Since Prosafe SE's ("Prosafe" or the "Company") Q4 2015 report, the offshore oil services market has continued to deteriorate following the oil price decline.
For Prosafe, this negative development has been coupled with a further delay in the start-up of the Safe Scandinavia Tender Support Vessel ("TSV"), suspension of additional Mexico contracts as separately announced (including cancellation of a letter of intent for a new 4.5 year contract of ca USD 145 million for Safe Notos) and a consequent deterioration of Prosafe's contract backlog, as well as the unavailability of the bond market as a refinancing source. As a consequence, Prosafe was likely to enter into a situation where its financial covenants would be under pressure. The Company has therefore engaged legal and financial advisors and initiated a review of the Company's strategic options and funding situation.
Prosafe is in an ongoing dialogue with the Company's key stakeholders, including the main shareholders, bondholders, bank lenders and yards, and the Company is currently working with stakeholders and advisors to evaluate alternatives to improve the financial situation. The Company has obtained a reduced minimum liquidity bank covenant of USD 20 million until the end of the third quarter 2016. This temporary reduced level is applicable to both the USD 1.3 billion facility and the USD 288 million newbuild facility. In addition the Company will utilize the 2nd skipped payment option that was granted by the banks in the previous amendment process closed around year-end 2015. Further amendments to the bank and bond agreements will however be required in order to secure a robust financial foundation and to safeguard and further strengthen Prosafe's market leading position in the industry. The dialogue is constructive and the Company intends to communicate its updated financial plan during the second quarter of 2016.
As a result of the negative developments following the preliminary Q4 2015 report, the Company has incurred additional impairment charges to those included in the preliminary Q4 2015 report. These impairment charges totalling USD 145.6 mill are further explained in the 2015 Annual Report.
Aggregate capital expenditure (capex) for 2016 remains in line with previous indications of USD 700 million. This figure includes final capex related to the completion of the TSV conversion which in total has cost in excess of USD 300 million compared to the USD 140 million initially budgeted, as well as the last three newbuild vessels of which the Safe Notos and the Safe Zephyrus were delivered early 2016. However, given recent shifts in the contract portfolio the Company is working with the yard to find an amicable solution regarding the delivery of the Eurus and thereby reduce actual 2016 capex compared to above figure. In this context it should also be noted that the Company is likely to contest parts of the additional costs incurred on the TSV conversion project.
As previously announced, the TSV commenced operations for Statoil on the Oseberg East field in March. The Company has been working to optimize the fleet deployment and utilization in a situation where the fleet renewal strategy is being completed while the market is historically soft and contracts are being suspended. Examples of measures to optimize the fleet are deferred deliveries, seller's credits and the replacement of Safe Boreas for Safe Notos for Talisman in the UK. In addition the Company has decided to scrap three of its oldest units, respectively the Jasminia, Hibernia and Safe Britannia, and to cold stack other units starting with the Safe Astoria. Through these measures the Company is seeking to reinforce its market leading position and contribute to a necessary restructuring of the industry while also reducing cost. The Company is currently in dialogue for potential employment of uncontracted vessels, including Safe Notos. The board currently anticipates that the Company will deliver an EBITDA in 2016 of between USD 170 mill and USD 220 mill depending on the outcome of these contract discussions.
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The board of Prosafe has resolved to appoint Stig H. Christiansen as the new interim chief executive officer (CEO) for Prosafe Management AS. He will replace Karl Ronny Klungtvedt, who has agreed to step down. Mr. Christiansen will take up the position immediately and will continue to serve as the CFO of Prosafe in addition to his position as acting chief executive officer.
In due course, the board will start a recruitment process for a new permanent CEO evaluating both internal and external candidates for the position.
The board looks forward to working with Mr. Christiansen on the challenges facing the Company. Mr. Christiansen is experienced as both a former CEO and CFO and will be a key asset over the coming months.
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Prosafe is the world's leading owner and operator of semi-submersible accommodation vessels. The company operates globally, employs 850 people and is headquartered in Larnaca, Cyprus. Prosafe is listed on the Oslo Stock Exchange with ticker code PRS. For more information, please refer to www.prosafe.com
Larnaca, 27 April 2016
Georgina Georgiou, General Manager
For further information, please contact:
Harald Espedal, Chairman
Phone: + 47 97 59 33 83
Stig Harry Christiansen, Acting Chief Executive Officer
Prosafe Management AS
Phone: +47 51 64 25 17