Siem Offshore Inc

OSE:SIOFF

Earnings Call Transcript 2022-Q2

[Bernt Omdal, executive]

[Audio Gap] in revenue, and we delivered an EBITDA of USD 32.2 million. This is equivalent to 43% EBITDA margin. Our cash position was USD 72 million at the end of the quarter and our book equity ratio was 34%.

In addition to short-term work concluded, we secured one long-term contract in the quarter, that was the Siem Spearfish whom was awarded a contract with DeepOcean, securing continued utilization until end of 2023. Subsequent events, we have managed to get in place a contract for the Oil Spill Recovery Vessel, Siem Maragogi. Duration of the contract is 3 years with commencement in direct continuation of the current contracts.

First of two options is also declared for the Siem Atlas and Siem Giant, both PSVs are now firm until end of 2023. A 3 months option is declared by Equinor for Siem Opal with commencement in September this year. We also have received a contract extension for Avalon Sea 18 months extension upon completion of the current contract. This is ensuring a continued operation well into second quarter 2024. Vidar Jerstad will now give some more details regarding the results for the second quarter. Vidar?

[Vidar Jerstad, executive]

Thank you, Bernt. In the second quarter, Siem Offshore generated $75.3 million in revenue and an operating margin of $32.2 million. Both figures represent a decent uplift from previous quarter and same quarter last year. Depreciation was $16.6 million. There were no impairments or reversal of new impairments in the quarter. Operating profit ended, therefore, at $15.6 million.

Interest rate expenses were $5.3 million. However, unrealized currency gains flips net financial items into positive territory. Net financial items were positive by $4 million. Net profit before taxes and also after taxes ended at $19.6 million after adjusting for minority shareholders in one of our subsidiaries, we end up at $19.4 million.

This slide shows operating margin before G&A distributed on segments. Please note that the OSCV, Well-Intervention and Anchor Handling Vessels has had a considerable increase in margin compared to same quarter last year. The OSCV and Well-Intervention Vessels had an operating margin of $20.7 million. Anchor Handling Vessels had an operating margin of $6.2 million.

The PSVs generated $2.4 million and other vessels, $8.3 million. And let's take a quick look at the balance sheet. The book equity of the company is $352 million. This represents an equity ratio of 34%. Gross interest-bearing debt is $595 million, and net interest-bearing debt is $522 million. Siem Offshore's financial position is good and continues to improve. Siem Offshore should be an attractive counterpart and business partner going forward.

And on the next slide, we take a look at the year-to-date cash flow in the company. We started the year with a cash balance of $92 million. We have received $36 million from operations. We have paid $7 million in interest. We have invested $19 million in CapEx, we have invested in the vessels. We have repaid debt of $26 million. We have received some external funding from a minority shareholder in one of our companies of $1 million, and we have some currency effects of $4 million.

We ended with a cash balance of $73 million. Note that the first half year has been very CapEx intensive and this is not representative for the second half of the year. CapEx investments will not absorb same amount of cash as it has done the previous year -- half year. And now the contract backlog.

At the end of first quarter 2022, the backlog amount is $411 million. The OSCV and Well-Intervention Vessels dominate with 65% of the backlog. Our Anchor Handling Vessels are represented by only 1% of the backlog.

[Bernt Omdal, executive]

Thank you. On this slide, we have listed all the vessels in the operation for the OSV segment. Currently, we have 28 owned vessels in operation. And in addition, we had three vessels on management. There are no major changes to the fleet composition, Thus, we will not go into the details here.

This slide covers overall geographical footprint in terms of office locations and vessel locations. We continue our operations around the world, moving vessels to location we refined it safe to operate and where we are able to sign favorable contract for the company. We are starting with Anchor handler fleet. We have currently three Anchor handlers working out of Australia.

We have one Anchor Handler working in Taiwan. And in Canada, we have one Anchor Handler working [indiscernible] contracts there. In the North Sea, we have the Siem Opal, which is -- she's still working for Equinor on a firm contract. And in the spot market in the Northeast of market, we have Siem Ruby and Siem Pearl. In addition, we have the Siem Emerald still in lay-up.

When it comes to the construction vessels, all vessels are on contract. Siem Stingray is working in European waters on a firm contract. Siem Barracuda is still in Taiwan, looking there on a firm contract. And as mentioned, Siem Spearfish is on a firm contract taking our end of 2023. Siem Dorado is also on the contract working in the North Sea. The two Well-Intervention Vessels, Siem Helix 1 and Siem Helix 2 are both on long-term contracts working in Brazil, as mentioned here.

The PSV fleet, most of them are on long-term contracts, Siem Thiima and Siem Pilot, both working in Australia. Siem Pride still in the North Sea on a long-term contract. And the Siem Symphony, she's trading a favorable North Sea spot market. In Brazil, we have the Siem Atlas and Siem Giant, still trading on contracts. In Brazil, we also have a smaller fleet as we call it. We have two vessels in lay-up that is the Siem Pentotiba and Siem Piata. Siem Maragogi and Siem Marataizes are both on term contracts.

In addition, we have our core drilling vessel, Joides Resolution. She continues working around the globe on long-term contracts. And then we have the well stimulation vessel, Big Orange. She is currently working in the North Sea. Looking at the availability under each segment, you will see we have a good coverage for this year. Under the current improving markets and continued focus on energy security, we believe the available capacity going forward represent an attractive earning potential.

As you can see from 2023 and 2024, we have approximately half, 50% of the leads available for new import contracts. We continue to focus on ESG. A lot of good work has been done by our onshore and offshore staff. There is full focus on reducing our carbon footprint and a new ESG strategy is being called out as we speak.

Small and short market update. There is a general increase in activity in all offshore support segments worldwide. The Anchor Handler market in the North Sea spot market has experienced really higher day rates, driven by low availability due to -- mainly due to increased project work. We saw day rates close to NOK 2 million per day in the spot market.

The PSV segment was tight for most of the period and performed better than in recent years. The OSCV market was more or less sold out already from Q1 this year. And a few contracts that were concluded reflected high day rates and favorable contract terms. The expected increase in activity in Brazil, West Africa and North Sea now finally showing signs of realization.

The longer-term outlook has strengthened for the OSV market on the back of increased oil price projections where EU is targeting to reduce its dependency on Russian oil and gas. So to summarize, because there has been a strong quarter with high activity. We continue to improve our financial position, positive market outlook in all segments. We deliver first-class operations with an excellent HSEQ performance, and we have a strong backlog with quality counter parties.

So that was really the presentation. And now we will open for questions.

[Bernt Omdal, executive]

[Operator Instructions] One question here in the chat. [indiscernible] How do you see the winter shaping up for the subsea vessels with availability of inter rates higher than last year?

Well, there is still a little bit of uncertainty with regards to what day rates that are obtainable during the winter months. But what we see in general now is that our clients are asking for 365 days contract and not only contracts going in the summer season.

Any other questions, please? There is one more question here. Three Anchor Handlers are about to complete contracts in Australia. How do you see prospects in 2022 for these vessels?

We believe that it will be challenging winter months for Anchor Handlers, but still, we are positive. We see that there is a demand for vessels going forward.

Please feel free to ask any questions. Okay. I don't see any more questions in the chat here. Well, the vessels in Lay-up, I mean, that is being monitored on a weekly basis, but are not to [indiscernible] No firm work available time being for those vessels.

Okay. If no further questions, we thank you all for attending this presentation, and we wish you all a good day. Thank you.