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Third Quarter Report
Period Ended 30 September 2015
Songa Offshore Group Third Quarter Report 2015
Third quarter key points
Selected financial information
(IFRS unaudited figures)
Q3 2015
Q3 2014
Jan - Sep
2015
Jan - Sep
2014
Full year
2014
Total Revenue
Operating expenses
Operating profit before depreciation (EBITDA)
Operating profit (EBIT)
Net profit (loss)
124
(60)
64
(297)
(317)
110
(68)
42
13
1
354
(177)
178
(249)
(311)
415
(247)
169
25
(6)
495
(298)
197
17
(57)
Earnings (loss) per share, basic and diluted
(0.04)
0.00
(0.03)
(0.01)
(0.07)
873,913
873,913
873,913
873,913
873,913
Amounts in USD million
Income statement data
Number of shares (000)
Financial performance
Songa Offshore SE (“Songa Offshore” or “the Group” or “the Company”) reports:
o
Revenue of USD 124.2 million in the third quarter 2015 and USD 354.4 million for the nine months of 2015
o
EBITDA in the third quarter of USD 63.8 million and USD 177.8 million for the nine months of 2015, with
EBITDA margins of 51% for the third quarter 2015 and 50% for the nine months of 2015
o
An impairment loss in the third quarter 2015 of USD 328.3 million was recognized
o
Loss in the third quarter of USD 317.5 million and USD 311.5 million for the nine months of 2015
o
Loss per share in the third quarter of USD 0.04 and USD 0.03 for the nine months of 2015
Highlights
o
The Company took delivery of Songa Endurance on 24 August 2015 and has drawn down the rig related
financing accordingly
o
Songa Equinox arrived in Norwegian waters 22 October 2015
o
Songa Dee, Songa Delta and Songa Trym delivered 100% operational efficiency and an average of 97.6%
earnings efficiency in the third quarter 2015
o
Average operating expense in the third quarter 2015 was USD 137,000 per rig per day compared to USD
141,000 per rig per day in the second quarter 2015
o
EBITDA in the third quarter 2015 was USD 63.8 million, compared to USD 60.4 million in the second
quarter 2015, reflecting both higher revenue and lower cost
o
Following further developments in the Norwegian Continental Shelf (NCS) drilling market during the
quarter, the Company performed an impairment test of its rigs, resulting in the recognition of an
impairment for the third quarter 2015 of USD 328.3 million related to Songa Dee, Songa Delta and Songa
Trym
o
On 2 November 2015 the Company received a notice of cancellation of the drilling contract with Statoil for
Songa Trym effective from when the current well is completed around 12 November 2015. The Company
will receive a contractual cancellation fee based on the current full day rate of USD 377,000 and the
contractual end date early March 2016
2
Songa Offshore Group Third Quarter Report 2015
Review of financial results, financing and financial position
of the Group for the third quarter 2015
Financial results
Operating revenue in the third quarter 2015 was USD 99.7 million, compared to USD 91.1 million in the third quarter
2014. The increase is primarily due to higher revenue contribution from Songa Dee as the rig was partly in yard for
its Special Periodic Survey (SPS) in the third quarter 2014.
Other revenue in the third quarter 2015 was USD 10.8 million, compared to USD 10.7 million in the third quarter
2014.
Total revenue in the third quarter 2015 was USD 124.2 million, compared to USD 109.6 million in the third quarter
2014. The main reason for the increase is the same as described above.
Operating expenses were USD 37.9 million, compared to USD 49.1 million in the corresponding prior year quarter,
primarily explained by USD 9.2 million of favourable currency fluctuation from stronger USD, and USD 2.2 million
lower operating expenses related to the three operating rigs.
General and Administrative (G&A) expenses were USD 9.8 million compared to USD 11.7 million in the
corresponding prior year quarter. The decrease is mainly explained by lower South East Asia administration cost
of USD 1.0 million and favourable currency fluctuation.
EBITDA was USD 63.8 million compared to USD 42.1 million in the corresponding prior year quarter. This
represents an EBITDA margin of 51%, compared to 38% in the third quarter 2014, reflecting the aforementioned
changes.
