Polarcus fourth quarter and preliminary full year 2018 results
27 Feb 2019
Polarcus Limited (“Polarcus” or the “Company”) (OSE: PLCS) releases its fourth quarter and preliminary full year 2018 financial statements.
Q4 2018: continued revenue growth and strong utilization
Segment¹ revenues of USD 58.4 million, up 6% from Q3 2018; the fourth consecutive quarter of revenue growth
Segment¹ EBITDA of USD 2.5 million, down from USD 7.3 million in Q3 2018
Cash from operations of USD 11.5 million, up from USD 0.4 million in Q3 2018
Total cash balance of USD 31.2 million (excluding undrawn WCF of USD 40 million), up from USD 28.4 million at end of Q3 2018
Vessel utilization of 96%, the highest ever Q4 utilisation, up from 86% in Q3 2018
Eight new contract awards secured since beginning of Q4.
Full year 2018: solid improvement year-on-year
Segment¹ revenues of USD 202.2 million, up 13% from USD 179.0 million in 2017
Segment¹ EBITDA of USD 29.1 million, up 60% from USD 18.2 million in 2017
Robust vessel utilization of 87%, up from 77% in 2017
More than 20% increase in tender activity compared to 2017 with pricing improving throughout the year
Excellent operational delivery with high productivity and low technical downtime
Strong health and safety record maintained; zero lost time injuries.
2019 outlook: delivering improved EBITDA & cashflow
Backlog of USD 232 million, increased by 40% compared to same time last year, with strong pipeline of opportunities in 2019
Polarcus fleet is 100% booked for H1 2019 and 70% booked for the full year 2019, providing good visibility of future earnings and the ability to further increase pricing levels
Polarcus expects to deliver improved EBITDA and cashflow in 2019 compared to 2018.
On the 2018 fourth quarter performance, Polarcus CEO Duncan Eley commented:
“Polarcus saw revenue growth for the fourth consecutive quarter with USD 58.4 million segment revenues in Q4. The 6% increase in segment revenue was driven by strong utilization and improved day rates. The fourth quarter has traditionally been a quiet period for the industry, however Q4 marked the Company’s highest ever utilization of 96%, up from 86% in Q3. Continued improvements in the underlying business were partly offset by reduced revenue from vessel management fees and multi-client late sales compared to Q3.
“The improved revenue for the quarter was accompanied by increased cost. Gross cost of sales increased to USD 46.5 million compared to USD 39.8 million in Q3. Reimbursable costs also increased in the quarter to USD 5.5 million from USD 5.0 million in third quarter. The higher cost level was driven by high utilization, and elevated project specific costs.
“Segment EBITDA for the quarter was positively impacted by an improved margin from our core proprietary contract business, however negatively impacted by the reduction in vessel management fees and multi-client late sales. As a result, segment EBITDA reduced sequentially to USD 2.5 million from USD 7.3 million in Q3 2018.
“The fourth quarter delivered increased cash from operations of USD 11.5 million compared to USD 0.4 million in the third quarter, driven primarily by USD 8.1 million positive working capital movements. As a result, net cash flow for the quarter was positive which increased the Company’s total cash at year-end to USD 31.2 million (excluding the USD 40 million undrawn working capital facility), up from USD 28.4 million at the end of Q3 2018.
“Tender activity was robust in Q4 and we have been able to secure eight new contract awards since the end of Q3 2018. Encouragingly, these latest additions to the Company’s backlog demonstrate improvements in both pricing and contractual terms compared to 12 months earlier.”
Regarding the 2018 full year performance and market outlook, Mr Eley went on to state:
“In 2018, higher segment revenues of USD 202.2 million, combined with a continued focus on cost control, resulted in an improved segment EBITDA of USD 29.1 million compared to USD 18.2 million in 2017. The 13% increase in segment revenues year-on-year was as a result of increased utilization levels and overall improvements in contract pricing.
“Health, safety and the environment continue to be top priorities for Polarcus. We maintained our strong health and safety record during 2018 with zero lost time injuries. Importantly, the Polarcus fleet is already fully compliant with IMO2020 requirements through our use of low sulfur MGO and we remain committed to minimizing our emissions through operational efficiency and innovative technology.
