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Third Quarter Financial Statement And Dividend Announcement For The Nine Months Ended 30 September 2017

Financials Archive

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Income statement

Profit and Loss

Statement of comprehensive income for three months ended 30 September 2017

comprehensive income

Statement of financial position

Balance Sheet

Review Of Performance

INCOME STATEMENT REVIEW

3Q17 vs 3Q16

The Group's revenue for the three months ended 30 September 2017 ("3Q17") decreased by US$16.1 million (20.2%) to US$63.7 million as compared to the corresponding three months ended 30 September 2016 ("3Q16"). The decrease in revenue was mainly due to:

  1. reduction in charter rates;
  2. drop in utilisation rate of the Group's Service Rigs; and
  3. further depression in utilisation rate of the Group's Offshore Support Vessels.

The cost of sales and servicing for 3Q17 decreased by US$3.8 million (5.7%) to US$62.0 million as compared to 3Q16.

As a result of the above, the Group's gross profit for 3Q17 decreased by US$12.3 million (88.0%) to US$1.7 million as compared to 3Q16.

The decrease in other income in 3Q17 as compared to 3Q16 was mainly due to the foreign exchange gain recorded in 3Q16.

The other operating expenses in 3Q17 includes foreign exchange losses which amounted to approximately US$6.3 million mainly due to the strengthening of the Singapore Dollar against the United States Dollar as at 30 September 2017 and this resulted in foreign exchange losses on the Group's Notes Payable.

The increase in finance costs in 3Q17 as compared to 3Q16 was mainly due to the additional interest expense arising from higher interest rates as compared to 3Q16.

The lower share of associates and jointly controlled entities' results in 3Q17 as compared to 3Q16 was mainly due to lower contributions from the Group's Joint Ventures and Associates.

The Group incurred loss before income tax of US$13.2 million as a result of all the above.

Charter income derived from Singapore flagged vessels are exempted from tax under Section 13A of the Income Tax Act of Singapore. Current period income tax expense of US$0.5 million relates to the corporate tax expense and withholding tax expense incurred by vessels operating in certain overseas waters.

9M2017 vs 9M2016

The Group's revenue for the nine months ended 30 September 2017 ("9M17") decreased by US$45.9 million (18.7%) to US$199.7 million as compared to the corresponding nine months ended 30 September 2016 ("9M16"). The decrease in revenue was mainly due to:

  1. reduction in charter rates;
  2. drop in utilisation rate of the Group's Service Rigs; and
  3. further depression in utilisation rate of the Group's Offshore Support Vessels.

The cost of sales and servicing for 9M17 decreased by US$10.6 million (5.5%) to US$182.6 million as compared to 9M16.

As a result of the above, the Group's gross profit for 9M17 decreased by US$35.4 million (67.4%) to US$17.1 million as compared to 9M16.

The decrease in other income in 9M17 as compared to 9M16 was mainly due to lower gain arising from the disposal of subsidiaries as compared to the gain on assets held for sale in 9M16.

The decrease in administrative expenses in 9M17 as compared to 9M16 was mainly due to further cost cutting measures undertaken by the Group.

The other operating expenses in 9M17 includes unrealised foreign exchange losses which amounted to approximately US$25.3 million mainly due to the strengthening of the Singapore Dollar against the United States Dollar as at 30 September 2017 and this resulted in foreign exchange losses on the Group's Notes Payable.

The higher share of associates and jointly controlled entities' results in 9M17 as compared to 9M16 was mainly due to higher contributions from the Group's Joint Ventures and Associates.

As a result of the above, the loss before income tax for 9M17 stands at US$27.0 million.

Charter income derived from Singapore flagged vessels are exempted from tax under Section 13A of the Income Tax Act of Singapore. Current period income tax expense of US$2.0 million relates to the corporate tax expense and withholding tax expense incurred by vessels operating in certain overseas waters.

STATEMENT OF FINANCIAL POSITION REVIEW

Non-current Assets

The Group's Non-current Assets amounted to US$2,365.2 million as at 30 September 2017. The decrease in Non-current Assets was mainly due to depreciation charges on Plant and Equipment during the period. The decrease in Joint Ventures was mainly due to the transactions in relation to the acquisition and subsequent divestment of joint ventures as announced on 28 March 2017 and 31 March 2017. The decrease is offset by the increase in investment in associates.

Current Assets

The Group's Current Assets amounted to US$502.8 million as at 30 September 2017. The decrease in Current Assets was mainly due to the repayment of loans, interest cost, deployment of funds towards the Group's Service Rigs. The decrease is offset by the increase in Trade Receivables and Other Current Assets, mainly due to the increase in amount owing from joint ventures.

