The order intake during the second quarter was the highest ever, and amounted to USD 227m, of which 80 per cent represent operational cash flow from bareboat charters in the Gulf of Mexico.
Main figures
(Figures in brackets refer to the same period last year)
Operating profit for the second quarter equalled NOK 102m (NOK 214m). Adjusted for goodwill amortisation, the operating profit was NOK 119m (NOK 231m). The decrease is primarily due to lower rig utilisation within Offshore Support Services, lower USD/NOK exchange rate and costs relating to subsea well intervention.
Net profit for the first quarter came to NOK 77m (NOK 160m), and fully diluted earnings per share equalled NOK 2.26 (4.69). Adjusted for goodwill amortisation, fully diluted earnings per share equalled NOK 2.76 (5.18).
Offshore Support Services
Operating profit for the second quarter came to NOK 56m (NOK 155m). The utilisation ratio was 77 per cent (87 per cent), and the average USD/NOK exchange rate was 6.99 (8.39). The main adverse factors are lower rig utilisation, costs relating to well intervention, lower USD/NOK exchange rate and also lower dayrates for Jasminia and Safe Hibernia. In addition, depreciation has increased following the upgrades of Safe Scandinavia and MSV Regalia.
Safe Scandinavia operated on a charter on Gullfaks for Statoil in the period from 24 March until 12 April, and on 9 May the rig commenced the charter on Grane for Norsk Hydro. Safe Caledonia arrived at Bayu Undan in the Timor Sea in mid May. The charter commenced on 1 July, but Prosafe received standby rates in the period from 21 May.
MSV Regalia was scheduled to carry out the first well intervention campaign for Statoil during the second quarter, but - as previously announced - the work was suspended due to technical problems with equipment from a subcontractor. The suspended operation resulted in costs of NOK 34m for Prosafe, plus loss of hire.
Five of the company's eight rigs - Safe Britannia, Safe Lancia, Jasminia, Safe Hibernia and Safe Regency - have throughout the second quarter operated on charters in the Gulf of Mexico. Safe Regency and Safe Lancia were, however, taken off hire on 2 June and 27 June, respectively, for upgrade work. The upgrade work is expected to go on for about three months per rig, while Safe Britannia is scheduled to be off-hire for about one month for upgrade during the third quarter.
Floating Production
Operating profit for the second quarter equalled NOK 23m (NOK 35m). Adverse factors compared with last year, are lower USD/NOK exchange rate, the sale of the FPSO Ruby Princess in October last year, and the fact that the company for the time being does not have any conversion projects ongoing. (See next paragraph). These factors are to some extent offset by Abo FPSO starting production offshore Nigeria in early April, and the three-year production and maintenance contract on OPL98 offshore Nigeria which started on in April.
After completion of the Abo FPSO, the company does not have any ongoing conversion projects. In periods between projects, personnel costs that normally relate to conversion of a vessel and hence are capitalised as part of the cost of the vessel, are expensed. As a consequence of this, personnel costs expensed within Floating Production have increased in the second quarter. As described in the report for the first quarter, a cost optimisation process has taken place in Singapore, which has resulted in one-off reorganisation expenses of NOK 3m in the second quarter. The cost optimisation means that the overhead costs will decrease somewhat as from the third quarter.
Drilling Services
Drilling Services shows stable and high earnings, and the operating profit in the second quarter came to NOK 29 mill (NOK 30 mill). Oseberg East and Oseberg C have been in maintenance mode throughout the second quarter, while the drilling programme on Jotun B was completed in May.
Outlook
2003 will be a transition year in terms of operating profit. The reasons for this are lower rig utilisation due to rig upgrades, a lower USD/NOK exchange rate and one-off expenses relating to subsea well intervention. 2003 will, however, be the best year ever in terms of order income and order backlog. Hence, prospects for 2004 and onwards are promising.
Within Offshore Support Services the company has secured long-term high earnings after winning five-year charters for five of the company's rigs in the Gulf of Mexico. The third quarter will, however, be influenced by the aforementioned upgrade periods for Safe Lancia and Safe Regency. In addition, Safe Britannia will be off-hire for about a month from 1 September for upgrade of cranes.
MSV Regalia will go off the Fram contract on 6 August, and thereafter the intention is to carry out the suspended well intervention work for Statoil in September. This is, however, depending on solving the previously announced technical problems with the equipment from a subcontractor. As a consequence of extra project costs, Prosafe estimates that the company will incur a minor operating loss on this contract during the third quarter.
Work is currently ongoing for securing further work for MSV Regalia in 2003. The rig has already been secured a 115 days charter on Troll for Statoil from July 2004.
Safe Scandinavia will be operating for Norsk Hydro on Grane until October, and Safe Caledonia is operating for ConocoPhillips on Bayu Undan until late April next year. Prosafe is working on securing further work thereafter, and sees opportunities both in the North Sea, Brazil, the Gulf of Mexico and in West Africa.
Within Floating Production the operating results are expected to improve slightly in the second half of 2003, due to the cost optimisation process which has taken place in Singapore. The company's goal is to win a new project in 2004, and the general prospects are positive.
The activity level within Drilling Services is expected to remain high going forward. The lightweight rig Rubicon is, however, coming off a three-year contract on Snorre in August. This will have an adverse impact on the earnings within Drilling Services until the rig is awarded a new contract. Prosafe is currently working to secure a new assignment for Rubicon. As regards the Norsk Hydro contract that the company was awarded in March this year, the company took over the operations on Oseberg B and Brage in July, while the operation on Njord will be taken over in October. The operation on Oseberg B was taken over while in drilling phase. The drilling programme on Brage is scheduled to commence in September, whereas the drilling programme on Njord is scheduled to start during 2004. Expected drilling start on Kvitebjørn for Statoil is September this year.
Prosafe is listed on the Oslo Stock Exchange with ticker code PRS.
