TOPAZ ENERGY AND MARINE LTD.: Topaz Energy and Marine Financial results for the quarter ended 31st March 2018

Topaz Energy and Marine Ltd. recently issued the following announcement.

Topaz Energy and Marine Financial results for the quarter ended 31st March 2018

Q1 2018 Revenues Increase 14% to US$66 million

Dubai, UAE, Wednesday 30th May 2018: Topaz Energy and Marine (“Topaz”), a leading offshore support vessel and marine logistics company, today announces its results for the three months ended 31 March 2018 (“the period”).

US$ Millions

Three Months Ended

Mar 2017Mar 2018% change

Consolidated Revenue5866+14%

EBITDA3133+6%

EBITDA Margin (%)53%50%-3ppt

Net Profit/(Loss)(3)(3)-

Net Profit/(Loss) Margin (%)NMNM-

Core Vessel Utilization62%84%+22ppt

Business Highlights

Safety is our number one priority. We are pleased to report No Lost Time Incidents (LTIs) for more than 28 months

Overall core fleet utilization at 84% with all operating regions delivering utilization at or above 80% during the period

Robust EBITDA margin of 50% generated during the period

Backlog continues to stand at US$1.5bn bolstering long-term earnings visibility and financial strength

Our strategic ‘Tengizchevroil’ (“Tengiz”) marine logistics project continues to progress on schedule with 16 vessels now received from the shipyards. Three vessels are earning full revenue, ahead of schedule. Full project ramp up continues

90% utilization rates in Africa region, with nine vessels now on charter

Continued fully compliant with financial covenants

René Kofod-Olsen, Chief Executive Officer, Topaz Energy and Marine said,

“The first quarter reflected our cautious optimism for the OSV sector as E&P activity picked up across several of our regions. Revenue increased by 14% to US$66m and EBITDA was up 6% to US$33m with a robust EBITDA margin of 50% from a re-set cost base. Our core fleet utilization increased to 84% during the period. Across most measures, Topaz continues to outperform our peer group.

Our core fleet utilization improved significantly to 84% in the quarter, up 17 points from Q4’s 67% and 22 points from Q1 2017. In the quarter, we achieved 80% or above utilization from all our regions, which is testament to the robustness of our more conservative operating model and resilience of the business. In our Caspian region, we achieved utilization of 85%, which includes the 100% utilization of the six vessels operating in Turkmenistan. In MENA our utilization was 80%; the MENA fleet includes two subsea vessels which are currently operating on or pursuing spot charters. In Africa, our utilization was at 90% with almost all vessels on term-contracts with new key clients in the region.

At the end of the period, we had five ageing vessels in lay-up, four of which have since been divested.

We have continued to invest in the business, in particular crew training, vessel maintenance and upgrades to our fleet. We have also invested in IT to continue expanding our technology advancement, to synchronize and manage our integrated business operations more effectively with real-time information.

Our stated expansion strategy as an offshore marine logistics provider, with Tengiz as the pinnacle project, is progressing ahead of schedule on all aspects. The company expects further expansion in this segment with our core global clients over the coming years.

While liquidity remains a key area for us, we continue to ensure we have sufficient liquidity in the business to meet all our commitments. We remained fully compliant with our financial covenants with comfortable headroom through the period”

Financial Review

US$ Millions

REVENUEThree Months Ended

Mar 2017Mar 2018% Change

Caspian4538-16%

MENA1110-9%

Africa27+250%

Topaz Solutions-11NA

Total5866+14%

Revenue for the period was US$66m, an increase of 14% compared to US$58m over the same period last year. This increase was mainly the result of (i) revenue from the Tengiz project of US$11m and (ii) nine vessels working in Africa generating US$5m in revenue. However, this increase was partially offset by (i) loss of revenue of US$6m in Azerbaijan on vessels coming off-charter from completed projects and (ii) off-hire/standby rate on two subsea vessels of US$2m.

US$ Millions

DIRECT COSTSThree Months Ended

Mar 2017Mar 2018% Change

Crew cost1113+18%

Technical maintenance34+33%

Depreciation / Dry-dock1716-6%

Mobilization charges---

Others69+50%

Total3742+14%

For the period ended 31 March 2018, direct costs increased by US$5m, to reach US$42m in Q1 2018, compared to US$37m incurred in the prior year. The increase in costs is due to higher vessel utilization in Africa and MENA and ramp up of the Tengiz project. On a like-to-like vessel basis, direct costs remained the same.