Depreciation was USD 32.5 million, compared to USD 27.6 million in the corresponding prior year quarter expense.
The higher depreciation mainly reflects the 2014 Songa Dee SPS expenditures that are depreciated over five years.
During the third quarter 2015, the Company incurred an impairment charge of USD 328.3 million related to Songa
Dee, Songa Delta and Songa Trym, primarily reflecting the negative developments both in the global and the
Norwegian Continental Shelf drilling markets.
Loss before Interest and Tax (EBIT) was USD 296.9 million compared to a profit of USD 13.2 million in the same
period in 2014, resulting from the above changes.
Finance income was USD 1.4 million in the third quarter 2015. USD 1.3 million is related to interest income on
financial assets related to the Songa Mercur and Songa Venus transaction that are recorded at a discounted value.
Finance expenses in the third quarter 2015 were USD 4.4 million compared to USD 9.5 million in the third quarter
2014. The decrease in expensed finance cost is primarily explained by the additional capitalization of the finance
cost related to Cat D new-builds.
Other financial items were negative by USD 14.2 million in the third quarter 2015. USD 17.6 million represents
realized foreign exchange losses in the third quarter in relation to foreign exchange forward transactions. This is
partly offset by a gain of USD 3.4 million primarily related to unrealized mark-to-market valuation changes of foreign
exchange forward transactions and balance sheet item revaluations. All items are reflecting the continued
appreciation of the US Dollar vs. the Norwegian Kroner during third quarter.
Loss before tax in the third quarter 2015 was USD 314.1 million compared to a profit of USD 3.4 million in the
corresponding prior year quarter.
Income tax expense in the third quarter 2015 was USD 3.3 million compared to USD 2.3 million in the third quarter
2014. Tax charges for the quarter were mainly of a non-cash nature and related to the Norwegian operations.
Loss in the third quarter 2015 was USD 317.5 million, compared to a profit of USD 1.1 million in the third quarter
2014.
3
Songa Offshore Group Third Quarter Report 2015
Financing
Cash position
During the third quarter of 2015, the Group’s unrestricted cash position decreased by USD 13.4 million from USD
168.6 million in the second quarter to USD 155.2 million. This is primarily reflecting new financing of USD 455.0
million and USD 95.2 million in cash flow from operations, partly offset by USD 524.4 million of capital expenditures,
primarily related to Songa Endurance, debt repayments of USD 19.0 million and cash outflows of USD 20.2 million
related to interest payments.
Songa Endurance credit facilities
In connection with the delivery of Songa Endurance on 24 August 2015 the Company utilized all credit facilities
related to the rig. These fully utilized facilities total USD 507 million and consist of USD 387 million of senior facilities
and USD 120 million of junior facilities, of which USD 52 million were already drawn.
Financial covenants
As of 30 September 2015, the Company is in compliance with all financial covenants under its loan and bond
agreements. Due to the impairment charge in third quarter 2015, as well as the balance sheet build-up from the
upcoming Cat D 3 and 4 deliveries, financial covenants related to book equity will potentially come under pressure
in 2016 when all Cat Ds are delivered. In this respect, the Company has had discussions with lenders and is working
towards a conclusion on the matter during fourth quarter 2015.
Rig Operations
All Songa Offshore’s operating rigs are working for Statoil on the Norwegian Continental Shelf. The three rigs had
an operational efficiency of 100.0% in the third quarter 2015. The average earnings efficiency was 97.6% in the
quarter.
Songa Dee achieved an operating efficiency of 100.0% during the third quarter 2015 and an earnings efficiency of
97.2%.
Songa Delta achieved an operating efficiency of 100.0% during the third quarter 2015 and an earnings efficiency
of 98.7%.
Songa Trym achieved an operating efficiency of 100.0% during the third quarter 2015 and an earnings efficiency
of 96.8%.
