Prosafe Sees 2017 Pain; 2018 Recovery

Posted by Joseph Keefe November 3, 2016

Market outlook remains uncertain in near term, and although there are a number of prospects in years ahead, 2017 is still expected to be low point in activity level.

Prosafe:

* Expects a gradual market recovery from 2018 onwards

* Prosafe scrapped three rigs in Q3 due to the weak rig market

* CEO Stig Harry Christiansen told an earnings presentation on Thursday: "We have identified the next candidate to be scrapped, Safe Lancia, which is currently cold stacked"

* CEO says: "Rig is ready to be scrapped if we decide"

* Prosafe has a fleet of 11 rigs and one rig under construction for late delivery in 2019

* Has about 30-40 percent contract coverage for 2017

* Currently only two of the 11 rigs on long-term contracts in 2017 and onwards, while two others are partly covered for 2017

* Has moved quickly to scrap three vessels and it anticipates that other suppliers' vessels will be scrapped and/or exit high end of North Sea market in years ahead

* Is further anticipated that consolidation within accommodation segment will happen

* Combination of these factors means that supply-demand environment is expected to become more balanced towards 2020

* Targets offshore 2017 opex savings of $30-40 mln in 2017 to a revised target level of $140-$150 mln

* Targets onshore 2017 opex savings of $12 mln in 2017 to a revised target level of $28 mln

* Targets annual fleet capex savings of $40-45 mln in 2017 to a revised target level of $10-15 mln (excluding new-builds and conversions) vs $20-30 mln target in Q2 report

* Number of employees are cut by 35-40 percent to around 500 from 800

* Guides EBITDA for 2016 and 2017 combined at around $320 mln with current contract backlog compared to previous guidance of $280 mln-$360 mln

* Says EBITDA guidance for 2016 is higher while 2017 is lower

* Says refinancing has improved cash flow from 2017-2020 of more than USD 1 billion

* CEO says potential for more cost cutting and will come back to that in Q1 2017

* CEO says in phase two (of cost cutting) we have to work with the organisation, take a closer look at working processes, details: that's an interesting job and if you do that you can find more potential

* Net interest-bearing debt $1.24 bln at end of Q3 vs $1.22 bln a year ago.