Main figures
(Figures in brackets refer to the corresponding period of 2005)
Operating profit for the first quarter came to USD 31.6 million (USD 18.9 million). This strong result reflects increased dayrates and high rig utilisation in Offshore Support Services.
Net profit for the first quarter amounted to USD 30.7 million (USD 14.7 million), and diluted earnings per share equalled USD 0.90 (USD 0.43).
Cash flow from operating activities came to USD 111.2 million (USD 31.8 million). The company invested USD 157.2 million during the period, primarily in the two on-going FPSO conversion projects and the acquisition of M/T Europe.
Total assets at 31 March amounted to USD 1 123.2 million (USD 986.2 million), while the equity ratio declined to 41.4 per cent (47.1 per cent) owing to the deferred tax liability related to the company's exit from the Norwegian tonnage tax system. This was charged to the accounts for the fourth quarter of 2005.
Offshore Support Services
Operating profit in the first quarter came to USD 23.4 million (USD 10.6 million). Utilisation of the rig fleet was 100 per cent (86 per cent). This reflects increased utilisation of and higher dayrates for Safe Scandinavia and MSV Regalia.
All five of the rigs working in the Gulf of Mexico were in regular operation throughout the first quarter. Safe Scandinavia was under contract for Shell in the US Gulf of Mexico, and MSV Regalia operated for Total off Angola.
Floating Production
Operating profit for the first quarter amounted to USD 9.5 million (USD 9.2 million). This improvement is attributable to reduced depreciation for FSO Madura Jaya and FPSO Petróleo Nautipa, owing to a revised estimate of scrap value and a contract extension respectively. Operating profit before depreciation declined by USD 0.8 million, reflecting higher staffing in connection with a strengthening of the company's engineering capacity and expertise.
Outlook
Offshore Support Services secured a one-year contract during the first quarter for Safe Caledonia, and one contract and two extensions for Safe Scandinavia. The total value of new contracts and extensions is in the order of USD 115-118 million.
The contract for Safe Caledonia is with Total and Elf on the Dunbar and Elgin/Franklin fields in the UK, and has a firm value of USD 52.1 million. Expected commencement is 1 February 2007. The contract for Safe Scandinavia is with Statoil on Snorre A and Sleipner B, with commencement in the second quarter of 2007 and at the end of the first quarter 2008 respectively. The Statoil contract is worth about USD 52 million. Safe Scandinavia's extensions relate to the contracts with Shell in the USA and ConocoPhillips in the UK respectively. The contract with Shell has been extended to five months in all, and the extension represents a value of USD 7.2 million. For ConocoPhillips, the extension applies to the Britannia field off the UK and is worth USD 4.1-6.7 million depending on the commencement date. The extensions ensure high utilisation for the rig in 2006 and until the start of the contract with BG International in the first quarter of 2007.
These contracts provide further confirmation that dayrates for advanced accommodation/service rigs have settled on a high level.
The outlook for the 2006-08 period is very positive. Offshore Support Services has secured a record 93 per cent contract coverage for 2006, but still has vessel availability in 2007 and 2008. It can thereby take advantage of the tight market with steadily rising dayrates. Containing a large number of units with dynamic positioning systems and vessels suitable for operation in harsh environments, the company's fleet is well adapted to market demand.
Activity in the market for Floating Production is greater than ever. A total of 10 projects were awarded in 2005, and the same number of new awards is expected for 2006. The high level of activity in the drilling market is a strong indicator of substantial field developments in 2007 and 2008. FPSOs are a unique field development concept for deep water and for regions where existing infrastructure is limited.
In January, the company was awarded a five-year contract extension by Gemsa Petroleum Company for operation and maintenance of FPSO Al Zaafarana in the Gulf of Suez in Egypt. The estimated value is USD 18.8 million.
The initial contract for operating FPSO Al Zaafarana was five years, and began in October 1994. Including the latest extension, this field has an estimated production life of at least 16 years - more than double the original estimate. That represents further confirmation of the trend for FPSO contracts to be extended significantly beyond their first firm period.
In the second half of 2005, Prosafe was awarded contracts for converting and operating two FPSOs for Devon Energy off Brazil and for New Zealand Overseas Petroleum off New Zealand respectively. These vessels are due to be completed in the first quarter of 2007, with production planned to start in the second quarter of 2007.
Prosafe has built up long experience in converting and operating FPSOs, and now has an organisation able to handle several conversion projects in parallel. Activity in the FPSO market is very high, and the company is sticking to its target of winning a large new project during 2006.
Oslo, 27 April 2006
The board of directors of Prosafe ASA
