Northern Offshore Reports First Quarter 2014 Results

HOUSTON, May 14, 2014 /PRNewswire/ --

Highlights
(All $ in USD)

• Northern Offshore, Ltd. (Oslo Bors: NOF.OL) today reported net income for the three months ended March 31, 2014 of $10.0 million, or $0.06 per diluted share, on revenues of $49.4 million.
• The company generated $20.3 million of first quarter adjusted EBITDA.
• Second of three one-year options exercised for the Energy Enhancer.
• 100% of the fleet contracted.
• Steel cutting commenced in April for the first new build jackup.
• The company's directors have declared a dividend of $0.05 per share, or approximately $8.2 million.
• The directors are evaluating a plan to spin off a portion of ownership in the Northern Producer.

First Quarter Analysis

Net income for the three months ended March 31, 2014 of $10.0 million, or $0.06 per diluted share, on revenues of $49.4 million compares to net income of $1.1 million, or $0.01 per diluted share, for the first quarter of 2013, on revenues of $41.4 million.

Revenues for the three months ended March 31, 2014 were $8.0 million higher than the same period in 2013, primarily due to higher operating efficiencies of the semisubmersible Energy Driller, and higher dayrates for the jackups Energy Endeavour and Energy Enhancer.  Slightly offsetting these increases was a decrease in tariff revenues for the floating production facility Northern Producer due to lower production during the quarter as compared to the same period last year.

Tariff revenues from the floating production facility Northern Producer averaged approximately $96,000 per day in the first quarter of 2014.  The company expects pricing levels to remain stable and production to decline slightly before completion of an additional well in the Don SW field later this year.

Drilling and production expenses for the three months ended March 31, 2014 were $3.1 million lower as compared to the same period in 2013, primarily due to a decrease in operating expenses for the drillship Energy Searcher.  Partially offsetting this decrease was an increase in operating expenses for the jackup Energy Endeavour primarily due to higher labor costs.  First quarter 2014 depreciation, general and administrative expenses, interest expense, amortization of deferred financing fees and other financial items were comparable to those of the same period in 2013.

As of today, the company has an outstanding credit facility balance of $47 million and an unrestricted cash balance of approximately $37 million.

The company's directors have declared a dividend of $0.05 per share, or approximately $8.2 million.  Shareholders of record with the VPS on May 30, 2014 will be entitled to receive the dividend, which will be paid on or around June 16, 2014.  The shares of the company will be trading ex-dividend from May 28, 2014.

Management Comment

Gary W. Casswell, Northern Offshore's president and CEO, commented, "We are pleased with our first quarter results.  Our operations personnel did their part in managing our rigs which contributed to our higher profit margin for the quarter.  We expect to see continuous improvement in EBTIDA throughout the year as the Energy Searcher will commence drilling operations soon, resulting in all five of our units earning revenue.

With respect to the Northern Producer, our client EnQuest has plans to drill another development well this year in the Don SW field, and is producing a Field Development Plan ("FDP") for the Don NE field.  Should the FDP result in additional development drilling in Don NE, earnings from the Northern Producer could increase substantially.  As such, our board of directors recently requested that management investigate the possibility of spinning off the Northern Producer and its life-of-field contract.  The board believes that a spinoff of the Northern Producer could unlock value for the shareholders and allow the remaining company to focus exclusively on growing its contract drilling business. 

The intent would be to establish a publicly traded company to own and operate the Northern Producer, with a focus on cash distributions to the shareholders.  Initially the plan is to consider distributing approximately 20% of this new company to the shareholders of Northern Offshore.  This company would also consider the acquisition of similar assets with long-dated contracts to enhance dividends.

Last year, Northern Offshore ordered two new jackup rigs and will continue to focus on growing the offshore drilling business by providing customers with modern equipment operated by a best in class organization. In April, we cut steel on the first new jackup, the Energy Engager, a major milestone for the company."

Conference Call Information

Northern Offshore, Ltd. will conduct a teleconference with security analysts at 9 a.m. CT, May 15, 2014 to discuss the company's quarterly results.  Individuals wishing to listen to the teleconference should call (866) 700-5192 (in the U.S.) or (617) 213-8833 (outside the U.S.) about five to ten minutes prior to the scheduled start time and refer to participant password 39106125.

The conference call also will be accessible by logging on to the company's website at http://www.northernoffshorelimited.com.  After logging on, go to "Investor Relations" and select the conference call webcast.

About the Company

Northern Offshore, Ltd. is a Bermuda holding company which operates offshore oil and gas drilling units and one production vessel in various markets around the world, including the North Sea, the Indian Ocean, Southeast Asia and West Africa. The company's fleet consists of four drilling units (a drillship, a semisubmersible and two jackup drilling rigs) and one floating production facility.  Additionally, the company has under construction two 350' high specification jackup drilling rigs, with delivery expected in the first and third quarters of 2016.  More information on Northern Offshore, Ltd. may be found by visiting the company's website at http://www.northernoffshorelimited.com.

For further information, please contact:
Brian Hefty at (713) 739-7686,
or via email at [email protected]

This announcement contains statements that reflect the company's expectations or predictions of the future. These statements are forward-looking statements.  These forward-looking statements may include statements regarding earnings guidance, capital allocation strategy, the impact of activity levels, business performance, and other market and industry conditions.  The company's actual results could differ materially from those reflected in such forward-looking statements.  Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the company's regulatory filings.  The company disclaims any intention or obligation to revise any forward-looking statements, including financial estimates, whether as a result of new information, future events or otherwise.

SOURCE Northern Offshore, Ltd.

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