Dolphin improves operating margins and creates strong visibility through USD 140 million backlog

Transcription

1 Dolphin improves operating margins and creates strong visibility through USD 140 million backlog Corporate Presentation 13 th November 2013 Unaudited 3rd quarter and 9 months 2013 Financial Result By Atle Jacobsen (CEO) & Erik Hokholt (CFO)

2 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. 2

3 Table of contents I. Highlights and financials for Q II. Company overview III. Market update 3

4 Atle Jacobsen, Dolphin Group CEO, commented for Q3 Dolphin delivered solid operating margins for third quarter with EBIT of 25%, driven by improved contract prices and high vessel efficiency. As for the entire seismic industry, Dolphin also experienced low Multi-Client late sales and a competitive market for new projects in the quarter. The seismic market has recently been challenging and will impact our Q and Q The combination of strong performance on recent projects and modern assets has created confidence in Dolphin s abilities. This has improved contract visibility and provided Dolphin with a healthy backlog in the amount of USD 140 million. Dolphin will continue to deliver on our long term business plan and create shareholder values through vessel capacity increase, strengthened internal seismic processing and G&G competence and through successful expansion of our Multi-Client business. To improve Multi-Client competitiveness, Dolphin will secure new dedicated financing and enter into strategic partnership agreements. 4

5 HIGHLIGHTS QUARTERLY HIGHLIGHTS Q Revenues of USD 70 million and YTD of USD 208 million EBITDA of USD 26.4 million (38%) and YTD of 72.5 million (35%) EBIT of USD 17.4 million (25%) and YTD of 45.0 million (22%) Net Income before tax of USD 15.4 million and YTD of 36.5 million EPS of USD 0.04 and accumulated EPS of USD 0.08 Strong contract seismic margins, but low pre-funding on strategic important 3D Multi-Client surveys Successfully completed 2013 season of 4D production seismic contracts The new 3D vessel (16str.), Sanco Swift, came swiftly into production Q3 SUBSEQUENT EVENTS: Order backlog at historical high level of USD 140 million Secured additional bank financing for planned seismic equipment purchase in

6 Dolphin financials - quarterly developments (USD million) Q3 - Revenues of USD 70.1 million, compared to USD 61.2 million in Q Q3 - EBITDA of USD 26.4 million (38%), compared to USD 28.9 million in Q Q3 - EBIT of USD 17.4 million (25%), compared to USD 16.8 million in Q Q3 - Net Income before tax of USD 11.6 million, compared to USD 13.6 million in Q Trend development: Polar Explorer (2D) re-delivered in January 2013, less capacity Q1/Q2 2013, Sanco Swift commenced operations in August 2013 More vessel capacity deployed on Multi-Client segment in Q3. Revenue mix expected to change, Multi-Client revenues to increase 6

7 Continued high contract vs Multi-Client revenues 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 4% 1% 1% 2% 13% 14% 32% 26% 83% 85% Quarterly revenue split Revenue (USDm) % 73% Continued high contract seismic activity 10% 11% 11% 9% 90% 89% 89% 91% Q4 (11) Q1 (12) Q2 (12) Q3 (12) Q4 (12) Q1 (13) Q2 (13) Q3 (13) *Includes MCS pre-funding and MCS late sale Other Multi-Client revenues* Contract revenues Higher Multi-Client investments will change future revenue split Multi-Client projects typically provide higher operating margins, but longer term cash generation Dolphin has a limited Multi-Client data library generating late sales, though growing this business is an important part of our strategy going forward 7

8 Distribution of revenues and Multi-Client library performance In millions of USD Q Q YTD 2013 YTD 2012 Year 2012 Geophysical Contract MCS pre-funding MCS late sales Processing Other Other (Interconnect) Contract Net operating revenues MCS cash investment Pre-funding % * 37.4% 74.5% 55.4% 69.9% 71.7% * Pre-funding reveues as percentage of MCS cash investment Strong contract sales for Q3, due to efficient operations Low MCS pre-funding level on Utstord Phase 2 Q3 late sales none existent and disappointing. Though, existing library positioning is good In thousands of USD Q Q Q Q Q Dolphin processing - continues to grow Beginning net book value 46,066 40,711 38,864 36,801 21,171 Multi-Client investment 18,201 8,879 4,783 5,695 23,472 Amortisation -2,776-3,523-2,936-3,632-7,843 Amortisation % 46% 46% 46% 46% 50% Ending net book value 61,491 46,066 40,711 38,864 36,801 MCS book library at USD 61 million 8

