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Highlights Fourth Quarter 2015

  • Operating revenue in Q4 2015 was USD 85.9 million (Q4 2014 - USD 102.5 million).
  • EBITDA in Q4 2015 was USD 36.9 million (Q4 2014 - USD 48.7 million).
  • A non-cash asset impairment charge of USD 196.5 million was recognized on Sevan Driller and Sevan Brasil.
  • Net loss in Q4 2015 was USD 194.1 million (Q4 2014 - loss of USD 102.7 million).  Excluding the non-cash asset impairment, net income in Q4 2015 was USD 2.4 million (Q4 2014 - loss of USD 1.1 million).
  • The net loss for the twelve months ended December 31, 2015 was USD 151.8 million (YTD 2014: loss of USD 125.0 million).  Excluding the non-cash asset impairment, net income in YTD 2015 was USD 44.7 million (YTD 2014 - net loss of USD 23.4 million).
  • On 29 October 2015 Sevan Drilling and Cosco agreed to exercise the first six-month option of the delivery deferral agreement for Sevan Developer, which extends the deferral period to 15 April 2016.
  • Advanced commercial negotiations ongoing with Petrobras regarding Sevan Driller and Sevan Brasil.  Sevan Driller contract was suspended effective December 1, 2015 while negotiations continue.

Financial performance summary

For the three months ended December 31, 2015

Operating revenue

Operating revenue was USD 85.9 million compared to USD 102.5 million in Q4 2014. The revenue decrease is explained by the Sevan Driller contract suspension December 1, 2015 and Sevan Louisiana dayrate reductions in November 2014.  The Sevan Louisiana achieved a Q4 2015 technical utilization of 97.6% (91.7% in Q4 2014), Sevan Driller technical utilization was 100.0% (94.5% in Q4 2014), and Sevan Brasil technical utilization was 98.4% (95.2% in Q4 2014).

Operating expenses

Total operating expense was USD 264.0 million compared to USD 175.1 million in Q4 2014.  The increase is mainly due to the fixed asset impairment charge, as explained in the paragraph below. Vessel operating expenses were USD 46.2 million compared to USD 50.1 million in Q4 2014. The decrease is mainly attributable to cost savings initiatives across the fleet and the impact of the Brazilian Real devaluation in 2015 compared to 2014.  General and administrative costs were USD 3.8 million compared to USD 4.4 million in Q4 2014, the decrease is due to benefits from cost savings achieved.  Depreciation expenses were USD 18.5 million compared to USD 19.7 million in Q4 2014.

Impairment

Sevan recognized a non-cash asset impairment charge of USD 196.5 million, compared to USD 101.6 million in Q4 2014). The impairment was a result of lower value- in-use estimates for Sevan Driller and Sevan Brasil compared to their carrying values following the recent decline in the rate levels in the ultra deepwater market. Refer to Note 4 to the accounts for further details.

Net financial items

Net financial items amounted to USD 15.0 million in Q4 2015 compared to USD 25.1 million in Q4 2014.  Interest and commitment fees on the Revolving Credit Facility with Seadrill ("RCF") increased by USD 0.7 million due to draw downs made and a higher outstanding balance on the RCF.  Interest expenses on the secured bank loan facility decreased by USD 3.6 million due to a decrease in the outstanding balance due to instalments paid, and decrease of the floating interest rate.

Net loss for Q4 2015 was USD 194.1 million compared to a net loss of USD 102.7 million in Q4 2014.

For the twelve months ended December 31, 2015

Operating revenue

Operating revenue was USD 366.8 million for the twelve months ended December 31, 2015 compared to USD 321.0 million for the comparative period in 2014. The revenue increase is due to the Sevan Louisiana commencing operations in May 2014 and operating for the full period in 2015, in addition to improved operating performance in 2015 compared to 2014.

Operating expenses

Total operating expense was USD 450.4 million for the twelve months ended December 31, 2015 compared to USD 369.3 million for the comparative period in 2014.  The increase is mainly due to the fixed asset impairment charge, as explained in the paragraph below.  Vessel operating expenses were USD 164.3 million compared to USD 174.2 million for the comparative period.  The decrease is mainly attributable to cost savings initiatives across the fleet and impact of the Brazilian Real devaluation in 2015 compared to 2014. General and administrative costs were USD 5.5 million lower from conclusion of the integration and restructuring. Depreciation expense increased as a consequence of Sevan Louisiana in service in the full period, offset by the impact of the asset impairment recorded.

Impairment

Sevan recognized a non-cash asset impairment charge of USD 196.5 million, compared to USD 101.6 million in Q4 2014. The impairment was a result of lower value- in-use estimates for Sevan Driller and Sevan Brasil compared to their carrying values following the recent decline in the rate levels in the ultra deepwater market. Refer to Note 4 to the accounts for further details.

Net financial items

Net financial items amounted to USD 67.3 million for the twelve months ended December 31, 2015 compared to USD 70.2 million for the comparative period in 2014. The decrease is mainly explained by the lower outstanding debt principal.

The net loss was USD 151.8 million for the twelve months ended December 31, 2015 compared to a net loss of USD 125.0 million for the comparative period in 2014.

Balance sheet

Cash and cash equivalents amounted to USD 42.4 million as of December 31, 2015 compared to USD 30.2 million as of December 31, 2014.  During Q4 2015, interest and principal payments under the debt facility and RCF were USD 11.0 million and USD 75.0 million, respectively. As of December 31, 2015, USD 170.0 million was drawn on the RCF.  Proceeds from the deferral agreement for Sevan Developer will be utilized for general corporate purposes and to partially repay the outstanding balance of the RCF.

Sevan Drilling Limited ("Sevan Drilling") is preparing its accounts on the assumption that the company is a going concern. Liquidity remains sensitive to performance of the rigs under their contracts, the continued availability of the RCF, and other market conditions.

 

For further information, please contact:

 

Scott McReaken, CEO, Sevan Drilling Management AS

 +47 91194651 mobile

 

About Sevan Drilling:

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

 

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


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