Lamprell Energy, a UAE-based provider of diversified engineering and contracting services to the onshore and offshore oil & gas and renewable energy industries, announces today 2013 interim financial results for six months to 30 June 2013.
The Group’s total revenue of $521.0 million for the period was broadly in line with the restated results for the corresponding period in 2012 when the company reported a total revenue of $528.1 million.
The company’s net profit for the first half 2013 was $7.3 million, compared to a net loss of $51.1 million reported for the same period in 2012.
The new build division was the largest contributor to the Group’s revenue with nine jack-up rigs and two liftboats which were either delivered or under construction during the period.
John Kennedy, Non-executive Chairman for Lamprell, said:
“The new management team led by Jim Moffat has achieved a great deal during the first half of 2013, securing longer term financing for the Group and bringing Lamprell back to profitability after the challenges of 2012. The business has been reinvigorated and Lamprell will be looking to take further steps for a positive and sustainable future as the region’s market leader in the buoyant offshore construction market.”
James Moffat, Chief Executive Officer for Lamprell, said:
“The business has performed well in the first half of the year. Our execution has been consistently strong and, in addition to the successful delivery of a number of key projects, our existing contract portfolio is progressing as planned. After the challenges of 2012, I am pleased to be able to report a return to profitability for the Group.
“Lamprell is a well-established business with a long-standing reputation for high build quality, close client relationships and a good safety track record. Our objective is to build on these qualities to ensure that Lamprell remains a competitive force in the industry capable of delivering sustainable growth over the long-term. We have made significant changes to the business, allowing Lamprell to emerge strongly from the issues of 2012 and we intend to build on this positive progress over the coming months and years, with the primary focus being on conversion of our good bid pipeline into contract wins.”
Chief Executive Officer’s Review:
Positive start to 2013
The business has performed well in the first half of the year. After the challenges of 2012, we are pleased to see clear indications of the Group’s successful recovery reflected in our financial results. The Group has seen a steady improvement in its operations and a consistent level of activity in its core business streams, namely new build rigs, offshore construction and rig refurbishment, year-on-year. The Group’s financial statements for the six months ending 30 June 2013 show a return to profitability, reporting a small net profit for the period which is driven primarily as a result of our improved operating performance.
The Group’s established market positions are a result of Lamprell’s reputation for high build quality, strong safety record, competitive construction costs, well-located facilities and our reputation for working collaboratively with our clients for success. In the year to date, the new management team continued to take actions to place the business on a firmer footing for the future, not least by successfully refinancing our debt facility. Since I arrived in Lamprell in March of this year, we have made significant progress but have more to do in order to position Lamprell to take full advantage of the opportunities in the Group’s core markets.
Market and performance overview
Strong forecast drilling activity internationally is expected to increase rig count and rig refurbishment activities, not least because two-thirds of the global jack-up rig fleet are over 25 years old. As a result, attrition rates of older rigs have accelerated in recent years. In general the jack-up rig market has continued to see good demand through 2013 as a result of which there has been strong tender activity. Lamprell’s market share remains strong in its core markets and we continue to see high levels of enquiries and bid activity with a robust pipeline of opportunities.
As at the half-year, the Group’s order book was valued at US$ 1.1 billion (31 December 2012: US$1.2 billion), predominantly comprising the on-going construction of eight new build jack-up rigs; the bid pipeline remains at a high level of approximately US$ 4.6 billion (31 December 2012: US$ 4.1 billion), with strong representation of the two key segments of new build jack-up rigs and new build offshore construction projects. Refurbishment projects typically have a shorter bid to award profile and therefore limited order book or pipeline values.
Since the beginning of the year, the Group has secured a contract win for an additional new build jack-up rig project for the Jindal group, which included an option for a further jack-up rig that expired in August 2013. The Board believes that the jack-up rig market will continue to provide the Group’s primary revenue stream in the medium term although, as we have noted in the past, we are facing increased competition from Asia. For this reason, we aim to differentiate ourselves based on our strong track record of quality and safety, together with our strategically well located facilities and the technical and operational capability to deliver complex projects on budget and on time.
In addition, the Group’s strong performance in the execution of several offshore construction projects during the last 12 months has further strengthened the Group’s reputation in both the local Middle East and North Sea markets. The Board believes that capital expenditure across the E&P sector will remain buoyant and will provide opportunities for the business to grow its offshore construction revenue stream in the coming years.