9 Significant growth in Revenues and profit YoY Key Financials Figures Q3 and first nine months 2013 results Q Q YTD 2013 Year 2012 Amount in USD million Net operating revenues EBITDA EBIT - Operational result Net Financial result Profit (loss) before tax Tax expense Net income Basic earings per share ($ per share) Diluted earnings per share ($ per share) Net cashflow from operating activities Cash and cash equivalents ( period end) Significant growth YoY Profitable from day one Building a company On track delivering on a long-term business plan Balance sheet well structured and with solid equity position to meet planned expansion Total Assets (period end) Total Equity (period end) Equity ratio 58.6% 60.6% 58.6% 50.3% 9

10 Solid cash-flow from operations in Q3 Dolphin Cash Flow as per Q Q Q YTD 2013 In thousands of USD Unaudited Unaudited Unaudited Operating Activities Profit before tax 15,363 16,444 36,490 Depreciation and write-down 6,216 4,281 18,356 Amortisation of Multi-Client library 2,776 7,843 9,235 Share-based payment expense ,764 Interest expense 2, ,495 Changes in current assets/liabilities 3,419 4,801-6,139 Net Cash Flow From Operating Activities 30,937 34,580 67,201 Investing Activities Purchase of property, plant and equipment -10,823-7,107-17,710 Prepaid seismic equipment -24,125-2,617-81,064 Net investment in Multi-Client -16,096-21,060-28,532 Investment in intangible asset and operating equipment ,202 Investment through acquisition ,349 Net Cash Flow From Investing Activities -52,368-31, ,857 Solid cash-flow from operations USD 31 million Equipment investment of USD 35 million for the quarter Undrawn credit facility of USD 50 million Balance sheet well structured and with solid equity position to meet planned expansion Financing Activities Net proceeds from issue of new equity ,149 Proceeds from borrowing ,500 Interest paid -2, ,892 Repayment of interest bearing debt -6,044-5,329-36,339 Proceeds from lending - -5,926 - Net Cash Flow From Financing Activities -7,971-11,955 25,418 Net Change In Cash and Cash Equivalents -29,401-8,888-37,238 Cash and cash equivalents opening balance 69,699 22,955 77,536 Cash and Cash Equivalents Closing Balance 40,298 14,067 40,298 10

11 Dolphin Multi-Client seismic data assets - BV of USD 61 million Q Q Q Q Library book value 13 Q Q Q Cash investments vs net Multi-Client sales Q Q Q Q YTD Net cash investments Net MC sales Attractive Multi-Client library, well positioned and built on limited cashinvestments Healthy balance between historical total USD 88 million cash invested and net sales of USD 69 million Sales potential of Multi-Client library > 2x Dolphin guides 2013 Multi-Client investments of USD million 11

12 New DnB/SR-Bank loan facility of USD 93 million Key facts: USD 50 million undrawn LIBOR bpts Minor adjustments to covenants*: > 40% equity ratio < 1.75 TIBD/EBITDA > USD 15 million liquidity from May 2014 Dolphin benefits: 1. Facility to be used for Polar Marquis and Sanco Sword 2. Structure allows for vendor and additional bond financing 3. Undrawn facility can be utilised for Super Duke in 2015 Fully funded for 2014 fleet expansion, working on improving financial flexibility * See details of all covenants in appendix 12

13 NOKm (Market cap vs injected capital) Share price (NOK) Dolphin has a history of strong value creation Strong value creation, executing on Dolphin Geophysical strategy 3,000 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 Shareholders value delivered through strong share performance 2,500 2, supporting shareholders at main list Oslo Stock Exchange Dolphin has raised new equity of NOK 1,127 million since December 2010 Current market capitalisation of Dolphin of NOK 1.78 bn (USD 289 million * ) 1,500 1, May June 2010: Private Placement NOK 12m at NOK 2.0 Market cap Injected capital Share price Nov 2011: Loan conversion NOK 34m at NOK 2.5 Mar 2012: Private Placement NOK 245m at NOK Source: Factset *Based on USD/NOK of

