Dolphin Group ASA. Unaudited Q4 and 2014 preliminary Full-Year Presentation. Atle Jacobsen (CEO) & Erik Hokholt (CFO)

Transcription

1

2 Dolphin Group ASA Unaudited Q4 and 2014 preliminary Full-Year Presentation 18 February 2014 Atle Jacobsen (CEO) & Erik Hokholt (CFO) Dolphin reports an overall strong 2014, with total revenues of USD 440 million and pre-tax profit of USD 35 million, in what became an increasingly difficult market 2

3 Disclaimer This presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. Such forward-looking information and statements are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Dolphin Group ASA ( Dolphin Group or Dolphin ) and its subsidiaries. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for the Dolphins businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time. Although Dolphin believes that its expectations and the information in this Report were based upon reasonable assumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this Report. Dolphin nor any other company within the Dolphin group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the Report, and neither Dolphin, any other company within the Dolphin Group nor any of their directors, officers or employees will have any liability to you or any other persons resulting from your use of the information in the Report. Dolphin undertakes no obligation to publicly update or revise any forward-looking information or statements in the Report. There may have been changes in matters which affect Dolphin Group subsequent to the date of this presentation. Neither the issue nor delivery of this presentation shall under any circumstance create any implication that the information contained herein is correct as of any time subsequent to the date hereof or that the affairs of Dolphin Group has not since changed, and Dolphin Group does not intend, and does not assume any obligation, to update or correct any information included in this presentation. The contents of this presentation are not to be construed as legal, business, investment or tax advice. Each recipient should consult with its own legal, business, investment and tax adviser as to legal, business, investment and tax advice. This presentation is subject to Norwegian law, and any dispute arising in respect of this presentation is subject to the exclusive jurisdiction of the Norwegian courts. 3

4 Table of contents I. Highlights for Q4 and preliminary Full-Year 2014 results II. III. IV. Financials Operational status and market outlook Appendix 4

5 Atle Jacobsen, CEO, commented for Q4 I m very pleased to report that 2014 was an overall strong year for Dolphin. The year ended with total revenues of USD 440 million, a group EBIT margin of 12% and net profit before tax of USD 35 million, in what became an increasingly difficult market. The focused and consistent efforts within our Multi-Client business segment resulted in solid late sales in Q4. The marine contract EBIT margin was negatively impacted by vessel relocations between regions and low utilisation for our 2D vessel and low-end 3D vessel. Going forward, solid backlog will soften the effect of the weaker pricing and utilisation that the industry will experience during 2015 Our modern fleet of six high-end 3D vessels capable of cost efficient powerful solutions surveys will be complete when taking delivery of Polar Empress in April. Dolphin has a continued expectation of strong Multi- Client performance in 2015, and we will continue to grow our Processing & Imaging business in order to reinforce our holistic marine geophysical offering to our clients. Our focus for the year will be to continue to leverage our "powerful solutions" offering combined with the value of being a fully integrated marine seismic company, with the goal of capturing more of our clients business. We reiterate our 2015 financial guidance. Dolphin is a fully integrated global marine geophysical company 5

6 Highlights Preliminary Full-Year Full-Year 2014 vs. (2013) Financial Revenues of USD million (USD million) EBITDA of USD million (28.4%) (USD 76.0 million ) EBIT of USD 54.6 million (12.4%) (USD 31.4 million) Profit before tax of USD 34.7 million (USD 19.8 million) Operational Two high-capacity 3D vessels successfully introduced in the seismic market Multi-Client sales exceeded cash investments Positioned to utilise multi-sensor technology from Schlumberger 6

7 Highlights Q4 Q vs. (Q4 2013) Financial Revenues of USD million (USD 38.8 million) EBITDA of USD 33.6 million (25.7%) (USD 3.4 million) EBIT of USD 6.4 million (4.9%) (USD million ) Profit before tax of USD 0.5 million (USD million) Operational Entered into a fully financed USD 40 million equipment agreement that included a complete Q-Marine Point-Receiver seismic system Solid order backlog for the winter season, relocated vessels for large contracts in the Pacific and the Indian Ocean 7

