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Sevan Drilling ASA: Sevan announces second quarter 2014 results

Highlights - Second Quarter 2014

  • Sevan Drilling reports record EBITDA of USD 40.8 million, mainly due to Sevan Louisiana having commenced operations and improved operating performance by Sevan Driller and Sevan Brasil.
     
  • Operating revenue reached USD 88.6 million in Q2 2014 (Q2 2013 - USD 63.9 million).
     
  • Sevan Driller achieved 94.7 percent technical utilisation (Q2 2013 - 84.7 percent) and 96.3 percent economic utilisation (Q2 2013 - 83.7 percent).
     
  • Sevan Brasil achieved 98.2 percent technical utilisation (Q2 2013 - 95.8 percent) and 103.1 percent economic utilisation (Q2 2013 - 95.8 percent).
     
  • Sevan Louisiana commenced operations in the US Gulf of Mexico on 28 May, and achieved 89.9 percent technical utilisation and 93.5 percent economic utilisation

Financial performance summary

For the three months ended 30 June 2014

Operating revenue
Sevan Drilling reports operating revenue of USD 88.6 million compared to USD 63.9 million in Q2 2013. Operating revenue consisted of earnings from Sevan Driller, Sevan Brasil and Sevan Louisiana. The revenue increase is due to improved operational performance of Sevan Driller and Sevan Brasil, and earnings from Sevan Louisiana which began operations on 28 May. 

Operating expenses
Total operating expenses was USD 64.3 million compared to USD 58.8 million in Q2 2013. 

The increase is a result of the commencement of Sevan Louisiana's operations offset by improved overall efficiencies.  Operating expense reductions were achieved through reducing rental equipment expenses, adopting continuous repair and maintenance routines, eliminating end of well services and improving supply chain efficiencies. 

General and administrative expenses decreased by USD 1.2 million compared to Q2 2013. The reduction is mainly due to workforce reductions offset by one-time costs of USD 1.1 million associated with a non-recurring FEED project with corresponding revenue of USD 1.6 million. 

The foreign exchange gain of USD 0.3 million is a consequence of a change in the exchange rate between USD and Brazilian Real.

Net financial items
Net financial items amounted to USD 14.4 million compared to USD 40.6 million in Q2 2013, reflecting lower financing and foreign exchange costs. 

Amortisation of deferred finance cost was USD 35.2 million less than in Q2 2013, mainly due to the write off of deferred financing costs as a consequence of the debt restructuring in Q2 2013. 

Interest expense was USD 2.0 million less than in Q2 2013 due to a lower interest rate on the current debt facility and additional amount of interest capitalised, offset by an increased debt.  The net financial items in Q2 2013 furthermore included an unrealised gain of USD 8.1 million from interest rate swaps. No swaps were held in Q2 2014. 

For the six months ended 30 June 2014

Operating revenue
Sevan Drilling reports operating revenue of USD 148.7 million for the six months ended 30 June 2014 compared to USD 119.8 million for the comparative period in 2013.

Operating expenses
Total operating expenses was USD 123.6 million for the six months ended 30 June 2014 compared to USD 120.5 million for the same period in 2013. 

General and administrative expenses were reduced by USD 2.1 million compared to the six months ended 30 June 2013.

Restructuring expenses of USD 2.3 million relate to employee severance costs. Workforce reductions concluded in May 2014. 

Net financial items
Net financial items amounted to USD 25.9 million for the six months ended 30 June 2014 compared to USD 59.0 million for the same period in 2013, reflecting lower financing and foreign exchange costs. 

Amortisation of deferred finance cost was USD 42.7 million less than for the six months ended 30 June 2013, mainly due to the write off of deferred financing costs as a consequence of the debt restructuring in Q2 2013. Interest expense was USD 4.8 million less than for the comparable period in 2013.

Balance sheet
Cash and cash equivalents amounted to USD 30.2 million as of 30 June 2014 (USD 128.7 million as of 31 December 2013).  The Company completed payments of interest under its bank facility with USD 10.3 million in Q2 2014. USD 30.9 million has been paid in interest during the first 6 months of 2014.

Principal repayments have been made in an amount of USD 35.0 million (USD 105.0 million year to date).  Construction and mobilisation costs were funded with available cash.  USD 30.0 million was drawn under the revolving credit facility provided by Seadrill Limited ("Seadrill") during Q2 2014, bringing the outstanding balance to USD 45.0 million at 30 June 2014.

Sevan confirmed with Cosco that an amount equal to 20% of the contract price for Sevan Developer has been paid to date through a settlement of a deferred liability. The Sevan Developer construction cost as of 30 June 2014 is USD 131.0 million, which includes the milestone payments, interest on the deferred payment, capitalized interest and variation orders.

Financing
The cash position at the end of Q2 2014, the revolving credit facility provided by Seadrill, and the additional revenue generated by Sevan Louisiana will provide adequate support for the Sevan Drilling Group operations going forward. Liquidity will, however, remain sensitive to the performance of the rigs under contract. 

The current bank facility allows a further drawing of USD 350 million against the final instalment for Sevan Developer. Such drawing is, however, subject to a satisfactory contract having been secured for Sevan Developer following delivery.

For further information, please contact:
Scott McReaken, CEO, Sevan Drilling ASA
+47 91194651 mobile

About Sevan Drilling:
Sevan Drilling ASA is an international offshore drilling contractor specializing in the ultra deepwater segment. Sevan Drilling ASA is listed on Oslo Børs.

This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

Sevan Drilling ASA Q2 2014 Report

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