14 Table of contents I. Highlights and Financials for Q II. Company overview III. Market update 14

15 Dolphin Group at a glance A full service marine geophysical company providing high quality: Contract seismic Multi-Client Processing Long-term charter of a fleet of eight seismic vessels: Long-term charter of seven modern 3D high-end vessels, of which three are to be delivered in 2014 and 2015 One ice-class 2D vessel Industry recognised management team with extensive experience and successful track record for listed companies Listed on Oslo Stock Exchange under the ticker DOLP Presence in Norway, UK, Singapore, Brazil and Houston Established as a marine geophysical company in

16 Focus on operational efficiency and shareholder value Business Strategy Pure play seismic market exposure Low cost and highend vessel base Build a strong Multi- Client database Focus on operational efficiency and attractive returns Strong strategic position Dolphin 9% Market share 2014* Position Dolphin as a pure play exposure to the seismic market through contract seismic, Multi-Client and seismic data processing Focus on high-end vessels that meet client expectations Long-term TC agreements with vessel owning companies Strong relative cash cost efficiency per streamer per day High utilisation and OPEX savings due to proven vessel design Create attractive short and long term returns through building a strong Multi-Client database with industry support Initial focus on the North Sea, West Africa and Brazil Capitalise on fleet specifications and operational experience Healthy balance between contract seismic and Multi-Client Generate strong, stable and healthy cash flow Fleet expansion represents an opportunity for profitable growth Flexible and attractive structure to reach critical mass based on sound investment decisions *Source: SEB Enskilda CF, companies 16

17 Dolphin Group Business segments MARINE MULTI-CLIENT PROCESSING EXPANDING MODERN FLEET GROWING MULTI-CLIENT DATA LIBRARY FULL ONSHORE AND OFFSHORE PROCESSING SERVICE In production 3x High-End 3D vessels 1x Mid size 3D vessel 1x Ice-class 2D vessels Under construction 3x High-End 3D vessels with delivery in, Q1/Q and Q Library of modern 2D and 3D data Areas of focus: North Sea West Africa Brazil USD 93 million already invested. Totally 16,000 km2 of 3D and 49,000 km of 2D successfully completed In house software development and R&D Processing centre in UK On-board processing on all vessels Developed advanced seismic broadband solution (SHarp) *PCIe= Peripheral Component Interconnect express 17

18 Our high-end 3D capacity more than doubles within 12 months ILLUSTRATIVE Revenues USD million Revenues are growing with an expanding fleet Sanco Sword (Mar 14) «SuperDuke» (Mar 15) «Polar Marquis» (April 14) (H1+Q3) Remaining CAPEX (USD m) Debt financing ratio 50% 0-50% 18

19 Four high-end 3D seismic vessels to be delivered in complementing one of the industry s most modern fleets Artemis Atlantic (2D) Polar Duchess (3D, str) Sanco Swift (3D, 16 str) Sanco Sword (3D, 16 str) Delivered May 2011 Delivered April 2012 Delivered July 2013 Delivery Mar 2014 Jan 11 May 11 Delivery of current fleet Vessels to be delivered Q1 12 Q3 13 Q1 14 Q1 15 Polar Duke (3D, str) Artemis Arctic (3D -6/8str) Polar Marquis (3D, 14 str) Super Duke (3D, 22 str) Delivered May 2011 Delivered May 2011 Delivery April 2014 Delivery Mar

20 One of the most modern fleets in the seismic industry Age distribution of marine seismic 3D fleet (including newbuild orders) Median fleet age (including newbuild orders) : 2007 Average fleet age (including newbuild orders) : Artemis Arctic Polar Marquis Polar Duke Polar Duchess Sanco Swift Sanco Sword Super Duke Source: SEB Enskilda CF 20