On 2 November 2015 the Company received a notice of cancellation of the drilling contract with Statoil for Songa
Trym effective from when the current well is completed around 12 November 2015. The Company will receive a
contractual cancellation fee based on the current full day rate of USD 377,000 and the contractual end date early
March 2016.
4
Songa Offshore Group Third Quarter Report 2015
Cat D New build Projects
Songa Equinox was delivered from DSME on 30 June 2015 and arrived in Fensfjorden, Norway on 24 October
2015. All third party equipment was installed before the rig arrived in Norway. Currently the rig is carrying out the
client’s Acceptance Test Program prior to contract commencement, targeted for end November 2015.
Songa Endurance was delivered from DSME on 24 August 2015. It has completed the third leg of its transit from
Korea to Norway and is currently in transit from Walvis Bay to Las Palmas. The rig is expected to arrive in Norway
late November 2015. All third party equipment will be installed on the rig before it arrives in Norway. Upon arrival
in Norway, the Songa Endurance will carry out the same acceptance tests as Songa Equinox.
The application for Acknowledgement of Compliance (AoC) for Songa Equinox was submitted to Petroleum Safety
Authorities Norway PSA(N) early March 2015, and the Songa Endurance’s application was submitted early August
2015. PSA audit and inspections have taken place at DSME with final verifications to take place shortly after rig
arrival in Norway.
The construction progress for Songa Encourage and Songa Enabler as per end of September 2015 was 92.2%
and 79.6% respectively. Delivery of Songa Encourage is scheduled in late November 2015, while Songa Enabler
is targeted to be delivered in the first half of the first quarter 2016.
The “ready-to-drill” cost estimates have not materially changed at an average of approximately USD 690 million
per rig, excluding deductible liquidated damages and costs for assisting tugs for the transit to Norway. Songa
Offshore will in addition receive USD 40 million per rig from Statoil in mobilization fee in relation to delivery. The
Company has received the mobilization fee for both Songa Equinox and Songa Endurance in August and
September 2015 respectively.
Cat D arbitration case with DSME
In July 2015, Songa Offshore received from DSME notices of arbitration in respect of the construction contracts for
the Cat D rigs. Since announcing the arbitration, DSME has not presented neither amount nor details of its claim.
DSME has previously alleged that the design documents (often referred to as the FEED package) contained
inherent errors and omissions, which, in turn, DSME asserted to have caused it to undertake extra work resulting
in delays and cost overruns. DSME considers that those delays and cost overruns are the responsibility of Songa
Offshore.
As previously reported, the Company will vigorously defend its position, since it is of the view that DSME is
responsible for the delays and any attempt to recover cost overruns is of no merit due to the "turn-key" nature of
the construction contracts. Songa Offshore has continued to prepare its case and remains confident of its position.
In this respect, the Company has obtained legal opinions from highly reputable law firms in the UK and Norway and
from a Queen's Counsel all of which confirm the Company’s position.
5
Songa Offshore Group Third Quarter Report 2015
Contract Status as of 6 November 2015
Unit
Customer
Current
Day rate
2015
2016
2017
2018
2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Option
Day rate
Norwegian Continental Shelf
Songa Dee
Statoil
362
Songa Trym
Statoil
377
Songa Delta
Statoil
369
Firm contract end rate
Songa Equinox
Statoil
490
Firm contract end rate + $15 k
Songa Endurance
Statoil
490
Firm contract end rate + $15 k
Songa Encourage
Statoil
443*
Firm contract end rate
Songa Enabler
Statoil
447*
Firm contract end rate
NCS Newbuilds
8 year firm + 4x3 year options
8 year firm + 4x3 year options
8 year firm + 4x3 year options
78year
yearfirm
firm++4x3
4x3year
yearoptions
options
*USDNOK quarter end rate of 8.50
Contract (incl. mob)
Yard
Option
SPS
The firm contract revenue backlog as of 30 September 2015 is USD 5.7 billion, with another USD 7.8 billion worth
of options.
