2nd Quarter and 1st Half

Transcription

1 Report for Global Rig Company ASA 2nd Quarter and 1st Half 28

2 Highlights Continued strong momentum in US market Major strategic leap forward: Successful financing efforts of new rigs Further positive development expected Group consolidated Financial Result: In NOK mill Q2 1H Operating profit Post tax profit

3 2nd Quarter and 1st Half 28 Summary 1.1 Summary The group generated post tax profits of NOK 6.2 mill in Q2 and NOK 5.1 mill total for the 1st half of 28. During the period, Global Group activities have been focused on opportunities and financing of new rigs. This was a fruitful effort. As the period came to a close, several possible clients for new rigs had been identified and rig manufacturing slots secured with experienced rig manufacturers. With this basis, equity financing was established and the group can look forward to continuing growth. This marked an important strategic step forward as more rigs will generate economies of scale, improving profits per rig. Increased size and equity also offers more flexibility in terms of operation and ability to take advantage of business opportunities arising. The oil and gas price reached historic levels throughout this period, and the US drilling market strengthened considerably, with price driven increase in drilling activity. The operational focus has been to relocate Rig 2 and 3 to put them to work for other operators on short term contracts as the original clients were not ready on location to start drilling. Shorter contracts may prove advantageous as market conditions are improving. All rigs are now drilling wells at satisfactory rates. Going forward, the Global Group will more than double its current activities, adding rigs, manpower and establishing operations in California. Global Rig Company s US subsidiary NorAm Drilling Company is vital in this process. It has competent personnel administratively and operationally, and will continue building its organization to manage the increase in activities and meet the requirements of its customers. 2. The Group Global Rig Company ASA was established Feb 19, 27. May 14 the company raised NOK 115 mill in equity, and on June 28, a loan agreement for NOK 12 mill bonds with warrants was signed. The total of NOK 235 mill was for financing the purchase of 3 onshore drilling rigs, and establishment and operations of a subsidiary drilling company in the US. 3

4 Global Rig Company ASA 1% 1% Global Rig Active AS NorAm Drilling Company Rig 1 Rig 2 Rig 3 Marketing Crewing Operations - engineering Global Rig Company ASA owns NorAm Drilling Company and Global Rig Active AS 1%. The three rigs are owned by Global Rig Active AS and are leased to NorAm Drilling Company. The rig purchases of the Norwegian subsidiary and the drilling operations of the US subsidiary have been financed through intercompany loans from Global Rig Company ASA. 3. Market strategy The first half of 28 was characterized by a sharp rise in oil and gas prices, with an associated increase in US drilling activity. Approximately 85% of US drilling is gas based, and the hike in gas prices sparked great interest in drilling prospects and new segments of old wells, leading to improved market conditions for drilling companies. Since the beginning of July, the prices have retracted, especially gas prices, but the market for rigs is still moving upwards. There is strong political support in the US for stimulating domestic oil and gas production. US onshore rigs in operation are dominated by old rigs that will be replaced by new builds as these are more efficient and may drill more complex wells, lowering the cost and increasing recoverable reserves per well. Global Rig Company s strategy of buying new rigs aimed at this market lays firm, and will be carried out now that sufficient financing has been provided and potential clients identified. The company has a long term strategy of diversifying into other regions of the world, but with a positive outlook on the development of the US market, we will take further advantage of an established US organization by scaling up its activities. North America Rotary Rig count to week 34, 28. Source: Baker Huges More than 7 old rigs are expected to be phased out within the next few years. In addition, the american natural gas production is rising at a clip not seen in half a century, and according to NY Times s Clifford Krauss reversing conventional wisdom that domestic gas fields were in irreversible decline. Many people in the naturalgas industry believe a new era is at hand, and a rising chorus of Wall Street analysts and Congressional lawmakers supports that notion. 4