21 Q3 Vessel schedule (for illustration purposes) Vessel JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUNE JULY Polar Duke North Sea Med India North Sea Polar Duchess Med Artemis Arctic North Sea Med India North Sea Artemis Atlantic North Sea Sanco Swift North Sea Brazil Sanco Sword North Sea Polar Marquis Schedule comments: Multi-Client Transit Idle Tendering Contract Total backlog including Multi-Client prefunding of USD 140 million as per 13 th November, 90% in Q4, 65% in Q1, 45% in Q2 and 10% in Q Continue to win work with our broadband technology SHarp Successful start-up and first job for for Sanco Swift Very difficult Q4 with late awards and permitting delays, causing lower utilisation Approximately 1 week maintenance stop for all vessels leaving the North Sea 21

22 Current Geographic presence all positioned in the North Sea WoS/Faroes 2,050 km 2D MC Artemis Arctic (contract) Artemis Atlantic Bergen Oslo Barents Sea 3,000 km 2 3D MC North Sea 5,000 km 2 3D MC Houston Central Graben 2,100 km 2 3D MC London Polar Duchess (Contract) Polar Duke North (contract) West Africa Atlantic 30,00 km 2D MC Deepwater Levantine Basin 2,230 km 2 3D MC Sanco Swift (Multi-Client) Sud Profond 3,600 km 2 3D MC Singapore Santos Campos Basins 13,650 km 2D MC Offices Target areas Dolphin 3D Multi-Client Dolphin 2D Multi-Client Vessels 22

23 Multi-Client status Q3 projects UtStord High Resolution 3D UtStord 3D survey extension from 3,200 km2 to 5,060 km2 but with a lower pre-funding rate This new MC survey is adjacent to the Johan Sverdrup Field Award of APA blocks covered by this new Dolphin MC 3D are expected to be announced in January 2014 UtStord Area UK Quad 29 SHarp BroadBand 3D 2,000 km2 Data which cover both awarded 27th and open 28th Licensing Round blocks Reasonable pre-funding with late sale forecast in Q and Q WoS/Faroes SHarp BroadBand 2D Regional well tie survey acquired using SHarp for subbasal Client feedback is that geological events Dolphin s SHarp data is imaging are not as clearly imaged or apparent on some existing 2D or 3D datasets Q29/30Area 23

24 Multi-Client in the Barentsea started in October Maud Basin SHarp BroadBand 3D Covers about 3,300 km2 of mostly open acreage potentially in the Norwegian 23rd Licensing Round About 1/3 already acquired and in processing This high-resolution SHarp BroadBand 3D survey is designed to tie the recent Wisting (shallow Jurassic reservoir) discovery with estimated reserves of between 60mbbls to 160mbls of light oil Discovery has stimulated industry s interest in the surrounding open acreage Similar features would be fast to drill and potentially quick to develop 24 24

25 Dolphin to begin Olho de Boi 3D survey offshore Brazil in November Dolphin in partnership with TGS is poised begin acquisition of a 5,000 km2 3D SHarp Broadband survey utilising the Sanco Swift. Processing is to be completed by TGS This survey is northeast of the Pão de Açúcar discovery in an area of similar structural and stratigraphic characteristics and will be of high interest to the industry for future bid rounds This exciting initial survey represents the first step in Dolphin s planned Multi-Client Brazil campaign 25

26 Processing status Financials Revenue shift towards Multi-Client as expected Q4 will see an uplift in external revenue Building backlog for 2014 Acquisition of assets from Quantum Geoservices PTE Permanent presence in Asia Pacific region Second processing centre Positive contribution from Q4 Sub-salt PSDM Open Geophysical Increase in proposals submitted Successful demonstration of PSDM at SEG ready for launch in Q1 Services Successful launch of Swift on-board processing Awarded first proprietary re-processing 3D Development of depth migration on track SHarp 3D 26

27 Dolphin broadband technology - SHarp Accepted by the industry Proven case histories Recognition of AVO and processing advantages over other broadband techniques Close to 50% of all Dolphin surveys acquired by Dolphin are now SHarp Calm sea Proprietary 4D test completed SHarp deep tow combined with powerful vessels allowed extended weather window as well as increase in bandwidth Rough sea Development and testing of a new broadband source 27