Market conditions and outlook
The Brent Crude Oil has continued to trend around USD 50 per barrel. The North Sea drilling market is still very
challenging with only a few short-term contacts in the market, both on the NCS and in the UK. As a result, several
rigs have come off contract and been stacked during the quarter. Visibility is still low and the competition for the
few tenders in the market is fierce. Songa Offshore is of the view that 2016 and 2017 will be two challenging years
for the industry.
6 November 2015
Limassol, Cyprus
Board of Directors
Songa Offshore SE
Questions should be directed to:
Bjornar Iversen, CEO + 357 99649152
Jan Rune Steinsland, CFO +47 97052533
6
Songa Offshore Group Third Quarter Report 2015
Consolidated Statement of Comprehensive Income
(IFRS unaudited figures)
For the period ended 30 September
Q3 2015
Q3 2014
Jan - Sep
2015
Jan - Sep
2014
31.12.2014
Operating revenue
Reimbursables
Other revenue
Total revenues
99,697
13,721
10,816
124,234
91,142
7,809
10,695
109,645
292,388
28,769
33,287
354,443
353,947
34,683
26,652
415,283
418,614
37,677
38,461
494,752
Operating expenses
Reimbursables
General and administrative expenses
Other gain and loss
Share of profits from joint venture
Total expenses
EBITDA
EBITDA %
(37,874)
(12,668)
(9,846)
(60,388)
63,846
51%
(49,105)
(7,448)
(11,667)
(155)
823
(67,550)
42,095
38%
(115,015)
(26,990)
(33,783)
(866)
(176,654)
177,789
50%
(180,584)
(30,285)
(37,433)
697
823
(246,781)
168,502
41%
(217,119)
(33,196)
(48,678)
799
Depreciation
Impairment
EBIT
(32,457)
(328,283)
(296,894)
(239%)
(27,610)
(1,254)
13,231
12%
(98,297)
(328,283)
(248,790)
(70%)
(86,322)
(57,218)
24,962
6%
(114,299)
(64,899)
17,360
Finance income
Finance expenses
Other financial items
Net financial items
Profit (loss) before tax
Income tax (expense) credit
1,376
(4,405)
(14,198)
(17,227)
(314,122)
(3,345)
1,124
(9,492)
(1,506)
(9,874)
3,357
(2,298)
4,329
(19,703)
(36,839)
(52,213)
(301,003)
(10,455)
1,247
(25,313)
(2,059)
(26,126)
(1,164)
(5,224)
3,414
(33,546)
(43,794)
(73,926)
(56,566)
(97)
Profit (loss) for the period
(317,466)
1,060
(311,458)
(6,388)
(56,663)
(0.04)
0.00
(0.03)
(0.01)
(0.07)
(317,466)
1,060
(311,458)
(6,388)
(56,663)
(7,103)
2,092
(565)
(5,394)
-
(13,919)
6,275
(1,652)
(5,355)
-
(13,824)
(7,485)
2,092
5,427
(323,042)
(4,335)
(320,754)
(11,743)
(70,453)
Amounts in USD ‘000
Earnings (loss) per share (USD)
Basic and diluted
(298,194)
196,558
40%
Consolidated statement of comprehensive income (OCI)
Profit (loss) for the period
Other comprehensive income
Remeasurements of post employment benefit
obligations
Financial derivatives hedging effects
Foreign exchange forward hedge discontinued
Tax OCI elements
Total comprehensive income (loss)
7
Songa Offshore Group Third Quarter Report 2015
Consolidated Statement of Financial Position
(IFRS unaudited figures)
For the period ended
Amounts in USD ‘000
30.09.2015
31.12.2014
651,976
1,819,371
17,939
96,371
43,099
2,628,756
1,063,416
731,057
53,722
72,740
52,971
1,973,907
45,611
6,091
33,546
36,684
318
12,946
200,061
335,256
41,577
4,597
25,419
14,894
246,161
332,648
2,964,013
2,306,554
132,762
633,869
(49,606)
717,024
132,762
633,868
269,138
1,035,768
1,223,974
254,378
116,099
253,102
74,239
15,867
270,642
282,292
109,649
172,089
22,335
22,512
Total non-current liabilities
Current liabilities
Current portion of bank loans and other facilities
Trade payables
Tax payable
Deferred revenue
Derivative financial instruments
Other liabilities
Total current liabilities
Total liabilities
1,937,659
879,519
155,730
40,705
4,777
36,343
7,100
64,675
309,329
2,246,989
176,875
13,424
3,519
41,710
39,125
116,613
391,266
1,270,785
Total equity and liabilities
2,964,013
2,306,554
ASSETS
Non-current assets
Rigs, machinery and equipment
New-builds
Financial assets
Derivative financial instruments
Deferred tax assets
Total non-current assets
Current assets
Trade receivables
Prepayments
Earned revenue
