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

Thursday, May 31, 2018/ Editor -  

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Q1 2018 Revenues Increase 14% to US$66 million
 
Dubai, UAE, Wednesday 31 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”).
                                                                                                                     
                                                                        
                     Three Months Ended
  Mar 2017  Mar 2018  % Change
Consolidated Revenue  58 66   +14%
EBITDA  31  33  +6%
EBITDA Margin (%)  53%  50%  50%
Net Profit/(Loss)  (3)  (3)  -
Net Profit/(Loss) Margin (%) NM   NM  -
Core Vessel Utilization  62%  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
                REVENUE   Three Months Ended
Mar 2017  Mar 2018  % change
Caspian  45  38  -16%
MENA  11  10  -9%
Africa  2  7  +250%
Topaz Solutions  -  11  NA
Total  58  66  +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 COSTS    Three Months Ended
Mar 2017  Mar 2018  % change
Crew cost  11  13  +18%
Technical maintenance  3  4  +33%
Depreciation / dry-dock  17  16  -6%
Mobilization charges - - -
Others  9  +50%
Total  37  42  +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. 

                          EBITDA          Three Months Ended
Mar 2017  Mar 2018  % change
Caspian  31   24 -23%
MENA  3  -33%
Africa  (2)  NA
Topaz Solutions  -  NA
Corporate / adj  (1)  (1)  -
Total  31  33  +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 FLOW Three Months Ended
 Mar 2017  Mar 2018  % change
EBITDA  31  33  +6%
Changes in working capital  (11)  NM
Cash generated from Operations  34  22  -35%
Cash conversion  108%   67% -43PPT
Income tax paid  (4)  (3)  -25%
Interest paid (6)  (22)  NM
Net cash generated from operating activities  24   (3) NM
Net cash used in Tengiz  (12)  NA
Cash used in investing activities (6)   (7) +17%
Cash used in financing activities   (1)  (8)  NM
Increase/(decrease) in cash and cash equivalents  18   (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
Facility Maturity Interest Rate Repayment Outstanding at
31 March 18
US$’000
Conventional and Islamic facility**  7 years

 3month LIBOR 

     + 2.75%

 Quarterly with bullet repayment  
Senior Notes 5 years   9.125%   Bullet  366,902
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 Covenant  Threshold  31 March 2018
Net Interest-Bearing  Debt to EBITDA  < 5.75  5.09x
Headroom                                                                                                                11%
Tangible Net Worth  > US$275m  US$310m
Headroom                                                                                                                13%
Free liquidity (in millions) > US$30m US$123m
Headroom                                                                                                              311%
EBITDA to DSCR  > 1.20x 1.41x
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.
 
                                                                                                                   In US$ million
                 Mar-17  Jun-17  Sep-17  Dec’17  Mar’18 Change Mar’18 v Mar’17
Cash & Cash Equivalents  57 49  51 78   48   (9)
Floating rate senior secured loans  292 286 278   296  289 (3)
Other loans / Senior Notes¹ 346 346  366 366  367 21
Subordinated shareholder funding  79  79  79  79  79 -
Total debt  717  711 723  741   735 
 18
Total equity 459 449 422  343 341  (118)
Total capitalization 1,176  1,160   1,145  1,084 1,076   (100)
Net debt 659 661 672   663   687  28
Total debt / LTM EBITDA 5.3   5.6  5.9  6.3  6.1  
Net debt / LTM EBITDA 4.8  5.2   5.5 5.6  5.7  
¹ Recorded as per International Financial Reporting Standards (IFRS)

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