Total Liabilities

The Group's Total Liabilities amounted to US$1,581.7 million as at 30 September 2017. The decrease in Total Liabilities was due mainly to repayment of loans due to banks offset by the increase in the Group's Notes Payable arising from the strengthening of the Singapore Dollar against the United States Dollar as at 30 September 2017. Included in Other Payables were the advance payments, performance deposits received, deferred revenue and accrued expenses.

Total Equity

The decrease in Total Equity was attributable mainly due to the losses incurred in the period.

STATEMENT OF CASH FLOWS REVIEW

Cash Flow from Operating Activities

The Group's net cash inflow from operating activities was US$43.4 million. This was mainly due to the net cash generated by the operations of the Group.

Cash Flow from Investing Activities

The Group's net cash used in investing activities was US$66.9 million. This was mainly due to the deployment of funds towards the Group's Service Rigs.

Cash Flow from Financing Activities

The Group's net cash used in financing activities was US$136.7 million. This was mainly due to repayment of bank borrowings and interest costs during the period.

Commentary

Update on the Group's Operation

The Group has generated positive net cashflow from operations amounting to US$43.4 million for the nine months ended 30 September 2017. The Group continues to expect positive cashflow from operations in the future based on the existing contracts.

The Group has managed to further deploy 4 additional units of Self-Propelled Jack-up Rigs ("Liftboats") further to the last reported financials. These included 3 units of the Liftboats to the offshore oil and gas industry as well as 1 unit of the Liftboat to the offshore windfarm industry.

The Group has undergone a strategic overview of its business and will focus on Liftboats. In the past few months, the Group has received enquiries for more units of its Liftboats which indicates strong demand for Liftboats services going forward. The Group is endeavoring to deploy its remaining 5 units of its Liftboats within the next 12 months. However, the Group presently does not have the appropriate capital and debt structure and cashflow to meet the required obligation for successful deployment of these Liftboats.

Hence, the Group has been actively engaging the various stakeholders to achieve a comprehensive solution while striving to preserve value for all the stakeholders.

Group's Refinancing Exercise

The Group is currently in advanced stages of negotiation with secured lenders to refinance the Group's existing liabilities as well as to release additional working capital required for the deployment of its remaining units of Liftboats. The principal terms of the refinancing includes each secured lender accepting minimal fixed principal repayments over the next 6 years, decreasing the interest rates for such loan facilities (or potentially electing to charge interest at a substantially reduced fixed rate in order to receive the Company's warrants), and granting up to an aggregate of US$100 million in additional revolving credit facilities by such secured lenders.

The success of refinancing with secured lenders are conditional upon the Group's refinancing exercise with the Securitiesholders. As such, the Group is also concurrently seeking approval from Securitiesholders on the refinancing of its liabilities to Securitiesholders. On 23 October 2017, the Group had announced the refinancing proposal for Securitiesholders and notice of meeting with the Securitiesholders for the Consent Solicitation Exercise ("CSE") to be held on the 20 November 2017.

In summary, the Group proposed for Securitiesholders of Series 003, 004, 005, 006, and 007 to elect for either Series A non-convertible bonds due 2024 or Series B convertible bonds due 2023, both with interest rate of 0.25%. The Group proposed for Securitiesholders of Series 008 to elect for either Series C non-convertible bonds due 2027 or amended Series 008 to allow conversion into the Company's shares.

In the event the Group achieve successful results for CSE and refinancing with secured lenders, the Group will convene an Extraordinary General Meeting to seek the Company's Shareholders approval on the proposed refinancing exercise.

The Group's ability to meet all its future obligations is dependent on the success of the CSE, the support from all its bankers, and the approval of the shareholders.

Impairment assessment of the Group's Assets

The utilisation of the Group's Service Rigs and Offshore Logistics Vessels remains depressed and the Group is currently exploring various options to reduce the burn rates of the Service Rigs and offshore logistics vessels that are currently not deployed. While the Group continues to seek deployment opportunities, the Group will be looking for opportunities to dispose its Service Rigs and Offshore Logistics Vessels that are currently not deployed and may be considered to be economically not viable. For long overdue and disputed receivables, the Group may terminate the contract and will seek to take repossession of those assets if there are opportunities to sell them or for potential redeployment.

In view of the above, the Group is in the process of assessing the amount of impairment losses on its assets, such as vessels and trade receivables. The assessment of the amount of impairment losses on the Group's assets is a highly judgemental and complex exercise which is heavily dependent on the market circumstances. The Group expects to finalise the assessment of the amount of impairment losses before the release of 4Q17 results.

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