Optimism Abounds at Songa Offshore, Shares Gain over 5.5%

songa eclipse
Songa Eclipse, Image courtesy Songa Offshore

Investors in Songa Offshore (SONG:OSLO) reacted positively today to comments made by interim CEO and Chairman of the Board, Jens A Wilhelmsen.  Share prices were up over 5.5% to 6.32 NOK.

“The results show that we have now definitely put a challenging period behind us,” commented Mr. Wilhelmsen.  “I am proud and happy to hand Songa over to a new CEO in a state of profit. All rigs are operational with a very high utilisation, and we have good control of all business processes, including the Category D new build programme.”

In Songa’s Q1 earnings report released today, the Oslo-based offshore drilling contractor notes their strategy going forward “will be the continuous improvement of rig operations and to finance the new build program.”

The past 12 months has been pretty tough for Songa and their stock price has taken a beating from a high of nearly 18 NOK, to today’s price of around 6 NOK.

“With the upgrade projects on the rigs behind us, we are now in a position where we should generate a good cash flow from our existing rigs going forward.  This is very important with regards to the financing of our new build programme,” added Songa’s CFO, Geir Karlsen.

Songa Offshore reported a first quarterly profit of USD 9.4 million. EBITDA was USD 50.4 million.

Earnings per share (EPS) and diluted earnings per share (DEPS) for the first quarter were USD 0.05. Average number of shares for the quarter was 202,912,544 and as per period end the outstanding number of shares was 202,912,544.

During the first quarter, there were a number of significant events for Songa, including the sale of the Songa Eclipse to Seadrill, and the appointment of two new directors, Transocean’s EVP for Assets – Mr. Arnaud Bobillier and Mr Steven James McTiernan.

On 18 February, the Songa Trym completed its yard stay and entered into a 3+2 year contract with Statoil. On that same day, Bjørnar Iversen was recruited from Odfjell Drilling AS to eventually take over the reigns as Songa’s CEO on the 1st of June.

On 1 March it Songa announced that their F&G L-900 design semisubmersible drilling rig, Songa Venus entered into a contract extension and farm out agreement with Mubadala Petroleum from the current contract with Petronas. The extension will cover a total of four firm wells in Vietnam and Malaysia under the current contract terms and conditions. This extension will see Songa Venus occupied until October 2013 with an aggregated revenue value of approximately USD 21 million.

Contract revenue backlog at 31 March is USD 6.5 billion firm, with another USD 8.2 billion worth of options.

songa rig contracts
click for larger

Market Outlook

In their earnings report, Songa notes that the short term outlook for the midwater market is largely unchanged from the previous quarter. “Our optimism for increased demand is tempered only by the potential movement of rigs between regions in search of better markets. We will continue to closely monitor this evolving situation. The level of interest from clients remains robust and we are confident that several
of these projects will move forward to the tender phase in the coming quarter, providing an
environment for increased dayrates.”