Financial assets
Derivative financial instruments
Other assets
Bank and cash balances
Total current assets
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Issued capital
Share premium
Other equity
Total equity
Non-current liabilities
Bank loans and other facilities
Bond loans
Convertible bond
Derivative financial instruments
Deferred revenue
Other long term liabilities
8
Songa Offshore Group Third Quarter Report 2015
Consolidated Statement of Changes in Equity
(IFRS unaudited figures)
Share
Capital
Share
Premium
Other
reserves
Post
employment
benefit
reserve
Hedging
reserve
Retained
earnings
Total equity
123,447
-
617,825
-
55,096
-
(10,612)
-
6,984
5,355
287,814
(6,388)
-
1,080,554
(6,388)
5,355
-
-
-
-
5,355
(6,388)
(1,033)
9,314
-
16,049
-
-
-
-
-
25,364
-
9,314
16,049
-
-
-
-
25,364
Balance as at 30 September 2014
132,762
633,874
55,096
(10,612)
1,629
281,426
Balance as at 1 January 2015
Profit for the period
Other comprehensive income
Total comprehensive income from
the period
132,762
-
633,868
-
55,407
-
(20,704)
-
3,286
(9,296)
231,151
(311,458)
-
1,035,768
(311,458)
(9,296)
-
-
-
-
(9,296)
(311,458)
(320,754)
-
-
-
-
-
-
-
-
-
2,009
-
-
-
2,009
-
-
2,009
-
-
-
2,009
132,762
633,869
57,416
(20,704)
(6,009)
(80,307)
717,024
Amounts in USD ‘000
Balance as at 1 January 2014
Loss for the period
Other comprehensive income
Total comprehensive income from
the period
Issue of share capital
Issue of convertible bond
Total transactions with owners,
recognised directly in equity
Issue of share capital
Employee long term incentive
program
Total transactions with owners,
recognised directly in equity
Balance as at 30 September 2015
1,094,175
9
Songa Offshore Group Third Quarter Report 2015
Consolidated Statement of Cash Flows
(IFRS unaudited figures)
30.09.2015
30.09.2014
(301,003)
(1,164)
Adjustment for:
Depreciation
Cost of option plans
Impairment
Finance costs
Other financial items
Other gain and loss
98,297
0
328,283
19,703
36,839
866
86,322
(51)
57,218
25,313
1,362
Movements in working capital:
Change in receivables
Change in payables
Change in other liabilities
Increase in restricted cash balances
Cash generated from operations
(11,706)
27,281
(25,393)
(20,000)
153,166
15,607
7,676
(45,405)
146,878
Taxes paid
Interest paid
Financing fees paid
Cash effect from other financial items
Net cash generated from operating activities
(385)
(55,907)
(5,753)
(15,872)
75,249
(3,929)
(33,695)
(25,714)
83,540
(1,092,331)
(1,092,331)
(98,503)
102,500
3,997
1,140,000
(195,051)
944,949
25,495
103,662
(79)
(227,860)
(98,783)
(72,133)
227,300
(11,246)
432,838
155,167
421,592
For the period ended
Amounts in USD ‘000
Cash flows from operating activities:
Profit (loss) before tax
Cash flows from investing activities:
Purchase of property, plant and equipment
Proceeds from the sale of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from share issue
Proceeds from the issue of bonds and new bank loan raised
Share issuance transaction cost
Repayment of bonds and bank loans
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Unrestricted cash and cash equivalents at the end of the
period
10
Songa Offshore Group Third Quarter Report 2015
FINANCIAL STATEMENTS
1 General information
In furtherance of a shareholder-approved plan to re-domicile to Cyprus, on 12 December 2008, Songa Offshore
ASA was converted into a European public company limited by shares (“Societas Europaea” or “SE”) in accordance
with Article 2 no. 1 of the European Council Regulation no. 2157/2001(the “SE Regulation”) and Section 5 of the
Norwegian Act on European Companies of 1 April 2005 (the “SE Act”). The conversion into an SE was effected
through a merger between Songa Offshore ASA and Songa Offshore Cyprus Plc. Effective 11 May 2009, the
survivor of the merger, Songa Offshore SE, transferred its registered office to Cyprus in accordance with Article 8
of the SE Regulation and Section 7 of the SE Act (the “re-domiciliation”).