“Despite the decline in the oil price during the fourth quarter, demand for marine seismic services in 2018 increased by more than 20% year-on-year in terms of square kilometers. The Company’s backlog at 31 December 2018 and value of awards announced after the year end is USD 232 million, representing a substantial increase compared to USD 164 million at the same time in 2017. This level of backlog provides Polarcus with a sound platform to further test pricing in the latter part of 2019 in addition to providing important visibility for planning and successful execution of secured projects.
“Recent oil price volatility has re-introduced some uncertainty around E&P companies’ spending outlook, however based on discussions with clients, we hold a positive view on 2019. With the oil price around current levels, pricing in the seismic market is expected to continue to improve over the short to mid-term driven by continued increase in demand from E&P companies and supply discipline from a reduced number of global vessel operators. As exploration activity and pricing levels are both expected to be higher in 2019, we plan to deliver improved EBITDA and cashflow in 2019 compared to 2018. We anticipate some operating cost increases in 2019 to support elevated operational activity and a number of projects taking place in higher-cost areas.
“Polarcus is in the midst of a transforming competitive landscape, with fewer operators enabling more disciplined supply of high-end 3D and 4D seismic vessel services for a growing client base comprising both E&P companies and pure-play multi-client companies. Pricing levels of recent awards represent an improvement in the global marine acquisition market. With increasing demand in 2019 from both segments of the client base we expect to see our margins continue to improve as pricing levels increase and the benefits of our operational leverage are realized.
“The Company will continue to focus on maximizing revenue, optimizing our operational cost profile and controlling the pace of our investments in a highly disciplined manner as the activity and pricing levels in the marine seismic market continue to increase. Polarcus is well-placed to further capitalise on an improving market with our industry-leading operational expertise and innovative approach to delivering our clients’ geophysical requirements.”
Chief Executive Officer, Polarcus
|Quarter ended||Year ended|
|(In millions of USD)||31-Dec-18||30-Sep-18||31-Dec-17||31-Dec-18||31-Dec-17|
|Net working capital movement||8.1||(9.2)||24.1||(11.9)||29.3|
|Multi-client prefunding revenue||0.3||0.5||3.5||14.1||21.7|
|Multi-client prefunding level||54%||21%||50%||75%||105%|
|Multi-client library net book value||4.0||4.9||10.4||4.0||10.4|
¹ All references to “Segment” and “Segment reporting” are adjusted for IFRS 15 effects and non-recurring items. Non-recurring items adjusted include impairments, onerous contract provisions and restructuring costs.
Duncan Eley, CEO
+971 50 553 2198
Hans-Peter Burlid, CFO
+971 50 559 8175
Polarcus (OSE: PLCS) is an innovative marine geophysical company with a pioneering environmental agenda, delivering high-end towed streamer data acquisition and imaging services from Pole to Pole. Polarcus operates a fleet of high performance 3D seismic vessels incorporating leading-edge maritime technologies for improved safety and efficiency. Polarcus offers contract seismic surveys and multi-client projects with advanced onboard processing solutions and employs approximately 350 professionals worldwide. The Company’s principal office is in Dubai, United Arab Emirates. For more information, visit www.polarcus.com
The information included herein may contain forward-looking statements. Forward-looking statements include all statements that are not historical facts, including but not limited to statements expressing or implying the Company’s intent, belief or current expectations with respect to, among other things, forecasts, estimates, and predictions. Such forward-looking statements necessarily involve risks and uncertainties and are dependent on assumptions, information, data or methods that may be incorrect or imprecise. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions or expectations proves to be inaccurate or is unrealized. Some factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, developments in the oil and gas industry, the demand for seismic services, the demand for data from the Company’s multi-client library, currency risks, political risks, regulatory risks, and unexpected operational setbacks. For a further description of other relevant risk factors we refer to our 2016 Annual Report. The reservation is also made that inaccuracies or mistakes may occur in the information given above concerning the current status of the Company or its business. Any reliance on the information given above is at the risk of the reader, and Polarcus disclaims any and all liability in this respect.
This information is subject to the disclosure requirements pursuant to section 5 -12 of the Norwegian Securities Trading Act.