EBITDAThree Months Ended

Mar 2017Mar 2018% Change

Caspian3124-23%

MENA32-33%

Africa(2)2NA

Topaz Solutions-6NA

Corporate / adj(1)(1)-

Total3133+6%

EBITDA increased by US$2m, or 16%, to US$33m during the period compared to US$31m in the same period last year. This increase was mainly the result of (i) EBITDA from the Tengiz project of US$6m and (ii) nine vessels working in Africa US$4m. However, this increase was partially offset by (i) loss of EBITDA of US$4m Azerbaijan on vessels coming off-charter from completed projects and (ii) off-hire/standby rate on two subsea vessels of US$2m.

Administrative expenses:

Administrative expenses increased by US$1m, or 17%, to US$7m during the period, compared to US$6m in the same period last year, as a direct consequence of the increased footprint. The commencement of the Tengiz contract, which resulted in increased manpower and office costs, contributed to the increase.

Finance costs:

Finance costs increased by US$1m, or 7%, to US$15m during the period compared to US$14m from the prior period due to an increased debt amount and slightly higher cost of funding on the refinanced bond.

Income tax expenses:

Income tax expense importantly remained steady at US$4m in both periods.

Cash flow

Cash generation as a percentage of EBITDA for the quarter ended 31st March 2018 was 67% (January to March 2017: 108%). The table below illustrates the cash flow for the reporting period:

US$ Millions

CASH FLOWThree Months Ended

Mar 2017Mar 2018% Change

EBITDA3133+6%

Changes in working capital3(11)NM

Cash generated from Operations3422-35%

Cash conversion108%67%-43PPT

Income tax paid(4)(3)-25%

Interest paid(6)(22)NM

Net Cash generated from operating activities24(3)NM

Net Cash used in Tengiz-(12)NA

Cash used in investing activities(6)(7)+17%

Cash provided by financing activities(1)(8)NM

Increase/(decrease) in cash and cash equivalents18(30)NM

Investing activities include US$3m towards expansion CAPEX and US$4m towards maintenance, mobilization and upgrade CAPEX. Financing activities include bilateral debt repayment of US$7.5m. Interest payments include US$3.5m of interest payments on the bilateral facility and US$17.1m coupon payment on the bonds.

Unutilized banking lines as at 31st March 2018 include an RCF of US$75m expiring in April 2020.

Financing

FacilityMaturityInterest RateRepaymentOutstanding at 31 March 18 US$’000

Conventional and Islamic facility**7 years3 month LIBOR

+ 2.75%Quarterly with bullet repayment288,796

Senior Notes5 years9.125%Bullet366,902

Total Topaz Loans 655,698

*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 at 31st March 2018, Topaz is compliant with all financial covenants.

Financial CovenantThresholdAs of 31 March 2018

Net Interest-Bearing Debt to EBITDA< 5.755.09x

Headroom 11%

Tangible Net Worth> US$275mUS$310m

Headroom 13%

Free liquidity (in millions)> US$30mUS$123m

Headroom 311%

EBITDA to DSCR> 1.20x1.41x

Headroom 18%

Capitalization

The following table sets out the consolidated cash, total indebtedness, shareholders’ funds, total capitalization and net debt at the end of the last five quarters.

US$ Millions

Mar- 17Jun- 17Sep- 17Dec- 17Mar- 18Change Mar’18 v Mar’17

Cash & Cash Equivalents5749517848(9)

Floating rate senior secured loans292286278296289(3)

Other loans / Senior Notes¹34634636636636721

Subordinated shareholder funding7979797979-

Total debt71771172374173518

Total equity459449422343341(118)

Total capitalization1,1761,1601,1451,0841,076(100)

Net debt65966167266368728

Total debt / LTM EBITDA5.35.65.96.36.1

Net debt / LTM EBITDA4.85.25.55.65.7

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.

Original source: http://www.topazworld.com/press-room/news/financial-results-for-the-quarter-ended-31-march-2018