In 1Q 2016, Deep Sea Supply ("DESS" or "Company") reports consolidated revenues of MUSD 16.5. As announced in the 4Q 2015 financial report, the sale of two vessels in February 2016 gave a loss of MUSD 17.3. Following this loss, the 1Q 2016 EBITDA is negative MUSD 11.6. Excluding this sale of vessels, the EBITDA was positive MUSD 5.8 in the quarter. Following ordinary depreciation of MUSD 9.5, financial expenses of MUSD 5.1 and currency items of positive MUSD 0.5, the pre-tax profit was negative MUSD 25.5.
Comparing 1Q 2016 financial figures with 4Q 2015, revenues decreased by MUSD 6.4. The main reason for this was lower utilization due to vessels coming off long term charters not being replaced by new contracts and sale of vessels. The vessels' operating expenses decreased with MUSD 2.2 from 4Q 2015 to 1Q 2016, due to vessels going being laid up, sale of two vessels and also underlying cost reductions.
Cash flow from operations was MUSD 4.8 for the three months period ended 31 March 2016. Capital expenditure related to scheduled special surveys and upgrading was limited to MUSD 0.1. In the three month period, the Company has repaid borrowings of MUSD 8.7 and paid interest expenses of MUSD 3.7. In addition to this, the sale of two vessels in February 2016 and the prepayment of borrowings relating to this sale, gave a net negative cash flow of MUSD 6.4. Cash and cash equivalents were MUSD 73.1 by the end of 1Q 2016, which is a decrease of MUSD 14.0 compared to MUSD 87.1 by the end of 4Q 2015.
Net interest bearing debt was MUSD 391.4 by the end of 1Q 2016, which is a decrease of MUSD 15.9 from end of 4Q 2015 due to ordinary repayment of borrowings and prepayment of borrowings related to sale of vessels.
The Company's bank loan facilities, except the senior loan facility, are maturing in 2019 or later. The senior loan has maturity date end of October 2016 and a balloon payment of USD 117 mill. The dialogue with the banks to refinance this balloon payment is well progressed.
DESS BTG is in a challenging financial position and has in place certain waivers of financial covenants from the banks. The Company is discussing with the banks a solution involving both refinancing of the balloon payments maturing in 2016 and certain amendments to the repayment profile and covenant structure. The dialogue with the banks is positive and well progressed, but no formal agreement has been reached yet.
During the first quarter of 2016 the oil price has increased somewhat, but still there are no signs of improvement of the fundamentals of the global OSV markets. The Company expects no improvement of the difficult market situation for OSVs in the short to medium term. In Brazil, the situation remains challenging, and the Company now has only 9 vessels left in Brazil. The North Sea spot market is challenging with unsustainable rate levels and low utilization for PSVs. Following the sale of two AHTS vessels in February 2016, the Company only has one vessel (PSV) in the North Sea spot market. The contract coverage for 2016 for the Company is not satisfactory, although the Company has been able to secure term work for in total 5 PSVs lately. DESS is currently in advanced contract negotiations for some other term opportunities, however the competition is fierce and rate levels are low.
As a consequence of the weak market, Deep Sea Supply will continue to lay up vessels that do not have any fixed activity the next months. In addition to laying up vessels to reduce cost, the Company is working hard to further reduce operating expenses for the vessels in operation.
The 50% owned joint venture DESS BTG which owns 21 vessels, is still in a challenging financial position with a significantly reduced contract backlog following the expiry of many term charters. The cash position is unsatisfactory low, and the Company is dependent on adjustments of its financial obligations going forward. The financing of DESS BTG is non-recourse to Deep Sea Supply Plc.
Limassol, 31 May 2016
Deep Sea Supply Plc
This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.