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Sevan Drilling ASA: Sevan announces third quarter 2014 results

Third Quarter 2014 - Highlights

  • EBITDA of USD 19.7 million (Q3 2013 - USD 16.6 million).
     
  • Operating revenue USD 69.8 million (Q3 2013 - USD 64.3 million).
     
  • Sevan Driller achieved 76.5 percent technical utilisation (Q3 2013 - 95.4 percent) and 73.9 percent economic utilisation (Q3 2013 - 90.2 percent).
     
  • Sevan Brasil achieved 83.7 percent technical utilisation (Q3 2013 - 90.6 percent) and 80.7 percent economic utilisation (Q3 2013 - 90.7 percent).
     
  • Sevan Louisiana achieved 30.6 percent technical utilisation and 31.0 percent economic utilisation.

       
         
             
Subsequent Events
             

  • Q3 downtime events concluded and all three rigs are operating.
     
  • Sevan Developer delivery deferred for up to three years.
     
  • Sevan Louisiana avoided termination and extended backlog on revised terms into 2018.
     
  • Fully financed through 2016 with debt financing supported by Seadrill.

Financial performance summary

For the three months ended 30 September 2014

Operating revenue
Operating revenue was USD 69.8 million compared to USD 64.2 million in Q3 2013. The revenue increase is explained by the revenue from Sevan Louisiana which began operations in Q2 2014.  This was partially offset by reduced revenue from Sevan Driller and Sevan Brasil compared to Q3 2013.

Operating expenses
Total operating expenses were USD 70.6 million compared to USD 66.4 million in Q3 2013. 

The increase is a consequence of additional expenses incurred in rectifying the causes for the downtime for Sevan Louisiana. This was partly offset by cost reductions as a consequence of continued improved ef­ficiencies in supply chain and inventory management and lower repair and mainten­ance costs. 

General and administrative expenses decreased by USD 2.6 million compared to Q3 2013.

No restructuring expenses were recognized in Q3 2014.

Net financial items
Net financial items amounted to USD 19.2 million compared to USD 13.5 million in Q3 2013. The increase was caused by a higher debt level and a reduction in the capitalised borrowing costs partially offset by lower financing and foreign exchange costs. 

Amortisation of deferred finance costs was USD 1.8 million (nil in Q3 2013) due to all unamortized finance fees having been written off in Q2 2013.  Interest expense was USD 2.4 million higher than in Q3 2013 due to higher total debt offset by a lower interest rate.

For the nine months ended 30 September 2014

Operating revenue
Operating revenue was USD 218.5 million compared to USD 184.0 million for year-to-date Q3 2013.

Operating expenses
Total operating expenses were USD 194.2 million compared to USD 186.9 million for year-to-date Q3 2013. 

General and administrative expenses were reduced by USD 4.7 million compared to year-to-date Q3 2013 due to workforce reductions offset by one-time costs of USD 1.5 million in connection with the Company's integration in Seadrill's management systems and USD 1.1 million of costs associated with a non-recurring consulting project for a possible newbuilding designed for use in the Arctic.

Restructuring expenses of USD 2.3 million relate to employee severance costs.

Net financial items
Net financial items amounted to USD 45.1 million compared to USD 72.4 million for year-to-date Q3 2013. 

Amortisation of deferred finance cost was USD 41.6 million less than the year-to-date Q3 2013 due to the one-time fees associated with the debt restructuring in 2013.  Interest expense was USD 2.6 million less than in 2013 due to lower interest rates and a larger amount of interest capitalised offset by a higher amount of debt. The net financial items for year-to-date Q3 2013 furthermore included a non-recurring gain of USD 12.5 million on interest rate swaps. No swaps have been held in 2014. 

Balance sheet
Cash and cash equivalents amounted to USD 32.9 million as of 30 September 2014 (USD 128.7 million as of 31 December 2013).  Sevan paid interest and principal under its bank facility and the revolving credit facility provided by Seadrill of USD 10.1 million and USD 35.0 million, respectively, in Q3 2014 and USD 41.1 million and USD 140.0 million, respectively, year-to-date. USD 30.0 million was drawn under the revolving credit facility in Q3 2014 bringing the outstanding balance to USD 75.0 million at 30 September 2014.

Financing
The revenue loss caused by the downtime on all rigs in Q3 2014 significantly weakened the Company's liquidity position and balance sheet.

Discussions were therefore initiated with Seadrill in Q3 2014 to explore ways the Company's financial situation could be strengthened and will resolve in Q4, as outlined in the Outlook.

Sevan has prepared the accounts under the basis the company is a going concern. Liquidity is sensitive to the performance of the rigs under their contracts and the ability to close potential debt financing required to fund shortfalls, which includes obtaining consents from the current bank syndicate as necessary.

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 Q3 2014 Report

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