Norway: STX OSV Doubles Q2 Operating Profit to USD 77 Million

TX OSV Holdings Limited, a major global designer and shipbuilder of offshore and specialized vessels headquartered in Norway, announces its results for the second quarter and first half ended 30 June 2011.

 Financial and Operating Review

Compared to corresponding periods in 2010, STX OSV’s operating profit doubled to NOK 420 million in 2Q 2011, and registered a 79% increase to NOK 829 million in 1H 2011. EBITDA increased to NOK 451 million for 2Q 2011 and NOK 890 million for 1H 2011, yielding an EBITDA margin of 15% for 1H 2011, up from 8.5% in 1H 2010. Cash and cash equivalents for 1H 2011 increased 82% year-on year to NOK 2,451 million, ending June 2011 with a net cash position of NOK 2,161 million.

The robust margin increase can be attributed to sustained stable operations, successful and timely vessel deliveries, and positive effects from improvement measures initiated, as well as an overall favourable business environment. The Company does not expect the EBITDA margin for full financial year 2011 to be below 1H 2011 levels.

 Orders, Deliveries and New Contracts

In 2Q 2011 alone, STX OSV secured nine new vessel contracts, comprising two anchor handling tug supply vessels (AHTSs), four platform supply vessels (PSVs), and three multi role vessels (MRVs) for DOF ASA. This brings the Group’s total order intake for 1H 2011 to 12 vessels, 11 of which will be delivered from Norway and Romania, and one from Vietnam.

Out of the 25 vessels scheduled for delivery in 2011, 10 had been delivered by the end of the second quarter. Four vessels were delivered from Norway and Romania in 2Q 2011, leaving the Company with 51 vessels in its order book as of 30 June 2011, 36 of which will be of STX OSV’s own design.

New order intake for 2Q 2011 amounted to NOK 3,099 million, not including the value of one of the vessels contracted, which is still subject to certain conditions to be lifted by end of 3Q 2011. Total order intake for 1H 2011 is NOK 4,128 million, while the order book value at the end of the second quarter amounted to NOK 15,328 million, slightly up from first quarter 2011.

Recent developments

Sale of stake held by parent STX Europe On 8 July, it was announced that STX Europe sold shares amounting to 18.27% of existing issued share capital to investment funds affiliated with OZ Management LP (“Och-Ziff”). Och-Ziff’s shareholding in STX OSV increased to 20.0% while STX Europe remains committed as a substantial shareholder, owning 50.75% of the Group.

Brazilian yard taking shape

STX OSV’s project for the development of a new shipyard at Suape in the state of Pernambuco, Brazil, is on track to start construction work shortly. Following granting of the environmental license for the shipyard construction at the end of the first quarter, the planning and permitting process is now in the final stage. While the investment budget was revised upwards as a result of acquisition of land for the yard, changes to the new yard’s layout and  facilities, as well as the construction market in Brazil, the additional investment is expected receive a similar proportion of debt financing as the originally planned investment. Preparations are currently ongoing for effectiveness of the contracts with Transpetro for the construction of eight LPG carriers to be built at the new yard, with a target for the contracts to be in effect, including receipt of first payment, by the end of third quarter or early fourth quarter 2011.

Joint venture with Industrial Control Design AS (“ICD”) of Norway

As part of STX OSV’s strategy to strengthen its technological capabilities, the Company on 16 June announced a partnership with ICD, a Norwegian-based company with core competencies in developing high-end automation and control systems. Together, the partners have established a new company for the development of offshore systems, creating new opportunities in several stages of the offshore value chain. The management believes that this will further raise STX OSV’s capabilities to develop and produce vessels with cutting-edge technology.

 Outlook

STX OSV is confident that demand for new offshore and specialized vessels will lead to continued healthy order intake for this year. The steady improvement in the offshore sector seen during the first half of 2011 is expected to  continue throughout 2011. In addition, new order intake in the second half of 2011 is expected to incorporate a more diverse range of vessel types.

The Company expects full year 2011 revenues to be no less than full year 2010, with strong financial results. Mr Roy Reite, Executive Director and Chief Executive Officer of STX OSV, commented, “While the current global  economic environment is challenging, STX OSV continues to be fundamentally wellpositioned to capitalize on opportunities in the market upturn.”

420 Million Norwegian kroner = 76.61724 Million U.S. dollars

Source: STX OSV, August 15, 2011;

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