In the Group’s other traditional area of strength, namely rig refurbishment and upgrades, there is increased competition for the small projects but we continue to see strong demand for medium sized refurbishment projects. This is expected to remain a profitable and important activity for the Group.
We have also reviewed the status of certain of our services businesses which do not form part of our core business, and we have commenced a process to dispose of these businesses but only if acceptable terms can be obtained and subject to Board approval. This process is at an early stage and may not proceed if acceptable terms cannot be agreed.
There have been further changes both at the Board and at the senior management levels. In March, Frank Nelson and I joined the Board as Chief Financial Officer and Chief Executive Officer respectively, with Peter Whitbread (the former Interim Chief Executive Officer) staying on the Board and providing the Group with the benefit of his experience. Then, in May, our previous Non-executive Directors (Jonathan Silver, Deena Mattar and Colin Goodall) retired from the Board and were replaced by three, new Non-executive Directors (Michael Press, Ellis Armstrong and John Malcolm). I would personally like to take the opportunity to welcome them to Lamprell and I look forward to working with them. Between them they have significant industry and operational experience and I believe they will contribute much to the ongoing development of the Group.
As announced yesterday, it is with regret that Frank Nelson has informed us of his intention to leave Lamprell to return to the UK for personal reasons. However, I am pleased that Joanne Curin will be joining the Group as Chief Financial Officer effective from 1 October 2013.
Joanne is an experienced Finance Director, with broad international business experience and significant listed company expertise. Frank Nelson will work with her until the end of October 2013 to ensure an orderly transition.
Operating review & update
Lamprell has built a reputation for high build quality, a strong safety record, and close client relationships. After the operational difficulties faced in 2012, it was important for us to ensure that our main projects progressed as planned and that we should complete the key underperforming projects as effectively and efficiently as possible. We can see from our record during 1H 2013 that we have taken great strides to achieve this.
In the first half of 2013, we have successfully delivered a number of key projects. In February, Lamprell delivered the Windcarrier’s “Bold Tern” windfarm installation vessel to our client, Fred. Olsen, and, notwithstanding the challenges that we experienced on that complex project we can be proud of the high quality and standards of the final product. Similar accolades have been given to the “Chaaya” jack-up drilling rig that was delivered to Greatships in January, as well as the two offshore structures that were delivered to the clients in March and June, all three of which were all delivered on or ahead of schedule. This is testament to the fact that Lamprell is one of the few fabrication yards within the Middle East-North Africa region which has both the expertise and the capability to build large scale complex decks and to North Sea standards, specifications and timelines.
Looking forward, construction on all other major new build projects is on track. Although the first Caspian Sea jack-up rig project continues to be a challenging project we are nearing completion and expect final delivery to the client in the Caspian Sea within the next few weeks.
The rig refurbishment and upgrade business has progressed well during the first six months of the year, with the Group having working on or successfully completing more than 15 rig refurbishment projects. There are three refurbishment projects which are all currently on-going although we are nearing completion of the major refurbishment project relating to the “Rowan California” jack-up rig, which is scheduled to depart in the coming days. I am pleased to note that this project achieved a major project milestone of more than one million manhours without lost-time incident (LT1).
During May, the first jack-up rig for the Jindal group, the “Jindal Star”, was successfully loaded out and the construction process continues as scheduled, with final delivery planned before the end of the year. Of particular note for this project we recently hit the major milestone of three million manhours without LTI. In a similar vein, I am pleased with the continued improvements in the safety records for many of the Group’s large-scale projects: the second Caspian Sea project recently reached two million manhours without LTI and the Group has to date performed a total of seven million manhours without LTIs on the on-going major offshore structure project for Nexen (where the first of two structures was delivered marginally ahead of schedule in June 2013).
After the challenges of 2012, the new management team has made significant progress in refocusing the business on its core activities and, in the successful refinancing of the Group’s debt facility to June 2016, re-established the Group’s medium-term financial stability. 2013 is a recovery year for the Group and we are pleased that the business has returned to profitability earlier than planned. The Board therefore anticipates that our performance for the full year will be ahead of our expectations.
The Group has been reinvigorated and we see high levels of bidding activity in our core markets with an increased pipeline of project opportunities. Contract wins so far this year have been slower than expected partly reflecting the lower number of project awards in the market and the management team is clearly focused on the conversion of its bid pipeline into wins. At the current time, approximately half of the revenues in our 2014 business plan have been secured under our existing order book, which extends to Q1 2015. We expect revenues in 2014 to be slightly down compared to 2013, with measured growth returning in 2015.
August 29, 2013