28 Table of contents I. Highlights and financials for Q II. Company overview III. Market update IV. Market update V. Market update 28

29 Dolphin exhibits full commitment to Brazil Regulatory permits from the ANP for the entire Brasilian coastline have been secured Pending proposals for multiple surveys representing over 49,000 km2 of SHarp Broadband 3D seismic with over 10 different operating and partner companies are due to be decided by the end of the 2013 Dolphin has been recognised in the market as a serious contractor with the commitment and resources to full fill existing and future 3D seismic needs Dolphin is working with multiple companies on plans for seismic surveys beyond existing commitments in anticipation of future bid rounds to begin in

30 Global market outlook Seasonally Q4-Q1 slow down in the demand causing lower utilisation and downwards pressure on rates Slow award process combined with several projects moved out in time due to permitting or client budget constrains are the main causes of the seasonal dip Increased activity on Multi-Client sales observed in Q4 but still uncertainty related to the sales levels High tender and project award activity for the North Europe summer season and improved industry visibility from Q2 Q4-Q1 rates reflex a oversupplied spot market and 10-15% reduction from Q3 levels are experienced Average pricing for the 2014 contract work booked so far is in the range 5-10% higher then average 2013 pricing a new wave of seismic exploration demand building up in frontier deep-water areas. Typical high demand areas are Brazil, Barentsea, Russian Arctic, Canada and Australia 30

31 Dolphin - assumptions and guidance for 2013 (unchanged from release 8 th January) New Vessel capacity to be delivered on time and budget Sanco Swift (3D, str.) on TC, end July 2013 Polar Marquis (3D, str.) expected on TC, January 2014 to be timed with market demand conditions after April 1 st Sanco Sword (3D, str.) expected on TC, mid April 2014 Potential short term hire of 2D and 3D capacity for Multi-Client projects, alternatively further consolidation of high-end 3D vessel capacity Pricing, costs, utilisation Expected day-rate increased from ~ USD/day in 2012 to ~ USD/day in 2013 for 3D high-end seismic vessels Overall revenues expected to increase by 40-50% with targeted revenues above USD 300 million for 2013 revised expectations 30-40% growth Further improved year on-year operating margins - Q4 and Q1-14 margins will be reduced due to spot market pricing Utilisation high-end 3D vessels, 84-90% - Q4 will suffer from lower utilisation Cash Opex high-end vessel of ~ USD/day External third party costs and revenues, 6-8% of revenues for 3D vessels Estimated SG&A costs USD million per quarter in 2013 Multi-Client activities Capex MCS 2D,10-12 vessel months and MCS 3D, 8-10 vessel months Total Gross MC-investments USD million Pre-funding targets of 2D > 50% and 3D>85% - lower for Q3, Q4 and Q1-14 on the new strategic 3D projects Sales ratio s times MCS investment costs Opportunistic, additional non-organic growth considered Sanco Swift, total approximately USD 60 million, whereas, USD 60 million paid by Q Capacity upgrade USD 8 million, dependent on client configuration request Processing 2013, USD 3-5 million 31

32 Questions and Answer Session Questions and Answer Session

33 Financial covenants applicable to Dolphin Definition Loan Facility DOLP01 Liquidity Free and available cash and equivalents USD 10m < USD 15m < from May 2014 USD 10m < Equity ratio Total Equity/Total Assets 40% < 35% < Gearing ratio TIBD / EBITDA Based on last 12 months 1.75 > NA Interest cover EBITDA/Net Interest Cost Based on last 12 months NA 2.5 < Working Capital Current Assets less Current Liabilities 0 < NA Incl. financial leasing Dolphin is continuing to comply with all covenants 33

34 Dolphin time-charter commitments culminated in 2012 Minimum operational leasing obligations *) *) Including all operating seismic vessels and the new committed vessels; Geo Atlantic, Sanco Sword and Super Duke Figures on top of bar chart illustrates total minimum operational leasing obligations. Source: Dolphin Group 34 34