Songa Offshore SE is a public limited liability company, subject to the laws and regulations of the Cyprus
Companies Law, Cap. 113. The address of its registered office is: 4, Profiti Elia, Kanika International Business
Centre, 6th Floor, Germasogeia. The Company’s shares have been listed on the Oslo Stock Exchange since 26
January 2006 with the ticker SONG.
Songa Offshore SE (“the Company”) and its subsidiaries (together, “Songa Offshore” of “the Group”) are engaged
in the business of constructing, owning and operating drilling rigs to be used in exploration and production.
Songa Offshore operates in the international oil service industry within the offshore drilling sector, and owns and
operates a fleet of three semi-submersible rigs, Songa Dee, Songa Delta and Songa Trym, all operating in the midwater segment in the Norwegian part of the North Sea. Drilling rigs, related equipment and crews are generally
contracted on a day rate basis to exploration and production companies. The Songa Mercur and the Songa Venus,
both previously owned 100% by Songa Offshore, now owned 100% by the Opus Offshore Group, are operated in
South East Asia through a 50% owned Joint Venture established with Opus Offshore Group.
In addition to the three semisubmersible drilling rigs in operation, Songa Offshore took delivery of Songa Equinox
on 30 June 2015 and Songa Endurance on 24 August 2015. Furthermore, Songa Offshore has two
semisubmersible Cat D drilling rigs, Songa Encourage and Songa Enabler, under construction at the DSME yard
in Korea.
Songa Dee, Songa Delta, Songa Trym, Songa Equinox and Songa Endurance and the remaining two rigs under
construction, are contracted for employment in Norwegian waters, with Statoil as charterer.
The Company is headquartered in Limassol, Cyprus, and the Norwegian rig operations are managed from
Stavanger, Norway.
2 Basis for preparation
The condensed unaudited consolidated interim financial statements have been prepared in accordance with IAS
34 Interim Financial Reporting. The interim financial statements should be read in conjunction with the annual
consolidated financial statements for the year ended 31 December 2014, which have been prepared in accordance
with IFRS as adopted by the European Union.
The Group does not consider that its drilling operations are affected by seasonality factors.
11
Songa Offshore Group Third Quarter Report 2015
3 Accounting policies
The condensed unaudited consolidated interim financial statements have been prepared under the historical cost
convention except from the revaluation of certain financial instruments.
In the current period, the Group has adopted all new and revised Standards and Interpretations issued by the
International Accounting Standards Board (the IASB) and the International Financial Reporting Interpretations
Committee (IFRIC) of the IASB that are relevant to its operations and effective for accounting periods beginning on
1 January 2015.
The accounting policies, presentation and methods of computation applied in these condensed consolidated
financial statements are consistent with those applied in the preparation of the Group’s consolidated annual
financial statements for the year ended 31 December 2014.
4 Financial risk management and financial instruments
Financial Risk
Through its activities the Group is exposed to a variety of financial risks: market risk, foreign currency risk, interest
rate risk, credit risk and liquidity risk arising from its operations and the financial instruments that it holds. The
Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to
minimize potential adverse effects on the Group’s financial performance. The Group makes use of derivative
financial instruments such as foreign exchange forward contracts and interest rate swaps to moderate certain risk
exposures.
