Sharjah rig-builder MIS has posted a strong set of financial results at the end of its financial year. Highlights for the 1st Quarter 2009 included:
Revenue of $147.2 million was 80% ahead of the same period last year and 18% ahead of the previous quarter. This reflects progress on the seven new-build jack-up rigs in production during the quarter versus three at the same time last year.
Net income of $10.4 million was 246% ahead of same period last year (29% ahead of the previous quarter), representing a record quarterly profit for the company. This improvement is principally because of the increasing contribution from the newer rigs, the continuing high level of profitability of MIS’ traditional business and the absence of last year’s write backs on the first two new-build projects (Hulls 104 and 105).
Handover: The SeaWolf Oritsetimeyin (Hull 104) was formally handed over in February, paving the way for full and final settlement from the owner after the quarter end in April 2009.
The firm’s financial statement revealed that revenue continued to grow in the quarter, positive activity in its new-build backlog during 2008, and the continued strength of its traditional business. Profit measures at every level reflect both the additional volume and an improving level of profitability in the new build business. Net interest costs in the period amounted to $1.6 million (versus $0.8 million in Q1 2008 and $1.3 million in Q4 2008), as average borrowings increased.
Despite the improvement in net income referred to above, net operating cashflow declined compared to the same period last year as working capital increased substantially, reflecting both the higher level of new build activity and delayed receipts from certain customers. All major receivables that were delayed in the quarter have been subsequently received.
Investing activities include capital expenditures of in the period of $4.5 million (primarily equipment and facilities for our Sharjah operations), compared with $1.3 million in the 1st quarter of 2008. We expect such expenditure to be somewhat lower over the balance of 2009.
Since the end of the first quarter, MIS said its cash position has improved substantially, largely as a result of the completion and hand-over of Hull 104 (resulting in the receipt in April 2009 of $43 million). And the renegotiation of contract terms for Hulls 109 and 110 to allow the owner to benefit from procurement cost savings and MIS to benefit from a more favourable payment profile, has resulted in the accelerated receipt in May 2009 of progress payments amounting to $101 million.
The company’s backlog remains at a historically high level, despite net consumption during the period reflecting the absence of further new-build contract awards
Outlook
The high level of backlog reported above will ensure that revenue for 2009 as a whole is ahead of last year and the progress made in improving new-build productivity and other lessons learnt on the first two rigs, should result in a continuing improvement in profitability.
The impact of lower oil prices and other financial factors on the health of the offshore drilling industry, however, makes it unlikely that MIS will be able to replenish its new-build backlog in the near future. MIS outlined that it will offset the effects of any temporary reduction in new-build revenue by reducing its cost base and concentrating in the short term on the growth of other areas of the business which are less cyclical and therefore less affected by the economic crisis, highlighting rig refurbishment, EPC and its safety services business units.
