Topaz Energy and Marine Ltd. issued the following announcement on March 26.
Topaz Energy and Marine (“Topaz”), a leading offshore support vessel company, today announces its results for the twelve months ended 31 Dec 2017 (“the period”).
US$ Millions
Three Months EndedTwelve Months Ended
Dec 2016Dec 2017% changeDec 2016Dec 2017% change
Consolidated Revenue6669+5%282244-13%
EBITDA3431-9%145118-19%
EBITDA Margin (%)52%45%-7ppt51%48%-3ppt
Net Profit/(Loss) before exceptions2(6)NM(2)(24)NM
Net Profit/(Loss) Margin (%)3%-9%-12ppt-1%-10%-9ppt
Net Profit/(Loss) after exceptions(98)(79)NM(102)(116)NM
Net Profit/(Loss) Margin (%)NMNM-NMNM-
Core Vessel Utilization---73%65%-8ppt
Business Highlights
Safety continues to be our top priority. We are pleased to report no Lost Time Injuries (LTIs) during the past 24 months.
Overall core fleet utilization at 65%, amidst persistent challenges in the sector.
Solid EBITDA margin of 48% for the year, despite rate pressures.
Topaz continues to maintain an industry-leading backlog of US$ 1.5bn through established long-term contracts, adding to the company's long earnings visibility and financial strength.
Multiple strategic contract wins during the year including a 5-year (plus 2 years of options) contract with Dragon Oil in Turkmenistan for six vessels, a strategically important 1-vessel contract for Total in Azerbaijan and the deployment of our Africa fleet on long-term contracts.
Early commencement of our strategic Tengizchevroil (“Tengiz”) project with two vessels in operation during 2017 - six months ahead of schedule.
Further optimization of costs with US$20m of savings in operating costs and overheads in 2017 compared to the previous year.
Successful refinancing of Senior Notes via the issuance of US$375m 9.125% Senior Notes due in 2022.
Fully compliant with financial covenants; covenants proactively reset during the period.
René Kofod-Olsen, Chief Executive Officer, Topaz Energy and Marine said,
“2017 was a challenging year for the industry, but we believe the worst of the downturn is now behind us. 2018 will also be challenging but we are cautiously optimistic as market conditions improve. Oil markets are more positive with demand and supply close to equilibrium. The number of projects being commissioned is increasing, with the supermajors reporting improved results for Q4 2017.
“Despite the market conditions, Topaz made good progress during the year against our strategy. We secured a number of important contracts during the year including Dragon Oil in Turkmenistan and Total in Azerbaijan. We commenced operations of two vessels for our Tengiz contract in Q4 2017, six months ahead of schedule. This is a game-changing contract for our business. Topaz, with its partners, developed an entirely new class of vessel to meet the client’s needs. Strategic projects such as Tengiz have helped us to maintain our industry leading backlog of US$ 1.5bn.
“Our core fleet utilization improved to 67% in Q4 2017 from Q3’s 64%. Our fleet in the Caspian, which accounts for more than 75% of our revenue, delivered a utilization rate of 80%, illustrating the resilience of our Caspian business. Excluding laid-up vessels, our core MENA fleet was 84% utilized. Our core utilization for Africa was 40% for the year, although we experienced a significant increase in demand in the latter part of the year, and have since mobilized additional tonnage into the region to meet demand.
“We also reactivated a total of seven vessels across all our markets, which were laid-up at the end of 2016. For our five vessels which are still in layup, we are evaluating options as part of our fleet renewal program.
“We have continued to invest in the business whilst generating additional cost reductions and efficiencies from the business, resulting in cost savings of $20 million for the year. We invested in systems supporting vessel maintenance, safety, customer relationship management, crew training, competency programs and localization initiatives to make Topaz more efficient and effective.
“Financially, we maintained a healthy business profile and delivered Revenues of US$244 million and a solid EBITDA margin of 48%, testament to our focus on cost control and efficiency.
“2018 is going to be an exciting year for Topaz and the OSV industry, as consolidations are likely to transform the industry. Topaz, with our strong client relationships and unique marine logistics offerings, continue to actively review strategic options.”
Financial Review
REVENUEThree Months EndedTwelve Months Ended
Dec 2016Dec 2017Dec 2016Dec 2017Variance
Caspian5053206187-9%
MENA13116248-30%
Africa35149-36%
Total6669282244-13%
Revenue for the period was US$244m, a decrease of 13% compared to US$282m revenue in 2016. This decrease is mainly the result of (i) off-hire of barges and tugs in Kazakhstan of US$17m, (ii) loss of revenue of US$13m due to layups and pressure on rates and utilization in the MENA and Africa regions, (iii) loss of revenue of US$13mdue to lower utilization in Azerbaijan as the projects our vessels were contracted for reached completion and (iv) off-hire/standby rate on two subsea vessels of US$8m. However, this decrease is partially offset by the commencement of revenue from the Tengiz contract of US$16m.
$ Millions
DIRECT COSTSThree Months EndedTwelve Months Ended
Dec 2016Dec 2017Dec 2016Dec 2017Variance
Crew cost12125548-13%
Technical maintenance331310-23%
Depreciation / Dry-dock18177368-7%
Mobilization charges1-42-50%
Others1017334021%
Total4449178169-5%
For the year ended December 2017, our direct costs decreased by US$9m, a 5% improvement year on year, to reach US$169m in 2017, compared to US$178m incurred last year.
We continued our relentless focus on cost optimization, which allows us to operate in an efficient yet safe manner. Hard negotiations with our suppliers achieved savings on maintenance, while the decrease in depreciation/dry-dock is mainly due to an impairment charge reducing the depreciation amount. The increase in other costs is mainly due to costs associated with the Tengiz contract on supervision during the construction phase of the vessels.