8 Key financials - quarterly developments (USD Million) Net operating revenues EBITDA Revenue growth to record high USD million, despite a challenging market EBITDA of USD 33.6 million (26%) at high level, due to successful Multi-Client sales EBIT Profit Before Tax EBIT of USD 6.4 million (5%) influenced by idle 2D vessel and increased regional relocation cost of vessels 8

9 Solid backlog avoided spot market for winter season (USD Million) Backlog quarterly development* USD 285 million as of 1 Feb 2015 Well covered for the next quarters - ~ 95% covered for Q ~ 80% covered for Q ~ 62% covered for Q ~ 15% covered for Q4 15 ~ 30% of backlog relates to Powerful Solutions (+12 streamers) Includes planned Multi-Client projects in the UK and Norway, est. 12% of vessel capacity next 9 months Modern high-capacity 3D vessels are in demand 9

10 Table of contents I. Highlights for Q4 and preliminary Full-Year 2014 results II. III. IV. Financials Operational status and market outlook Appendix 10

11 Profit & Loss Statement (USD Million) Q Q Year 2014 Year 2013 Unaudited Unaudited Unaudited Audited Net Operating Revenues Operating Expenses Cost of sales Amortisation and write-down of Multi-Client library Selling, general and administrative cost Share-based compensation Depreciation, amortisation and write-down Total Operating Expenses Operating Profit (EBIT) Total financial income Total financial expenses Net Financial Items Profit Before Taxes Tax expense ordinary Tax expense currency effect Record revenues Contract EBIT margin was negatively impacted by: low utilisation of our 2D and low-end 3D vessel vessel relocations between regions USD 1.5 million FX loss USD 0.5 million loss on shares None cash FX effect on Norwegian tax positions of USD 4.2 million Net Income Basic earnings per share ordinary tax Diluted earnings per share ordinary tax Average share outstanding 343,344, ,489, ,681, ,349,588 Average share outstanding diluted 345,249, ,679, ,524, ,227,931 11

12 Revenue distribution Q Q Year 2014 Year 2013 In millions of USD Unaudited Unaudited Unaudited Audited Geophysical: Marine Contract Multi-Client prefunding Multi-Client late sales Processing Other Dolphin Interconnect: Contract Net Operating Revenues Comments Record quarterly revenues of USD million, and 79% growth YoY Multi-Client late sales boost in Q4 to USD 27.3 million, with 80% increase for the year Multi-Client sales triggered by new completed data sets in prospective areas Processing & Imaging growing as planned (74% YoY) 12

13 Asset-light balance sheet (USD Million) YE 2014 YE 2013 Comments on assets: Asset-light balance sheet Increase in seismic equipment for the new vessels Sanco Sword and Polar Marquis. Other current assets increased due to high receivables Comments on equity and debt: Equity increase through retained earnings. Total equity ratio of 40.3% New debt* related to equipment purchase for new vessels Improved financial covenants * to better reflect Dolphin s development * See appendix for details 13

14 Asset-light business model limited off-balance sheet commitments Annual minimum operational leasing obligations (USD million) 374 USD 185 million reduced commitment from 2012 to Includes all seismic vessels (Polar Empress from Q1 2015), and only firm Time-Charter period Significantly lower commitments than vessel ownership Asset-light model, highly flexible and valuable in a weak market No vessel impairment writeoffs (Not Applicable for Dolphin) Graph shows total minimum operational leasing obligations according to IAS 17 Source: Dolphin Group ASA, 31 December

15 Cash flow detailed (USD Million) Operating Activities Q Q Year 2014 Year 2013 Unaudited Unaudited Unaudited Audited Profit before tax Depreciation and write-down Amortisation and write-down of Multi-Client library Interest, share-based payment and other Interest expense Changes in current assets/liabilities Net Cash Flow From Operating Activities Investing Activities Purchase of property, plant and equipment Prepaid seismic equipment Net investment in Multi-Client Investment in intangible asset and operating equipment Investment through acquisition Net Cash Flow From Investing Activities Financing Activities Net proceeds from issue of new equity Purchase of treasury shares Proceeds from borrowing Interest paid Repayment of interest bearing debt Net Cash Flow From Financing Activities Net Change In Cash and Cash Equivalents Cash and cash equivalents opening balance Cash and Cash Equivalents Closing Balance Q4 comments: Working capital increased due to high Multi-Client sales, which will be collected in Q Certain clients delayed payments into 2015 Limited Multi-Client investments in Q4 Full-Year comments: Solid cash-flow from operations at USD 104 million Capex relates to Polar Duchess replacement, increased streamer pool and processing capacity expansion 15

