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SINVEST
The Board`s Report for the 1st Quarter of 2006
The Sinvest Group consolidated accounts for 1st Quarter 2006 have been prepared in
accordance with the International Financial Reporting Standards (IFRS). All figures for
same periods in 2005 are in accordance with this standard and comments refer to figures
(see below).
Operating result for the 1st Quarter 2006 shows a profit of NOK 681.1 mill compared to a
profit of NOK 4.5 mill for the same period in 2005. The positive result this quarter is
mainly due to a profit of NOK 709.6 mill on sale of all the remaining shares in Ocean
Rig.
The net result for the 1st Quarter shows a profit of NOK 647.2 mill compared to a loss of
NOK 47.2 mill in 1st quarter of 2005. The financial expenses in the 1st Quarter is mainly
due to interests on the NOK 1 billion loan in Sinvest. Borrowing costs directly
attributable to the building contracts (NOK 42,5 mill) are capitalized in the balance under
Rigs under Construction.
The Group’s total assets at the end of 1st quarter 2006 amounts to NOK 6.101 mill, of
which NOK 1.482 mill. relates to capitalized costs and installments paid to yards on the
eight jack-up rigs under construction in Singapore. NOK 304 mill. reflects the value of
the shares of other investments, mainly in Petrojack ASA.
The Group`s financial position is good.
During 1st Quarter the Group`s cash has increased and is at the end of the quarter about
NOK 4.098 mill. This is mainly due to the issuing of new Bond loans totaling, converted
into NOK 3.213 mill, for full financing of 4 of the 8 rigs under construction in Singapore.
Of this cash NOK 2.852 mill is placed in escrow accounts and will be released by
milestone payment to the shipyards. Futhermore the sale of Ocean Rig shares (net
proceeds NOK 908 mill) and the issue of 3 million new Sinvest shares (NOK 273 mill)
have contributed to the cash position.
Main events in the 1st Quarter 2006 and so far in the 2nd Quarter 2006:
1st Quarter 2006.
* Sinvest ASA has issued 3 million new shares at NOK 93,50 per share in end of
January in an overnight private placement with a net proceed of NOK 273 mill.
* Sinvest ASA sold all its 9,9 million shares in Ocean Rig with a net proceeds of NOK
908 million.
* The subsidiary DDI Holding AS (DDH) has issued totally four new Bond Loans to
finance the following rigs:
- Deep Driller 1, Bond loan USD 140 mill.
- Deep Driller 2, Bond loan USD 140 mill.
- Deep Driller 7 and 8, Bond loans USD 160 mill. and NOK 400 mill.
The main proceeds from the Bond loans are placed on escrow accounts and will be
released according to running installments to the yards. All the Bond loans will be
secured in a first priority mortgage of the rigs.
* The subsidiaries of DDI Holding have executed the two last options to build two new
rigs, one at PPL (DD7) and one at KFELS (DD8).
* The Christening ceremony for Deep Driller 1 took place at the PPL shipyard on 8th
March.
2ndt Quarter 2006
* Sinvest has in the beginning of the Quarter acquired 100% of the shares in Beta
Drilling AS for NOK 16 mill. Beta Drilling and ”Arktik” (a russian company) have
earlier entered into a charter agreement for hire of the jack-up rig “Murmanskaya” for
a period of 3 years after an initial reactivation period.
* The subsidiary DDH has in this quarter issued a new Bond loan of USD 140 mill. to
finance Deep Driller 3. 80% of the proceeds from the loan is placed in an escrow
account and will be released to finance the remaining payments to the yard at delivery
of the rig in October this year. The loan will be secured in a first priority mortgage of
the rig.
* The Christening ceremony for Deep Driller 2 took place at the Keppel FELS shipyard
on 8th April.
* Delivery of both Deep Driller 1 and Deep Driller 2 will take place during 2nd Quarter.
Investment in Jack-up rigs.
At the end of first Quarter our construction program consists of eight newbuilding jackup units. Five at the Keppel FELS shipyard and three at the PPL shipyard, both yards in
Singapore.
The two new construction contracts were as mentioned executed in January and February
this year:
- Deep Driller 7. Pacific Class 375 to be delivered by PPL during the third quarter of
2008. Contract price: USD 140,3 mill.
- Deep Driller 8. KFELS Super B Class to be delivered during the first quarter of 2009.
Contract price: USD 139,6 mill.
All the contracts with the yards are Turn Key contracts.
Three of the jack-ups under construction will be delivered during 2006 and the fist unit
Deep Driller 2, was delivered from yard on 27th April. The second unit Deep Driller 1
will be delivered from yard these days. Both units are currently undergoing operational
preparation and will shortly commence drilling operations under their respective drilling
contracts. Deep Driller 3 is scheduled to be delivered from KFELS in October this year.
The jack-up rig “Murmanskaya” which has been charted by Beta Drilling, is currently
being transported to Singapore, onboard a heavy-lift vessel. The rig is estimated to arrive
on 10th June. A reactivation program is planned and the “Murmanskaya” is now being
marketed for commencing drilling operations during the 4th quarter of this year.
The subsidiary DDI has signed drilling contracts for the two delivered units:
- Deep Driller 1. A two well (about 4 months duration) drilling contract with Hardy Oil
& Gas. The value of the contract is about USD 24 mill. The company has further
signed an 18 months term contract with Reliance Industries to start upon completion of
the Hardy contract. The value of this contract is about USD 108 mill. Both contracts will
be performed offshore India.
- Deep Driller 2. A 16 months term contract with Brunei Shell Petroleum Company for
operations offshore Malaysia and Brunei Darussalam. The value of the contract is
about USD 88 mill.
The Deep Driller 3 (scheduled delivery in October 2006) is currently being marketed for
various opportunities following delivery.
The market for jack-up units has improved further during the fist quarter and premium
jack-ups are now contracted at dayrates in excess of USD 200,000 per day. Oil
companies are contracting units longer in advance of the planned commencement and we
now experience a high level of interest for our units becoming available both this and
next year.
Premium Drilling (PD)
The Drilling Contractor PD which we own jointly with Awilco Offshore is now well
established in Houston with a well qualified and experienced staff. PD is prepared to
commence operations with our first two units Deep Driller 1 and Deep Driller 2.
PD is today recognized as a world–wide Drilling Contractor.
Venture Drilling AS (VD)
Sinvest owns VD on a 50/50 basis with Petrolia Drilling ASA. VD has signed a letter of
intent for a three year drilling contract with a major oil company for drilling in the Gulf
of Mexico. VD is now in a final stage of discussions about additional equipment the
client wants on board the vessel. “DS Deep Venture” (ex. Valentin Shashin) is under
reactivation at a shipyard in Argentina.
Investment in Petrojack (PJ)
Sinvest owns about 18% of the shares in PJ.
Sinvest and Awilco have an agreement to co-ordinate and co-operate on any possible
purchases of shares in PJ. In April 2006, Sinvest and Awilco Offshore, announced a
conditional agreement with Petrojack for the acquisition of the three rigs Petrojack has
under construction in Singapore. At the end of the quarter Sinvest`s shares in PJ had an
unrealized financial gain of NOK 100 mill. compared to cost. The financial gain is
booked through equity.
Kristiansand, 23 May 2006
Sinvest ASA
Board of Directors