5 4. Financial statements The statements below have not been audited. Profit and loss Financial result (post tax) 1H 28 Q2 28 Global Rig Company ASA NOK 2.2 mill NOK 1.1 mill Global Rig Active AS NOK -.9 mill NOK.9 mill NorAm Drilling Company USD.7 mill USD.8 mill Global Group NOK 5.1 mill NOK 6.2 mill Intercompany transactions have been eliminated in the Group result. The Group had operating income of NOK 48.9 mill from drilling and associated activities in the first half of 28. Operating expenses were NOK 32.1 mill, 42% being payroll related. The Group had operating profits of NOK 16.8 mill. Q2 had lower costs and higher income than the preceding quarter. Group net financial expenses for 1H 28 of NOK 9.4 mill. are mostly related to interest on bonds, and partly NorAm Drilling Company financial expenses and losses due to the falling US dollar. Whereas the Group had losses in Q1, better operating and financial result in Q2 yielded total profits for the first half. The result before tax was NOK 7.4 mill, and NOK 5.1 mill post tax. Global Rig Company had NOK 3.8 mill in operating expenses during the first half of 28. Of this, NOK 2. mill was payroll related. The company earned NOK 14.3 mill in interest on intercompany loans. The main financial expense was NOK 6.8 mill in payments of bond interest. Profits before tax was NOK 3.1 mill and the after tax result was NOK 2.2 mill. There were no major deviations in income and cost levels in the second quarter for the company compared to Q1. Balance Sheet The Group has NOK 8.8 mill remaining in deferred taxes from losses in 27. Its tangible assets include rigs, vehicles, warehouse and office equipment, and amounted to NOK mill. Accounts receivable has accumulated to NOK 33.8 mill as some of NorAm Drilling Company s clients have yet to pay their obligations. Steps have been made to retrieve these values and stop further accumulation, including litigation and moving the rigs to other operators. Other receivables are mainly, in addition to Global Rig Company s receivable described below, NOK 1. mill in prepayment of drillpipe. The group as a whole had NOK 5.3 mill in cash holdings at the end of the first half 28. The equity of the group was NOK 88.1 mill. In addition to parent company bonds, NorAm Drilling Company has some long term liabilities related to vehicles and purchase of land and warehouse. Current liabilities consist mainly of accounts payable to vendors of rig accessories and the bond interest. Global Rig Company ASA s main assets are the intercompany loans and shares in the subsidiaries. During the first half 28, NOK 35 mill of the loans were converted to shares in Global Rig Active AS, and USD 1.5 mill were converted to shares in NorAm Drilling Company. This was done to ensure sufficient equity in the subsidiaries. Global Rig Company had other receivables mostly due to a technical accrual of expenses related to the bonds. Bank deposits amounted to NOK 3.7 mill by June 3. The company had equity of NOK 1.3 mil, and a bond loan of NOK 12. mill. Other liabilities were mainly interest on the loan that were accrued but not paid at the end of the quarter. Cash flow The Group had net change in cash of NOK mill due to purchase of land and warehouse and some additional accessories for the rigs, and for covering operating and financial expenditures. Net use of cash was less in Q2 compared to Q1 as operations generated positive cash flow. The cash position was NOK 5.3 mill on June 3. Global Rig Company ASA had a change in cash of NOK -9.8 mill mostly due to additional intercompany loans. Interest accrued has been added to the loans. Cash and cash equivalents were NOK 3.7 mill on June 3. 5

6 GLOBAL GROUP - Income Statement (Norwegian krone - NOK) INCOME STATEMENT (NOK) Note pr (3.6.7) Q2 28 (Q2 27) 27 Sales Other operating income Total operating income Payroll Expences Depreciation of tangible and intangible assets Rig mobilization, service and supplies Insurance rigs and employees Other operating expenses Total operating expenses Operating profit (+) / loss (-) Interest income from group companies - - Other interest income Other financial income Interest expense to group companies Other interest expenses Other financial expenses Net financial items Profit(+)/Loss(-) before income tax Income tax expence Net profit(+)/loss(-) Transferred to other equity

7 GLOBAL GROUP - Balance Sheet (Norwegian krone - NOK) BALANCE SHEET (NOK) Note pr ASSETS Fixed assets Intangible assets Deferred tax assets Total intangible assets Tangible assets Rigs and accessories Other tangible assets Total tangible assets Financial assets Investment in subsidiaries Loan to group companies Total financial assets Total fixed assets Current assets Receivable Accounts receivable Other receivable Total receivable Cash and cash equivalent Bank deposit/cash Total cash and cash equivalents Total current assets TOTAL ASSETS

8 GLOBAL GROUP - Balance Sheet (Norwegian krone - NOK) BALANCE SHEET (NOK) Note pr EQUITY & LIABILITIES Equity Owners equity Issued capital 4, Share premium 4, Total owners equity Accumulated profits Other equity Total accumulated profits Total equity 4, Liabilities Non-current liabilities Liabilities to financial institutions Intercompany loan Other long term liabilities Total non-current liabilities Current liabilities Accounts payable Public duties payable Other current liabilities Total current liabilities Total liabilities TOTAL EQUITY & LIABILITIES GLOBAL GROUP - Key Ratios (Norwegian krone - NOK) Key Ratios (NOK) pr Q Equity to assets ratio 38,9 38,8 Earnings per share,43,52-1,36 Diluted earnings per share,37,45-1,2 Cash Flow Statement (NOK) pr Q Cash from operation Cash from investments Cash from financing Change in cash Cash position OB Cash position CB

9 GLOBAL RIG COMPANY ASA - Income Statement (Norwegian krone - NOK) INCOME STATEMENT (NOK) Note pr (3.6.7) Q2 28 (Q2 27) 27 Sales - - Other operating income - - Total operating income - - Payroll Expences Depreciation of tangible and intangible assets - - Rig mobilization, service and supplies - - Insurance rigs and employees - - Other operating expenses Total operating expenses Operating profit (+) / loss (-) Interest income from group companies Other interest income Other financial income Interest expense to group companies - - Other interest expenses Other financial expenses Net financial items Profit(+)/Loss(-) before income tax Income tax expence Net profit(+)/loss(-) Transferred to other equity