16 Multi-Client net sales higher than cash investments Net cash investment vs. MC net sales Net Book Value Comments: Achieved target for 2014 of Net MC Sales > cash investment Q4 Net cash investment of USD 8 million, with prefunding of 63% (USD 5 million). Q4 Investment to Sales ratio of 3.5x Solid late sales, primarily from Barents Sea library Comments: Net Book Value of library reduced in Q4 Dolphin Multi-Client assets are funded by clients Reduced MCS investment guidance of USD 50 million achieved for

17 Multi-Client investments and NBV per vintage Performed detailed review of all MC library vintages at year-end 2014 Additional project writedown of USD 3.6 million made in Q Average amortisation rate of 46% used in 2014 Few converted contract projects All vintages below max NBV USD million N n NBV Max NBV Dolphin takes a prudent approach to Multi-Client investments and amortisation 17

18 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 NOKm (Market cap vs injected capital) Share price (NOK) Dolphin has a history of strong value creation Focus on delivering shareholder value through growth and earnings by executing the corporate strategy of Dolphin Dec 2010: Private Placement NOK 391m at NOK 2.5 Oct 2011: Private Placement NOK 215m at NOK 3.0 Feb 2013: Private Placement NOK 226m at NOK 7.4 9, ,5 Continue to deliver on business plan and get to a position of regular dividend payments and/or share buybacks ,0 Dolphin has raised a total equity of NOK 1,135 million (USD 150 million) since ,5 3,0 Current market capitalisation of est. USD 135 million / NOK 1 billion 500 1,5 Listed at main list Oslo Stock Exchange with 1872 supporting shareholders 0,0 Market cap Injected capital Share price May June 2010: Private Placement NOK 12m at NOK 2.0 Nov 2011: Loan conversion NOK 34m at NOK 2.5 Mar 2012: Private Placement NOK 245m at NOK 4.60 Source: FactSet retrieved 16 February

19 Table of contents I. Highlights for Q4 and preliminary Full-Year 2014 results II. III. IV. Financials Operational status and market outlook Appendix 19

20 Business lines Marine Contract Multi-Client Processing & Imaging Processing Software Expanding modern fleet Growing Multi-Client data library Full onshore & offshore processing & imaging Land & marine seismic processing software In production Library of modern 2D & 3D data In-house Processing and R&D Software for the 21 st Century 5x High-End 3D vessels 1x Mid size 3D vessel 1x Ice-class 2D vessel Under construction 1x High-End 3D vessel to be delivered in Q Areas of focus: North Sea UK and Norway Norwegian Barents Sea West Africa Brazil USD 172 million already invested Processing centres in UK, Houston and Singapore On-board Processing on all vessels Fast track data delivery AVO Friendly Broadband solution (SHarp) QC, Time & Depth Processing Interactive user interface Advanced 2D and 3D visualisation Parallel processing and job management 26,800 km2 of 3D and 48,100 km of 2D successfully completed 20

21 Rapid and successful fleet expansion one vessel to go Polar Duke (3D, str) Polar Duchess (3D, str) Sanco Swift (3D, 16 str) Polar Marquis (3D, 14 str) Delivered May 2011 Delivered April 2012 Delivered July 2013 Delivered May 2014 May 11 Q1 12 Q2 13 Q2 14 Q2 15 Fully operational fleet Vessel to be delivered Artemis Atlantic (2D) Artemis Arctic (3Dm 6/8str) Sanco Sword (3D, 16 str) Polar Empress (3D, 22 str) Delivered May 2011 Delivered May 2011 Delivered April 2014 Delivery April

22 Dolphin is asset-light with flexible Time-Charter commitments Vessel Firm initial period/options Artemis Atlantic Polar Duke Artemis Arctic TC firm 4 years from May '11 Option of 2+2 years TC firm 5 years from May '11 Option of 6 years TC firm 5 years from May '11 Option of 2+2 years April Redelivery May May Polar Duchess Polar Marquis TC firm 5 years from March '12 Option of 4+2 years TC firm 3.5 years from May '14 Option of 2+2 years March Nov Sanco Swift TC firm 5 years from June '13 Option of years June Sanco Sword TC firm 5 years from March '14 Option of years March Polar Empress TC firm 5 years from April '15 Option of 3+3 years Comments: Artemis Atlantic will be redelivered in Q Artemis Arctic planned redelivered end 2015 Variable options to extend at a pre-agreed rates Control high-end vessels in 11 years, only small index adjustment of the terms in option period Dolphin business model is flexible and highly favourable compared to steel on balance sheet April 22