EBITDAThree Months EndedTwelve Months Ended
Dec 2016Dec 2017Dec 2016Dec 2017Variance
Caspian3430139119-14%
MENA22149-36%
Africa(1)-(1)(5)NM
Corporate / adj(1)(1)(7)(5)NM
Total3431145118-19%
EBITDA decreased by US$27m, or 19%, to US$118m during the period compared to US$145m in the same period last year. This decrease mainly relates to (i) EBITDA reduction due to off-hire of barges and tugs in Kazakhstan of US$16m, (ii) EBITDA reduction of US$8m due to layups and pressure on rates and utilization in the MENA and Africa regions, (iii) EBITDA reduction of US$11m due to lower utilization in Azerbaijan as the projects on which the vessels were working came to end, (iv) EBITDA reduction of US$9m due to off-hire/standby rate on two subsea vessels. However, this decrease was partially offset by the EBITDA from the Tengiz contract of US$2m and by savings in overheads of US$6m.
Administrative Expenses:
Administrative expenses decreased by US$6m, or 18%, to US$27m during the period, compared to US$33m during the same period last year. This is due to lower staff costs and various efficiency initiatives implemented across operational offices.
Finance costs:
Finance costs increased by US$19m, or 32%, to US$78m during the period compared to US$59m during the same period last year due to the one-off costs of US$19m related to the refinancing of our Senior Notes.
Income tax expense:
Income tax expense decreased by US$1m, or 6%, to US$13m during the period compared to US$14m in the same period last year.
Cash flow
The cash generation as a percentage of EBITDA for the twelve months ended December 2017 was 107% (January-December 2016: 112%).
The table below sets out a breakdown of cash flow for the year ended 31 December 2017:
CASH FLOWThree Months EndedTwelve Months Ended
Dec 2016Dec 2017Dec 2016Dec 2017Variance
EBITDA3431145118-19%
Changes in working capital(6)(3)178-53%
Cash generated from Operations2827162126-22%
Cash conversion82%90%112%107%-5PPT
Income tax paid(4)(5)(18)(15)-17%
Interest paid(22)(29)(55)(70)-27%
Net Cash generated from operating activities2(7)8941-54%
Net Cash generated from Tengiz-(1)-13100%
Cash used in investing activities(8)(7)(44)(29)-34%
Cash provided by financing activities(16)42(52)18NM
Dividend paid to JV partner(9)-(9)(4)-56%
Increase/(decrease) in cash and cash equivalents(31)28(16)39NM
Investing activities include US$6m towards expansion CAPEX and US$23m towards maintenance, mobilization and upgrade CAPEX. Investing activities also include milestone CAPEX payments of US$148m to Vard under the new build contract for the Tengiz project, which was fully pre-funded by advance payments received from the client. Financing activities include bilateral debt repayment of US$30m, US$2m for repayments of parent company debt in March 2017 and US$46m of interest payments. We have drawn US$25m from our Revolving Credit Facility (RCF) in Q4, for general liquidity purpose.
Unutilized banking lines as of 31 December 2017 include an RCF of US$75m expiring in April 2020. We successfully reset our covenants in December 2017, thereby providing us additional headroom on our financial covenants, while remaining within the previous covenants.
Financing
FacilityMaturityInterest RateRepaymentOutstanding as of 31 Dec 17 US$’000
Conventional and Islamic facility**7 years3 month LIBOR
+ 2.75%Quarterly with bullet repayment296,225
Senior Notes5 years9.125%Bullet366,409
Total Topaz Loans 662,634
*Recorded as per International Financial Reporting Standards (IFRS) in US$.
** Includes US$25m drawn from the RCF facility in Q4 2017.
Bank Covenants
The senior secured borrowing arrangements include undertakings to comply with certain financial covenants. As of 31 December 2017, Topaz is compliant with all financial covenants.
Financial CovenantThresholdAs of 31 Dec 2017
Net Interest-Bearing Debt to EBITDA< 5.254.96x
Headroom 14%
Tangible Net Worth> US$275mUS$313m
Headroom 14%
Free liquidity (in millions)> US$30mUS$153m
Headroom 410%
EBITDA to DSCR> 1.20x1.42x
Headroom 18%
Capitalization
The following table sets out Topaz’s consolidated cash, total indebtedness, shareholders’ funds, total capitalization and net debt at the end of the last five quarters.
US$ Millions
Dec- 16Mar- 17Jun- 17Sep- 17Dec- 17Change Dec’17 v Dec’16
Cash & Cash Equivalents395749517839
Floating rate senior secured loans300292286278296(4)
Other loans / Senior Notes¹34534634636636621
Subordinated shareholder funding8179797979(2)
Total debt72671771172374115
Total equity463459449422343(120)
Total capitalization1,1891,1761,1601,1451,084(105)
Net debt687659661672663(24)
Total debt / LTM EBITDA5.05.35.65.96.3
Net debt / LTM EBITDA4.74.85.25.55.6
¹ Recorded as per International Financial Reporting Standards (IFRS)
About Topaz Energy and Marine
Topaz Energy and Marine is a leading international offshore support vessel company providing logistics support and marine solutions to the global energy industry with primary focus on the Caspian Sea, the Middle East, West Africa and Subsea operations. Headquartered in Dubai, Topaz Energy and Marine operates an existing fleet of ~100 offshore support vessels with an average age of approximately nine years. Topaz Energy and Marine is a subsidiary of Renaissance, a publicly traded company listed on the Muscat Securities Market in Oman. In addition, Standard Chartered Private Equity holds a minority position in the company.
www.topazworld.com
Original source: http://www.topazworld.com/press-room/news/financial-results-for-the-year-ended-31-dec-2017
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