10 GLOBAL RIG COMPANY ASA - Balance Sheet (Norwegian krone - NOK) BALANCE SHEET (NOK) Note pr ASSETS Fixed assets Intangible assets Deferred tax assets Total intangible assets Tangible assets Rigs and accessories Other tangible assets Total tangible assets Financial assets Investment in subsidiaries loan to group companies Total financial assets Total fixed assets Current assets Receivable Accounts receivable Other receivable Total receivable Cash and cash equivalent Bank deposit/cash Total cash and cash equivalents Total current assets TOTAL ASSETS

11 GLOBAL RIG COMPANY ASA - Balance Sheet (Norwegian krone - NOK) BALANCE SHEET (NOK) Note pr EQUITY & LIABILITIES Equity Owners equity Issued capital 4, Share premium 4, Total owners equity Accumulated profits Other equity Total accumulated profits Total equity 4, Liabilities Non-current liabilities Liabilities to financial institutions Intercompany loan Other long term liabilities Total non-current liabilities Current liabilities Accounts payable Public duties payable Othe rcurrent liabilities Total current liabilities Total liabilities TOTAL EQUITY & LIABILITIES GLOBAL RIG COMPANY ASA - Key Ratios (Norwegian krone - NOK) Key Ratios (NOK) pr Q Equity to assets ratio 44,6 44,1 Earnings per share,19,9,14 Diluted earnings per share,16,8,12 Cash Flow Statement (NOK) pr Q Cash from operation Cash from investments Cash from financing Change in cash Cash position OB Cash position CB

12 Notes to the Financial Statements Note 1: Accounting Principles The statements above have not been reviewed by an auditor. Global Rig Company ASA and Group financial statements are presented herein. In the consolidated statement intercompany transactions and balances have been eliminated. The same accounting principles (NGAAP) apply in this report as in the annual accounts. Note 2: Deferred Tax Assets NorAm Drilling Company Global Rig Company ASA s US subsidiary operated with a loss in 27. While deferred tax assets were recognized for the Norwegian companies, the loss of the US subsidiary was not recognized as an asset due to uncertainty concerning the company s ability to utilize the asset. The pre-tax loss was fully allocated to Other Equity. Therefore, the estimated tax expense NOK 1.8 mill on NorAm Drilling Company s profits in the second quarter is not deducted from deferred tax asset, and pre-tax profits is fully allocated to Other Equity (See note 4). Note 3: Accounts Receivable 78% of Accounts receivable per June 3 is related to NorAm Drilling Company clients that have not been ready to drill, and the accounts have risen to substantial amounts. The claims are according to contract, are fully valid, and no losses have been recognized in the statements above. Note 4: Equity and Shareholders GLOBAL GROUP EQUITY (NOK) Note PR Equity OB Own shares Share issue 24 Share premium Net profit/loss for the periode US subsidiary tax result to other equity Currency effects etc Shareholder's dividend Equity CB GLOBAL RIG COMPANY ASA EQUITY (NOK) Note PR Equity OB Own shares Share issue 24 Share premium Net profit/loss for the periode Shareholder's dividend Equity CB

13 GLOBAL RIG COMPANY ASA - 2 largest share holders (As of June 3, 27) Name Share PACTUM AS 9, 6 % ROGALAND VEKST AS 8, 3 % SEB PRIVATE BANK S.A. LUXEMBOURG 6, 8 % BANK OF NEW YORK, BRUSSELS BRANCH 4, 7 % CONSAFE INVEST AB 4, 2 % AKSJEVOLD AS 4, 2 % HAVILA AS 4, 2 % RBC DEXIA INVESTOR SERVICES BANK 3, 3 % CROWN HILL CHARTERING A/S 2, 5% BANQUE INVIK SA LUXEMBOURG 2, 4 % NILSEN, SVEN IRGENS 2, % Name Share JUUHL, MICHAEL STENSRØD 1, 9 % LANG, SVEIN 1, 7 % SUNDT AS 1, 7 % DRAGESUND INVEST AS 1, 7 % RISA & ØGLEND AS 1, 4 % JACO INVEST AS 1, 4 % KG INVESTMENT COMP AS 1, 3 % BÅTSTØ MARITIM AS 1, 3 % ESPENES EIENDOM AS 1, 2 % TOTAL 65, 6 % Note 5: Special Events and Events after the Balance Sheet date Share issue On June 3 and July 11 the General Meeting (and Extraordinary General Meeting) approved share issue of 3.6 million and 6.2 million shares at NOK 9 per share (at face value 2 per share) to an International Fund, becoming a 75 percent owner of the company and group. The share capital increase was registered on July 3 and July 21, respectively. The issue represented a total of NOK million in equity. This will be reflected in future Financial Statements. Bond payment On Aug 14 the Bondholders of Global Rig Company s Bond of NOK 12 mill exercised a put option on the loan. The loan has now been settled according to the loan agreement. 13

14 GLOBAL RIG COMPANY ASA Fortunen 7 N-513 Bergen, Norway Phone: Fax: post@globalrig.no Prodution: dragefjellet.no Photo: AP Torres, MD Cowan Global Rig Comany ASA 28