The interim consolidated financial statements do not include all financial risk management information and
disclosures required in the annual financial statements; they should be read in conjunction with the Group’s
consolidated financial statements as at 31 December 2014.
Fair value estimation
The following table presents the Group’s assets and liabilities that are measured at fair value at 30 September
2015:
Carrying amount / fair value at 30 September 2015
Amounts in USD ‘000
Financial assets:
Financial assets
Derivatives
Financial liabilities:
Derivatives
Carrying amount / fair value at 31 December 2014
Amounts in USD ‘000
Financial assets:
Financial assets
Derivatives
Financial liabilities:
Derivatives
Level 1
Level 2
Level 3
-
96,689
54,623
-
-
(260,202)
-
Level 2
Level 3
-
72,740
53,722
-
-
(211,214)
-
Level 1
12
Songa Offshore Group Third Quarter Report 2015
Level 1
Fair value is measured using list prices from active markets for identical financial instruments. No adjustment is
made with a view to these prices.
Level 2
The fair value of financial instruments not traded on an active market is determined using valuation methods which
maximize the use of observable data, where available, and rest as little as possible on the Group’s own estimates.
Classification at level 2 presupposes that all the significant data required to determine fair value are observable
data.
Level 3
Fair value is not based on observable market data (that is, unobservable inputs).
5 Rig, machinery and equipment
Rigs
New-builds
Fixture
Total
1,050,598
12,704
731,057
1,088,314
12,817
2,435
1,794,473
1,103,453
Reclassification to asset held for sale
-
-
-
-
Machinery and equipment fully written off
-
-
-
-
1,063,302
(97,041)
1,819,371
-
15,253
(1,255)
2,897,926
(98,297)
-
-
-
-
Amounts in USD ‘000
Period ended 30 September 2015
Opening net book amount
Additions
Book value before depreciations
Total depreciation charge
Reclassification to asset held for sale
Impairment
(328,283)
-
-
(328,283)
697,978
1,819,371
13,997
2,471,347
Cost
1,331,244
1,819,371
18,049
3,168,664
Accumulated depreciation
(693,265)
-
(4,052)
(697,317)
637,978
1,819,371
13,998
2,471,347
Closing net book amount
At 30 September 2015
Net carrying amount
Estimated lifetime
2.5-25 years
3-10 years
Depreciation rates
4-40%
10-33%
Depreciation method
Straight line
Straight line
The net additions of USD 1,088.3 million for the nine month period ended 30 September 2015, include capitalized
interest on the Cat D new builds of USD 49.7 million. Total accumulated capitalized interest on the Cat D new builds
amount to USD 181.8 million.
The Company has identified impairment indicators and performed an impairment test of each individual rig, resulting
in an impairment of USD 328.3 million. The impairment consist of USD 43.1 million for the Songa Dee, USD 149.6
million for the Songa Delta and USD 135.6 million for the Songa Trym. The rigs were written down to their
recoverable amount.
The Company estimated recoverable amount includes a number of assumptions such as future performance of the
units, future contract opportunities, availabilities and day rates. A WACC of 8.9% has been applied.
13
Songa Offshore Group Third Quarter Report 2015
6 Borrowings
As of 30 September 2015, total drawn and outstanding debt for the Group, including cross currency swaps related
to the two unsecured bond loans, amounted to USD 1,962.2 million. Drawn and outstanding debt consisted of the
following:
USD 196.5 million outstanding of the bank facility that the Company entered into in October 2010, with a LIBOR +
2.91% margin. The loan is repaid with quarterly installments until final maturity in March 2018, on which date a
balloon payment of USD 25 million is due.
USD 169.2 million outstanding under the senior unsecured NOK 1,400 million bond issued in November 2011. The
NOK bond carries an 8.40% fixed interest. In December 2013 and following the restructuring the full NOK 1,400
million bond was swapped to USD 250.0 million at a fixed coupon of 7.73%. The swap matures with the maturity
of the NOK bond in May 2018. Upon maturity the bond will be repaid at 103.5% of par value.
