Polarcus Fourth Quarter and Preliminary Full Year 2019 Results: Strong increase in full year earnings
27 Feb 2020
Note: All references in to “segment” and “segment reporting” are adjusted for IFRS 15 effects and non-recurring items. See Note 3 in the accompanying interim financial statements.
Polarcus Limited (“Polarcus” or the “Company”) (OSE: PLCS) releases its fourth quarter and preliminary full year 2019 results.
Polarcus CEO, Duncan Eley, commented:
“Polarcus delivered a substantial increase in earnings during 2019 with EBITDA more than doubling year-on-year and strong growth in operating cash flows. This result was driven by increased margins from improved pricing and continued focus on operational excellence and cost management.
We maintain a positive outlook for 2020, despite some recent fluctuations in global sentiment observed. Tender levels, multi-client activity and pricing all continue to develop positively.
With a young, high-performing fleet and industry-leading offerings including our Explore Green™ environmental agenda and Cirrus™ digital data transfer and processing capabilities, I am confident Polarcus is well-positioned to maximize value from the marine seismic market going forward.”
Q4 2019 HEADLINES
- Segment revenues of USD 55.3 million, compared to USD 58.4 million in Q4 2018
- Segment EBITDA of USD 7.6 million, up from USD 2.5 million in Q4 2018
- Net cash flows from operating activities of USD 21.9 million, up from USD 11.5 million in Q4 2018
- Vessel utilization of 71%, compared to 96% in Q4 2018
- Seven new contracts secured since the end of Q3 2019
FULL YEAR 2019 HEADLINES
- Segment revenues of USD 290.6 million, up from USD 202.2 million in 2018
- Segment EBITDA of USD 63.4 million, up from USD 29.1 million in 2018
- Segment EBIT of USD 28.0 million, up from negative USD 19.8 million in 2018
- Net cash flows from operating activities of USD 60.9 million, up from USD 11.3 million in 2018
- Total cash balance of USD 36.5 million, up from USD 31.2 million at end of 2018
- Vessel utilization of 79% with significantly higher contract day rates achieved compared to 2018
- Strong operational performance and excellent safety record maintained
- Backlog at USD 240 million; the highest level since 2014
2019 financial results reflect a significantly improved seismic market resulting in substantially higher realized day rates year-on-year. Segment revenues of USD 290.6 million increased 44% compared to USD 202.2 million in 2018, despite a lower fleet utilization of 79% compared to 87% in 2018.
The increased pricing level was maintained through Q4 2019. However, as anticipated, quarterly revenue was impacted by lower utilization resulting from planned repositioning of the fleet, as well as a delayed contract award on one project and an extended yard stay for one vessel. Despite lower revenue, fourth quarter Segment EBITDA increased to USD 7.6 million compared to USD 2.5 million in the same quarter last year, driven by lower gross cost of sales and more costs capitalized to multi-client projects.
During 2019 the Company successfully and safely executed a range of complex projects including the industry’s largest 4D project for the year, a multi-vessel wide-azimuth project, and a hybrid (streamer-node) project. All three projects were technically demanding and completed in challenging environments from harsh sea ice conditions through to obstructed shallow water. The Company delivered strong operational performance with technical downtime of less than 2% and maintained its strong environmental, health and safety performance.
The 44% increase in revenue during the year was accompanied by an associated increase in project specific costs, notably related to the hybrid (streamer-node) project which was acquired using third party services as well as increased costs attributable to the source and support vessels required for the wide-azimuth project. This resulted in a 26% increase in gross cost of sales to USD 225.8 million, up from USD 179.1 million in 2018. The improved revenues significantly offset the higher cost of sales which resulted in more than doubling segment EBITDA to USD 63.4 million, compared to USD 29.1 million in 2018.
Net cash flows from operating activities during 2019 improved to USD 60.9 million, compared to USD 11.3 million in 2018. Multi-client investments in 2019 were USD 6.1 million with prefunding revenue of USD 10.2 million resulting in 168% prefunding. Payments for PP&E in 2019 was USD 16.7 million with USD 3.7 million relating to acquisition of new streamers on attractive terms. As a result of the increased streamer pool and the continued high-quality output from the in-house streamer repair facility, the Company does not anticipate any significant capital expenditure on streamers until 2022, at which time a gradual investment profile is anticipated.
Total cash at year-end increased to USD 36.5 million from USD 31.2 million on 31 December 2018. The Company’s USD 40 million working capital facility remained undrawn throughout the year.
Robust levels of tender activity developed throughout 2019 driven by solid demand from both E&P companies and multi-client companies without vessels. Recent increases in contract pricing have been underpinned by tighter supply and demand balance in the marine seismic acquisition segment.
The reshaping of the seismic industry that has occurred, resulting in an increased number of multi-client companies without vessels, provides a catalyst to drive further positive market developments assuming global energy demand is maintained. Opportunities to increase prices will be driven by healthy levels of exploration and production activity and sustained supply side discipline. The Company will continue to prioritise projects with superior margins reflecting its operational capabilities.
During the year, the Company launched Polarcus Cirrus™ in collaboration with its digitalization partners DownUnder GeoSolutions and Blueware. Cirrus™ comprises a suite of cloud-based applications and services designed to bring clients near real-time access to high fidelity data, optimised through more sophisticated priority processing. This offering is expected to gain further momentum during 2020 as more E&P clients realise the opportunity of accelerated decision-making to compress the timeline for hydrocarbon production.
Industry-wide focus on the environment continues to sharpen. Polarcus is receiving growing recognition for its Explore Green™ capabilities, a cornerstone of the Company since inception. Polarcus leads the way in the monitoring and improvement of acoustic, gaseous, solid and liquid emissions and expects this to be well-received by stakeholders going forward.
The Company’s fleet is 100% booked into late Q2 2020 and 65% booked for full year 2020. Backlog at 31 December 2019 and value of awards announced after the quarter end is estimated at USD 240 million. This is the strongest backlog since 2014. With a young and uniform fleet, demonstrated operational excellence, and best in class data transfer and remote priority processing capabilities, Polarcus is well-positioned to continue benefiting from an improving market.
Duncan Eley, CEO
+971 4 43 60 915
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 seismic vessels with 3D and 4D imaging capabilities, which incorporate leading-edge maritime technologies for improved safety and efficiency. Polarcus offers contract seismic surveys and multi-client projects with advanced onboard processing solutions. The Company services its clients globally from its head office in Dubai and regional offices located in Houston, London and Singapore. 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 2018 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 the Norwegian Securities Trading Act