Northern Ocean issued their third quarter results and below are the highlights:
Highlights – Third Quarter Subsequent Event
-
West Bollsta commenced its initial contract for Lundin Energy Norway AS on October 6, 2020.
Results
In the third quarter, operating revenue was $21.4 million compared to $24.8 million in the previous quarter. The West Mira continued operations under contract and achieved technical utilization of 79% for the quarter and year-to-date at 86%. The West Mira was out of service for 20 days during the quarter mainly related to repairs on the deck crane. Contract revenue was $20.1 million, reimbursable revenue was $1.1 million and other revenue from the provision of management services was $0.2 million in the third quarter.
Total operating expenses were $28.1 million compared to $27.2 million in the previous quarter. Rig operating expenses were $20.3 million, which is $1.6 million higher than the previous quarter mainly due to repair costs associated with the deck crane incident as well as replenishment of spare parts inventory. Reimbursable expenses were $1.1 million and depreciation was $5.5 million. Administrative expenses were $1.3 million in the quarter.
Other financial expenses were $2.5 million compared to $3.4 million in the previous quarter. Loan interest expense decreased to $3.4 million compared with $4.0 million in the previous quarter due to the lower debt balance and amortization of deferred charges was $0.5 million. There was a foreign exchange gain of $1.4 million due to appreciation of the Norwegian Kroner throughout the quarter compared with a foreign exchange gain of $1.1 million in the second quarter.
The net loss in the third quarter was $8.1 million resulting in a basic and diluted loss per share of $0.13.
Business Update
In the third quarter 2020, the Company continued delivering drilling services while adopting new measures to promote the health and wellbeing of our people amid the global pandemic. The West Mira continued drilling activities for Wintershall Norge AS (“Wintershall”) and is drilling its fifth well of the contracted ten well program. The firm contracted term is now estimated to the end of Q4 2021 and Wintershall has options for six additional wells (at market terms) that would extend employment through Q4 2022.
The West Bollsta commenced operations on October 6, 2020 for Lundin Energy Norway AS (“Lundin”) and began drilling activities in the Barents Sea. The West Bollsta will drill exploration wells first then continue in the Rolvsnes and Luno II development fields under its ten well contract. The firm contracted term is estimated through Q2 2022 and Lundin has options for four additional wells (at market terms) that would extend employment through Q4 2022.
The Company’s revenue backlog at September 30, 2020 is estimated at $269 million, excluding options and performance bonuses and adjusted for current estimates of well programs. The fourth quarter to-date technical utilization for the fleet is approximately 89%.
In the second quarter 2020, the Company and its lenders agreed an amendment of and waivers in respect of certain covenants in its term loan facility effective through the end of December 2020. The Company has an ongoing dialogue with its lenders regarding the amendments and current state of the business. Additionally, discussions with Seadrill regarding outstanding balances related to the projects continue and the Company is working towards agreeing solutions with its stakeholders in the near term.
Outlook
The Company continues to see long-term fundamentals strengthening in the harsh environment offshore drilling market for premium rigs.
While demand for natural resources has pulled back due to economic slowdown resulting from the global pandemic, the harsh environment markets, especially in Norway, continue to remain active and are showing supportive demand into 2021 and beyond. With the market having higher barriers to entry and naturally a smaller rig count versus international markets, it is further along in balancing rig supply and demand remains high for premium high specification drilling rigs. The Company’s rigs are top tier by having high automation with safe and efficient systems, including battery hybrid power and lower emissions solutions. The Company’s fleet is fully contracted and operating today and we remain focused on maintaining relationships with stakeholders to ensure drilling activities continue during these challenging and uncertain times.
Source: Northern Ocean
