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Polarcus CEO, Duncan Eley, commented:
"Our third quarter earnings demonstrated 10% improved revenue driven by higher
achieved day rates compared to Q2 2020. Tight cost control and strong project
execution led to improved EBITDA generation sequentially. With continued focus
on preserving liquidity we managed to deliver positive cash flow from the
business in Q3 2020 before debt service and working capital movements, despite
low fleet utilization.
Tender activity slowly increased during the quarter with demand uncertainty
remaining in the near term. We expect exploration and production spending to
increase through 2021 with fundamentals supporting a longer-term recovery.
COVID-19 has seen significant changes impact our market during 2020. The
enhanced business continuity measures and substantial cost reduction measures
implemented earlier in the year will enable the Company to successfully navigate
the near-term activity fluctuations.
Polarcus remains well positioned to continue securing and delivering premium
projects around the globe."
HEADLINES Q3 2020
- Segment revenues of USD 25.2 million, compared to USD 22.8 million in Q2
2020
- Segment EBITDA of USD 3.4 million, compared to negative USD 2.5 million in
Q2 2020
- Cash from operations of negative USD 2.6 million, compared to USD 12.7
million in Q2 2020
- Total cash balance of USD 32.4 million at quarter-end, compared to USD 44.8
million at end of Q2 2020
- Vessel utilization of 43%, compared to 50% in Q2 2020
- Backlog of approximately USD 139 million, compared to USD 141 million at end
of Q2 2020
- Bareboat charter for V. Tikhonov extended for three years, while Ivan Gubkin
was redelivered
Third quarter Segment revenues of USD 25.2 million improved 10% sequentially,
but decreased significantly compared to the same period last year as activity in
the marine seismic market remained subdued due to the global slow-down on the
back of the COVID-19 pandemic. Vessel utilization during the quarter dropped to
43% compared to 50% in Q2 2020 as a result of V. Tikhonov being on standby for
two months in Q3 2020. Core fleet utilization in the quarter remained flat
sequentially, while realized day rates on contracts increased 26%, resulting in
improved revenue compared to Q2 2020.
During the quarter, the V. Tikhonov charter was extended into Q4 2023 which
largely compensates for the loss of future bareboat charter revenue from Ivan
Gubkin (now Polarcus Amani) that was redelivered earlier than scheduled.
Operating cost continued to be tightly managed. With increased flexibility in
the cost base introduced during the last six months, gross cost of sales dropped
to USD 22.6 million compared to USD 23.5 million in the previous quarter and USD
63.0 million in Q3 2019. General and administrative costs reduced to USD 2.3
million compared to USD 2.8 million in the previous quarter and USD 3.1 million
in Q3 2019. The cost management measures implemented since Q1 2020 resulted in a
Segment EBITDA that improved sequentially to USD 3.4 million for the quarter.
Cash from operations in the quarter was negative USD 2.6 million impacted by
negative working capital movements of USD 5.8 million. Total cash at quarter-end
was USD 32.4 million compared to USD 44.8 million at the end of the previous
quarter.
Polarcus continues to secure new projects despite the challenging market
conditions, with four new awards announced since the end of Q2 2020. Backlog at
30 September 2020, together with the value of awards announced after the
quarter-end, is estimated at USD 139 million compared to USD 141 million at the
end of Q2 2020. The Company’s fleet is 50% booked to the end of H1 2021.
OUTLOOK
Continuing restrictions on economic activity worldwide to mitigate the effects
of COVID-19 have negatively impacted the Company’s earnings over the past six
months. This challenging market environment has led to a more uncertain outlook
with subdued demand for seismic services, lower day-rates and extended payment
terms. These market conditions continued through Q3 2020 and a recovery in
tender activity, whilst underway, has been slow.
Sentiment related to oil price and COVID-19 restrictions will be an important
factor for medium-term demand levels as E&P companies work with more compressed
budget cycles. A negative or neutral sentiment enduring through Q4 2020 will
likely mean that visibility of demand for the Company’s services for at least H1
2021 will remain limited. However, recent discussions with clients do indicate
that E&P investment is currently expected to increase during 2021.
The reshaping of the marine seismic industry that has occurred, resulting in
fewer acquisition companies, has led to an improved industry structure.
Continued supply-side discipline has been observed since the first impact of the
COVID-19 pandemic. Four vessels have been removed from the global vessel count
since the end of 2019 resulting in 19 global active vessels at the end of Q3
2020. With only 12 of these 19 vessels working on projects going into Q4 2020,
further supply-side discipline will be required in order to mitigate reduced
demand observed in 2020.
Industry-wide focus on the environment continues to sharpen and Polarcus is
receiving growing recognition for its Explore Green™ capabilities, a cornerstone
of the Company since inception. Following a successful launch in 2019, Polarcus
Cirrus™ is expected to gain further momentum as more E&P clients realize the
opportunity of accelerated decision-making to compress the timeline for
hydrocarbon production. With a highly efficient, modern and uniform fleet,
combined with demonstrated operational excellence, Polarcus is well-positioned
to continue securing and delivering premium projects around the globe, despite
the near-term uncertainty in marine seismic acquisition demand.
Note: All references above to “segment” results have been adjusted for IFRS 15
effects and non-recurring items. Refer to Note 3 in the accompanying interim
financial statements.
Contacts
Duncan Eley, CEO
+971 4 43 60 915
duncan.eley@polarcus.com (mailto:duncan.eley@polarcus.com)
Hans-Peter Burlid, CFO
+971 50 559 8175
hp.burlid@polarcus.com (mailto:hp.burlid@polarcus.com)
About Polarcus
Polarcus (OSE: PLCS) is a focused geophysical service provider of safe and
environmentally responsible marine acquisition services globally. Our
geophysical offering is driven by innovation and collaboration to provide
clients with better seismic data faster. Polarcus operates a fleet of high
performance seismic vessels with 3D and 4D imaging capabilities, which
incorporate leading-edge technologies for improved environmental performance and
operational efficiency. Polarcus offers contract seismic surveys and multi-
client projects with advanced priority processing solutions including Cirrus, a
suite of cloud-based applications and services designed to bring clients closer
to acquired seismic data, enabling faster and better informed exploration
decisions. The Company services its clients globally from its head office in
Dubai and regional offices located in Houston, London, Singapore and delivers
Group asset management services from Oslo. For more information, visit
www.polarcus.com
Disclaimer
The information included herein may contain forward-looking statements. Forward-
looking statements include all statements that are not historical facts,
including but not limited to statements expressing or implying the Company’s
intent, belief or current expectations with respect to, among other things,
forecasts, estimates, and predictions. Such forward-looking statements
necessarily involve risks and uncertainties and are dependent on assumptions,
information, data or methods that may be incorrect or imprecise. Actual results
could differ materially from expectations expressed in the forward-looking
statements if one or more of the underlying assumptions or expectations proves
to be inaccurate or is unrealized. Some factors that could cause actual results
to differ materially from those in the forward-looking statements include, but
are not limited to, developments in the oil and gas industry, the demand for
seismic services, the demand for data from the Company’s multi-client library,
currency risks, political risks, regulatory risks, and unexpected operational
setbacks. For a further description of other relevant risk factors we refer to
our 2019 Annual Report. The reservation is also made that inaccuracies or
mistakes may occur in the information given above concerning the current status
of the Company or its business. Any reliance on the information given above is
at the risk of the reader, and Polarcus disclaims any and all liability in this
respect.
This information is subject to the disclosure requirements pursuant to Section
5-12 the Norwegian Securities Trading Act
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