Siem Offshore Inc

OSE:SIOFF

Earnings Call Transcript 2021-Q3

[Bernt Omdal, Chief Executive Officer]

Good day, everyone, and welcome to the review and presentation of our results for the third quarter of 2021. My name is Bernt Omdal, and I'm the Chief Executive Officer of the company. I'm joined here by our CFO, Vidar Jerstad. And together, we will take you through this presentation. Siem Offshore's report for the third quarter 2021 was released prior to the market opening today. We intend to cover the main highlights of the report, and we will refer to the presentation issued together with the financial report. We will cover the main happenings through the quarter and subsequently, financial performance and position, vessel employment and contract backlog, and we will provide some comments on the market outlook. Looking at the highlights for the quarter. We had $66.5 million in revenue. We delivered USD 28.8 million in operating margin, equivalent to 43%. We have a positive EBITDA from all vessel segments. And our cash position was USD 90 million at the end of the quarter. We continue to deliver safe and efficient operations in all regions even with the COVID challenges the industry is faced with. The utilization of the fleet was 91%, excluding vessels in lay-up. Moving on to the next slide. On the contract side, we managed to receive or been awarded a 6-month extension for the Siem Topaz that will take until February 2022. We have also been awarded a 300-day firm contract for one of our construction vessels. An extraordinary general meeting has been summoned to elect 2 new directors to the Board. Moving on. Vidar Jerstad will now give you some more details regarding the results for the third quarter.

[Vidar Jerstad, Chief Financial Officer]

At the end of the third quarter of this year, our fleet consists of 28 offshore vessels. The number for same date last year was 32. 5 vessels were in lay-up. That's the same number as last year. Most of our segments are performing according to or above expectations. Contract backlog at the end of the quarter was USD 339 million. Some key financial numbers for the third quarter. Revenue, $66.5 million compared to same quarter last year of $70.5 million. EBITDA, $28.8 million compared to $29.1 million. Operating profit, $13.3 million compared to $13.8 million. Net profit for the third quarter was $2.4 million, up from minus $2.7 million same quarter last year. Let's take a look at the income statement. We see and acknowledge that our operating revenue was $66.5 million, a bit down from same quarter last year. That mainly relates to our anchor-handling segment. We sold 2 vessels in the second quarter this year. So we now have 8 vessels instead of 10. Also, we have had 2 anchor-handling vessels up for 10-year class renewal in the third quarter, keeping them off the market. Also, the Canadian fleet, the fleet that is owned by our Canadian subsidiary or managed by our Canadian subsidiary has reduced their fleet by 2 vessels. So that is the main event behind the reduction in revenue for the third quarter. However, take a look at the first 9 months, we see that revenue is up from $187.7 million last year, $189.2 million this year. Taking a look at the operating margin, we see that for the first 9 months this year, we have an operating margin of $75.8 million compared to $63.9 million last year. I also want to highlight the financial expenses that in the third quarter, that has dropped significantly, and that is also due to the restructuring of the company, which we did in May this year. The third quarter this year is the first full quarter where the full restructuring is affected. We expect the lower financial expenses to last going forward. Net profit of the company is $2.4 million. If we take a look at the first 9 months, we see that the net profit is $95.8 million. Then we must remind that $92 million are a debt forgiveness element in relation to the restructuring that happened in the second quarter. Also comparing with the figures from the last 9 months in 2020, we must remember that in 2020, the first 9 months, we had impairments of $251 million. The net profit for the third quarter, if we adjust for the minority shareholders in our subsidiaries, was $3.3 million for our shareholders. Now we're going to take a look at the -- deeper look into the segments. The company had 6 platform supply vessels in third quarter. The PSVs recorded an operating revenue of $9 million and had a utilization of 84%. The operating margin before administrative expenses for these PSVs was $2.5 million. We also have 4 offshore subsea construction vessels and 2-well intervention vessels. These 6 vessels generated revenues of $32.1 million. They had a utilization of 97%, and the operating margin before G&A was $20.7 million. The company has 8 anchor-handling vessels. Those 8 vessels generated $10.4 million, had a utilization, excluding vessels in lay-up, of 88%, and operating margin before G&A was $1.4 million. The company has a fleet of 5 smaller Brazilian vessels. 2 vessels are in lay-up. 2 vessels are operated under term contracts in Brazil, and 1 vessel is operating on a Bareboat. These 5 vessels has generated $3.7 million, had a utilization of 93% when we exclude vessels in lay-up, and operating margin before administrative expenses is $2 million. The company also has one Canadian owned offshore support vessel. That vessel generated $3.3 million, has been utilization of 100% and leaves us with an operating margin before G&A of $2.3 million. The company also owns a scientific core drilling vessel, JOIDES Resolution, operating revenue is $7.7 million for the third quarter and operating margin before G&A is $4.4 million. We can also pay some attention to the segments that the OSCV and well-intervention vessels are, of course, the most important segment for us right now, which is a big contributor to our results. However, the anchor handling vessels, which are 8 out of over 28 vessels are the largest segment, vessel-wise. However, it contributes least economic-wise. Now take a look at the financial position at the end of the third quarter. After we have restructured the company in the second quarter, we now see a book equity ratio of 32%. Before the restructuring and at the beginning of the year, this ratio was only 1%. We today have a cash or cash equivalent of $90 million. The company has made principal repayments of $109 million the first 9 months in 2021. That leaves us with a gross interest-bearing debt of $636 million. And let's take a look at the cash flow year-to-date, 2021. We started the year with cash of $103 million. We have generated $75 million in cash from operations. We have paid $18 million in net interest. We have invested $18 million in the vessels. We have sold vessel for $52 million. We have repaid debt for $109 million. And we have received equity from minority shareholders in subsidiaries for $10 million. Other effects are minus $5 million. Cash at the end of third quarter is $90 million.