USD 85.2 million outstanding under the senior unsecured NOK 750.0 million bond issued in June 2012. The NOK
bond carries a 7.50% fixed interest. In December 2013 and following the restructuring the full amount NOK 750
million bond was swapped to USD 124.7 million at a fixed coupon of 7.37%. The swap matures with the maturity
of the NOK bond in December 2018.
USD 150.0 million outstanding under the convertible bond issued in December 2013, with a book value of USD
116.1 at 30 September 2015. The convertible bond has a conversion price of USD 0.51032, semi-annual coupon
payments at 4.00% per annum and matures in December 2019.
USD 50.0 million outstanding under the unsecured shareholder loan from Perestroika AS. The interest rate is 3
months LIBOR + 8.00%.
USD 387.0 million outstanding under the senior facilities for the financing of Songa Equinox, which were drawn in
connection with the delivery of the rig in June 2015. The interest rate is 3 months LIBOR + 3.00%.
USD 117.0 million outstanding under the junior facilities for the financing of Songa Equinox, which were drawn in
connection with the delivery of the rig in June 2015. The interest rate is 7.50% fixed.
USD 387.0 million outstanding under the senior facilities for the financing of Songa Endurance, which were drawn
in connection with the delivery of the rig in August 2015. The interest rate is 3 months LIBOR + 3.00%.
USD 120.0 million outstanding under the junior facilities for the financing of Songa Endurance, which were drawn
in connection with the delivery of the rig in August 2015. The interest rate is 7.50% fixed.
USD 180.0 million outstanding under the pre-delivery facility for the financing of Songa Encourage and Songa
Enabler, witch where drawn on 30 June 2015. The interest rate is 3 months LIBOR + 3.00%.
7 Other financial items
For the period ended 30 September
Q3 2015
Q3 2014
Jan-Sep
2015
Jan-Sep
2014
31.12.2014
Revision of estimate of financial assets
Gain / Loss on realised foreign exchange
Forwards
17,573
-
3,157
45,752
-
8,693
5,420
Mark to Market change on financial derivatives
Net foreign exchange loss/ (gain)
Total Other financial items
(1,392)
(1,983)
14,198
(1,506)
(1,506)
(10,449)
(1,621)
36,839
(2,059)
(2,059)
32,438
(2,758)
43,794
Amounts in USD ‘000
14
Songa Offshore Group Third Quarter Report 2015
8 Bank and cash balances
For the period ended 30 September
Amounts in USD ‘000
Q3 2015
31.12.2014
Cash at the bank and in hand
155,167
227,300
Unrestricted cash and cash equivalents for the
purpose of the cash flow statement
155,167
227,300
39,439
5,455
11,602
7,259
Other bank deposits
Escrow account regarding employees’ tax
Restricted bank balances
Total bank and cash balances
44,894
18,861
200,061
246,161
9 Share capital
The total number of issued shares in the Group as at 30 September 2015 was 873,912,544, each with a par value
of EUR 0.11.
10 Tax – Australian Tax
As reported in the 2014 Songa Offshore SE Annual Financial Report, the Australian Taxation Office (ATO) raised
claims against Songa Offshore for the 2009 year in relation to the restructuring implemented in May 2009. The
dispute, including all matters with the ATO, was settled on 4 September 2015 with Songa Offshore agreeing to
make a cash payment of AUD 1.2m (approximately USD 0.8 million). A corresponding provision was made in the
second quarter 2015 interim financial statement.
11 Main events after the end of third quarter 2015
On 2 November 2015 the Company received a notice of cancellation of the drilling contract with Statoil for Songa
Trym effective from when the current well is completed around 12 November 2015. The Company will receive a
contractual cancellation fee based on the current full day rate of USD 377,000 and the contractual end date early
March 2016.
12 Approval of interim financial statements
These interim condensed consolidated financial statements were approved by the Board of Directors on 6
November 2015.
15