Topaz Energy and Marine Net $ 20.8m Profit Investment
Topaz Energy and Marine, a leading offshore support vessel company, today announces its results for the year ended 31 December 2015.
* Net Profit for the period was US$ 20.8m before exceptional items, impairment charge of US$71 million on vessels and a one-off charge of US$8.3 million associated with debt re-financing.
* The key Caspian region continued to perform strongly with robust core fleet vessel utilization of 96% (94% in 2014). Topaz signed long-term contracts with BP in the Caspian, further strengthening contract backlog and long-term earnings visibility.
* Proactive focus on cost management contributed to mitigation of the EBITDA reduction.
* Continued rigorous cash management program; focus on working capital cycle as well as deferring non-essential capex.
* Conservative fleet expansion with two new-build Subsea vessels commissioned in September 2015 adding to the two vessels already under construction (1 MPSV and 1 AHTSV). The MPSV was delivered in January 2016 with other vessels due in 2017. The new ERRV, Topaz Responder, has won a medium-term contract in the Mediterranean (Dec 2015).
* Consistent safety record; fatalities remains at zero.
René Kofod-Olsen, Chief Executive Officer, Topaz Energy and Marine said, “Despite a strong performance in our key Caspian market, which makes up 63% of revenue, our financial results reflect subdued demand for offshore support vessels in our nascent market in Africa and rate pressure in Mena.
Our Net Profit was impacted by two exceptional items, one being impairment charge of US$71 million on vessels as the current oil and gas environment materially impacted the valuation of our fleet. While our valuation principal of “Value in use” has not changed, weaker industry fundamentals mean we have had to re-base the valuation to align with the environment. Second being the unamortized arrangement fees written-off during the re-financing of debt. Excluding these exceptional items, Topaz delivered a Net Profit of US$ 20.8 million during 2015.
Utilization in our Caspian market is up by 2% to 96% compared with 2014 and revenue increased by 4.5% during the period. We recently secured 14 OSV contracts with BP in the Caspian Sea for a period of five years plus two one-year options, extending the tenure of our existing contracts for the 14 vessels until 2023. This significant deal increases our backlog to nearly US$1.4bn and gives us better long-term visibility of revenues. Our robust performance in this region throughout the year, despite a challenging market, demonstrates the strength of our relationships with long-term clients and our ability to generate returns in a lower oil price environment and we expect our performance will hold steady in this region through 2016.
The decrease in revenue in our Mena region is primarily due to the sale of a vessel during December 2014 of US$21.6 million, however we are also being impacted by the expiration of contracts in this region. In January 2016, we acquired a new AHTSV ‘Topaz Mamlaka’ which will be deployed to Saudi Aramco on a long-term contract of three years plus options from February 2016. We have been operating in the Mena region for more than two and a half decades and are confident we will maintain a satisfactory performance this year though we can expect the next few quarters to be challenging.
We moved a number of AHTSVs from Africa to Mena during 2015 and similarly mobilized some vessels from Mena to the Caspian in January on the basis of secured contracts. The versatility of our fleet means we are able to move our vessels to benefit from opportunities available in different geographies. While we are currently experiencing pressure in Africa, we are now fully set up in Angola and Nigeria, meaning we can quickly move from spot rates to securing longer contracts as the market recovers. We remain confident in the long-term opportunities in the offshore support market in Africa, which is forecast to grow over the medium term.
Our prudent approach to cash management during 2015 sets the foundation to operate a more efficient capital structure in 2016 and beyond. We refinanced US$ 350 million of existing debt and agreed a facility to borrow an additional US$ 200 million in April 2015 at highly competitive rates extending the maturity of our debt profile. This reflects the market’s confidence in our strategy and our ability to reduce overall risk while ensuring our capital structure supports Topaz to capture long-term growth and take advantage of appropriate opportunities as they arise. Our debt refinancing will continue to deliver savings in finance costs over the long-term despite the one-off non-cash charge US$8.3 million during 2015. We forecast the cost efficiency initiatives regarding procurement, administration, crew and overheads put in place during 2015 will save more than US$ 10 million during 2016 and we will continue to find ways to optimize our cost structure without compromising on quality and safety in the future.
Our focus on safety was recognized at the Seatrade Maritime Awards where Topaz was selected as the winner of ‘The Safety and Quality Award’ for its consistently strong safety performance. Topaz also received the ‘Offshore and Energy’ and ‘Maritime Services’ awards by Lloyd’s List in December. These awards recognise Topaz’s excellence in providing services to the offshore industry with particular focus on customer service, safety, environmental protection, cost management as well as vessel efficiency and reliability and company profitability.
As we head into 2016, we are likely to continue to see rate pressure as clients are impacted by the lower oil price environment, particularly in the Africa and Mena regions, where we are currently awaiting some tender decisions.
We expect the first half of 2016 to be a challenging period. However a subdued market also offers opportunities and during 2015, we have worked hard to ensure we have the right capital structure in place to take advantage of growth options delivered in this environment which are in line with our strategy.”
Revenue for the period of $362.5 million has decreased by 10% against corresponding revenue of $404.6 million in 2014. This negative variance mainly relates to (i) one-off revenue from sale of one vessel in the Mena region in December 2014 impacting $21.6 million, (ii) lower utilization of two Subsea vessels due to expiration of a long-term contract resulting in the loss of $11.9 million in revenue, (iii) loss of $5.4 million of revenue due to completion of long term contracts for six vessels in Saudi Arabia and their subsequent deployment on lower rates as per the market, (iv) one-off mobilization revenue of $2.1 million on two vessels considered in the same period last year (v) loss of revenue of $8.7 million due to lower utilization of four out of seven new vessels deployed in Africa and (vi) loss of revenue of $5.5 million due to lower utilization/vessels in dry-dock. However, this decrease is partly offset by (a) full impact from three vessels added to the fleet last year resulting in an increase of $6.6 million, and (b) better utilization of two vessels due to a new BP contract in the Caspian resulting in an increase of $6.5 million.