[Bernt Omdal, Chief Executive Officer]

All right. We will now go into the fleet and the employment situation. On Slide 12, we have listed the vessels in operation for the OSV segment. Currently, we have 28 owned vessels in operation. And in addition, we have 4 vessels on management. There is no major changes to the fleet composition, thus we will not go into the details. Moving on to the employment situation and our geographical footprint. We can start with anchor handlers. In Australia, we have 3 anchor handlers working on term contracts. That's Siem Topaz, Siem Sapphire and Siem Aquamarine. In Canada, we have one anchor handler working. That's the Avalon Sea. And in addition, we have the vessel Siem Commander, which currently is idle. The other vessels are on contract. In the North Sea spot market, we have - Siem Opal and Siem Pearl trading there. And we have the Siem Amethyst currently in Singapore, completing her class renewal. The remaining anchor handlers are in lay-up. That's the Siem Emerald and Siem Ruby. Moving on to the construction vessels. Siem Stingray is on a firm contract that expires early next year. And Siem Barracuda is on a firm contract until end of the year. Siem -- the sister vessel Siem Spearfish is on a firm contract in South America until late November. And then we have the vessel Siem Dorado, which is idle. The well intervention vessels, Siem Helix 1 and Siem Helix 2 are on firm contract through 2023 and 2024. We have 6 PSVS, and the backlog is as follows. Siem Thiima is on a firm contract in Australia until early next year. Siem Pride, she is firm until late 2025. And Siem Symphony is firm until May 2022. Then we have the Siem Pilot currently without any work. In Brazil, we have Siem Atlas and Siem Giant trading the Brazilian market. Both vessels are on term contract till third quarter 2022. For our smaller Brazilian fleet, the backlog is as follows. Siem Pendotiba and Siem Piatã, they are both idle in Brazil. And we have the Siem Maragogi and Siem Marataizes, which have contracts that expires late 2022 and the other one, early 2024. Our core drilling vessel JOIDES Resolution, continue working on her contract, and the contract expires late 2024. The well stimulation vessel Big Orange is firm till 2022. Yes. That should cover the vessels and their contract backlog. So moving on to the next page, that is the contract backlog in numbers. The company had a contract backlog of USD 339 million at the end of the quarter. And it's worth mentioning that this is a backlog with a positive margin. So say a little bit about the market. The market for the third quarter, the OSV market was more or less as we expected, with increased activity in all segments. We had no exposure here to the spot PSV segment as most of our PSVs was on term contract. I expect for -- except for the Siem Pilot, which was trading in the Canadian market. For anchor handlers, we concluded some really good spot jobs, but utilization was not as high as hold for, bringing the average rate for the quarter a bit down. For the offshore construction vessels, we managed to secure contracts for all of them, and we hope that we will be able to keep them on charts throughout the winter. The outlook. The market is still challenging, but we see a steady increase in number of tenders, and we also noticed that day rates are moving in direction -- in the right direction for all segments. There's no changes related to the market outlook compared to what we reported in August. And as mentioned before, we believe that the market will benefit from consolidation as there is too many vessels controlled by 2 many owners. So to summarize, the company continued to deliver positive EBITDA from all vessel segments. We deliver first-class operations, and we also delivered an excellent HSEQ performance. We have a firm contract backlog, and we continue to strengthen our position within the renewables segment. The restructuring agreement, which is implemented, gives the company a runway until end of 2024. We believe in an increased demand for oil in the next decade, which, in turn, will keep oil prices stable and increasing willingness to invest. Maintenance of the subsea infrastructure has been neglected for years, and we expect higher activity within this segment. COVID-19 is still there. It's still a challenge for us and really for other ship owners and as well. So yes, all in all, the future-looking away a much brighter than what we reported earlier on this year. That was the end of our presentation. Thank you for listening.