23 Dolphin retains market position Market shares (# of vessels 3D fleet) Market shares (# of practical streamers 3D fleet) Other 68 12% 4% 12% 15% 65 15% 6% 11% 17% 55 16% 11% 13% 56 16% 12% 12% 55 16% 11% 12% Other % 5% 13% 16% % 7% 12% 18% % 13% 14% % 15% 13% % 13% 13% 25% 25% 18% 18% 18% 24% 24% 21% 19% 21% 16% 18% 18% 18% 19% 19% 32% 26% 25% 23% 23% 32% 26% 23% 20% 19% E 2015E 2016E E 2015E 2016E Assumptions: Artemis Arctic (Dolphin) is taken out in 2016, SCF vessel (Polarcus) currently on bareboat, and where SCF has purchase option 23

24 Dolphin fleet - among the most powerful vessels in the industry 25% 12% High End Increased market share in 14+ streamer market -> higher margin 24

25 Multi-Client increased importance in soft contract market 2014 review Sales from Brazil, Norway, UK and North-West Africa Delayed Norwegian 23 rd licencing round resulted in lower sales in the Barents Sea Gohta Discovery Alta Discovery 2015 outlook Solid late sales already secured for Q Norwegian 23 rd licencing round announced Brazil 13 th licencing round expected Norwegian 2015 APA announced Promising Zulu discovery (Lundin) covered by our UtStord survey (2015 APA acreage) Dolphin will continue to expand its dominating positions with selective investments in the UK, Barents Sea and Brazil DOLP MC Seismic Time Slice Capturing Zulu Discovery Zulu Well (Dolphin MC data) (Dolphin MC data) 25

26 Multi-Client surveys in the right areas Gulspurv Maud ZULU well Gohta Wide spatial 3D Sharp Broadband Seismic coverage Several hydrocarbon plays revealed Covering APA and 23 rd round blocks UtStord 3D, 5000km2, east of Johan Sverdrup Zulu is first exploration well in PL 674 Covering APA 2015 blocks 26

27 Processing & Imaging a critical success factor Makes Dolphin a fully integrated marine geophysical contractor Our people, our software, our hardware Processing centres in Houston, London and Singapore Marine Contract Processing & Imaging Multi- Client Brings us closer to our clients It s all about imaging and reduced exploration and production risk A continuing successful growth story 74% YoY growth in external revenues, totalling USD 11 million for 2014 Current backlog of USD 10 million for 2015 Growing within re-processing and depth imaging Long-term target to represent 8% marine contract acquisition revenue 27

28 Market outlook 2015 Macro Sharp oil price decline last 6 months Continuing sanctions against Russia E&P spend and seismic Reduction in E&P spend Slowdown in tender activity, resulting in increased pricing pressure and lower utilisation Multi-Client sales more selective, driven by licensing rounds and discoveries Continuing reduction in seismic supply due to vessel stacking will contribute to improved supply/demand balance Brent Blend price development Source: Bloomberg 28

29 Market outlook 2015 (continued) Current market snapshot: Still low visibility in all regions for H Starting to see tender activity recovering from extremely low levels mainly for H Asia/Pacific best market, almost in balance North/South America in recovery mode North Sea looks to be a 4D and Multi-Client market this season West Africa heavily over-supplied East Africa / India with healthy demand Still high tender activity from Russia Dolphin Negative market effects dampened by strong Dolphin backlog and Multi-Client late-sales Modern powerful solutions capacity with wide-tow in demand Cost efficiency initiatives to reduce cost base Leverage being a fully integrated marine geophysical company 29

