.1
million. Principal repayments during Q3 2015 amounted to $0.2
million and additional amounts drawn on the credit facility during
the period was $0.2 million. Interest paid during Q3 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 Q3 2015 was $0.03 million.
The lease of Hawk Explorer is recognized in the
books as a finance lease at $3.9 million per Q3 2015. Instalments
and interest amounting to $0.6 million were paid during Q3 2015
($1.3 million in Q3 2014).
Net interest bearing debt was $28.3 million as at
the end of Q3 2015 ($92.9 million in Q3 2014).
Accrued interest on the bond loan, credit facility
and the unsecured note for Q3 2015 was $0.2 million ($1.4
million).
The company was in compliance with all covenants
as of 30 September 2015.
The total outstanding amount of common shares in
the company is 3,065,427,746. The company has also issued
884,687,500 warrants, convertible into 884,687,500 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 current 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. Reference is made to the Going Concern section in
selected notes and disclosures for further details on the current
financial position of the company.
The Board of Directors and
Chief Executive Officer
SeaBird Exploration Plc
4 November 2015
The third 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.