30 2015 Guidance summary* Dolphin s full year revenue is expected to exceed USD 500 million for 2015, representing a growth of 15-20% from 2014 The Dolphin Multi-Client investments will primarily be made in prospective offshore areas. Dolphin expect to allocate 15-20% of 3D vessel capacity to Multi-Client investments for 2015, representing cash investments of approximately USD million The new and final 3D vessel, Polar Empress with streamer capacity, is on schedule and is expected to be taken on charter in end of April 2015 Dolphin will fully divest from the marine 2D and low-end 3D seismic market in 2015 In a challenging market environment, Dolphin will focus on market positioning of the 6 modern high-capacity 3D seismic vessels, seismic processing and sales from an attractive Multi-Client seismic data library During 2015, Dolphin will prepare for the next generation of multi-sensor streamer technology, new acquisition techniques and joint cooperation models both on exclusive and non-exclusive basis will be targeted *See appendix for details 30

31 Question & Answer Session 31

32 Table of contents I. Highlights for Q4 and preliminary Full-Year 2014 results II. III. IV. Financials Operational status and market outlook Appendix 32

33 2014 original guidance - successfully delivered Two new high-capacity vessels, Sanco Sword and Polar Marquis delivered Revenues expected to exceed USD 400 million for 2014 Multi-Client investment in prospective areas offshore Brazil, Norway and UK Multi-Client investments of USD million for 2014 Processing services to grow more than 50% in 2014 Select and prepare for the next generation of multi-sensor streamer technology Extending the broadband advantages of Dolphin's acquisition and processing technique SHarp V V V V V V V < 50 33

34 Dolphin detailed assumptions and guidance for 2015 New Vessel capacity to be delivered on time and budget Polar Empress (3D, str.) to be delivered end April 2015 Pricing, costs, utilisation Overall revenues expected to exceed USD 500 million for 2015 Expected day-rates of USD/day in 2015 for 3D high-end seismic vessels, pending region and configuration Utilisation high-end 3D vessels, 82-88% Cash Opex high-end 3D vessels of ~ USD/day All high-end 3D vessels will be permanently accompanied by 1x chase vessel and 1x support/fuel vessel Other external third party costs and revenues, 6-8% of revenues for 3D vessels. In addition individual reimbursable country specific costs will apply Estimated SG&A costs USD million per quarter in 2015 Multi-Client activities Capex MCS 3D, 15-20% of vessel capacity Total cash MCS-investments in the range of USD million Pre-funding targets of 2D > 50% and 3D>70% Sales ratio s times MCS investment costs New seismic equipment investment of total approximately USD 45 million for 2015 Capacity upgrade and maintenance of USD 8-10 million, dependent on clients configuration request Processing 2015, USD 3-5 million (Official on 8 Jan 2015 Reiterated on18 Feb 2015) 34

35 Financial Covenants* / fully compliant as per 31/12/2014 Definitions** Loan Facility Bonds Liquidity Unrestricted cash USD > 15m USD > 10m and equivalents Equity ratio Total Equity/Total Assets > 35% > 35% Gearing ratio NIBD / EBITDA < 2.0 NA Rolling 12 months Interest cover EBITDA/Net Interest Cost Rolling 12 months > 3.25 > 2.5 Working Capital Positive Working Capital > 0 NA NIBD = total interest bearing debt (including financial leasing) less free and available cash. Any new debt outside of the Loan Facility is included in NIBD by adding ¼ in each of the 4 subsequent quarters. * Adjusted and valid from as per amended Term Loan Facility **All covenants measured quarterly on a consolidated basis 35

36 IBD with earliest major maturity in November 2016 Debt Security Size Balance 31/12/14 Tenure Maturity Interest Bond Dolp01 Unsecured NOK 400,000,000 USD 70,500,000 4 years Nov-16 3M Nibor Bond Dolp02 Unsecured NOK 500,000,000 USD 83,250,000 4 years Dec-17 3M Nibor Term Loan Secured USD 93,000,000 USD 58,166,667 Various tranches Jun-18 Libor Term Loan Secured USD 25,000,000 USD 22,500, years Nov-16 Libor Financial lease Secured USD 19,000,000 USD 8,303,621 Various Apr-19 Various, less than 5% Grand total USD 242,720,288 Comments: DOLP01 and DOLP02 have USD swaps Term loans primarily to finance seismic equipment Financial leasing primarily for processing and business IT equipment See Note 7, NIBD, with Short-Term debt USD 38.5 million and Long-term debt USD million 36