Paragon Offshore Reports Third Quarter 2014 Results

HOUSTON, Nov. 10, 2014 /PRNewswire/ -- Paragon Offshore plc ("Paragon") (NYSE: PGN) today reported a third quarter 2014 net loss of $894 million, or $10.14 per diluted share as compared to  third quarter 2013 net income of $158 million, or $1.80 per diluted share.  Results for the quarter include a $929 million, or $10.53 per diluted share, non-cash impairment charge related to Paragon's three drillships in Brazil and its cold-stacked FPSO in the U.S. Gulf of Mexico and a $6.9 million, or $0.08 per diluted share, gain related to the previously disclosed repurchase of an aggregate principal amount of $50.2 million of its senior unsecured notes. Excluding the impairment and the gain, Paragon's adjusted net income (see Reconciliation of GAAP to Non-GAAP Financial Measures Table for a reconciliation to net income) was $52 million, or $0.59 per diluted share.  For periods prior to Paragon's spin-off from Noble Corporation plc ("Noble") on August 1, 2014 (the "Spin-Off"), results of operations are based on Noble's standard-specification business and include contributions from three standard specification rigs retained by Noble and three standard specification rigs that were sold prior to the Spin-Off.  For more information regarding the Spin-Off, please see Paragon's filings with the U.S. Securities and Exchange Commission (the "SEC") available on the company's website at www.paragonoffshore.com.

"As a result of deteriorating market conditions in the third quarter, Paragon engaged in a proactive evaluation of our fleet value," said Randall D. Stilley, President and Chief Executive Officer.  "We concluded that the current values of our drillships in Brazil and our FPSO are higher than the current market values for similar units. Note that the impairment does not affect our outlook for the Brazilian market, which will continue to be important for Paragon. We remain committed to serving Petrobras and we are actively seeking to secure extensions for our rigs operating there." 

Mr. Stilley continued, "I am proud that Paragon delivered some very strong operating results in our first quarter as an independent company.  Despite rapidly evolving market conditions, we have managed the transition well, added new contracts for our rigs, controlled costs, and improved the balance sheet.  In short, we are executing the strategy we laid out to deliver long-term shareholder value."

Total revenues for the third quarter of 2014 were $505 million compared to $479 million in the second quarter of 2014. Total revenues for the third quarter and second quarter of 2014 include $16 million and $42 million, respectively, for rigs retained or sold by Noble. Excluding the revenues for the rigs retained by Noble, total revenues for the third quarter of 2014 were $489 and $437 million for the second quarter. Paragon reported utilization for its marketed rig fleet, which excludes two cold stacked floaters and one cold stacked jackup, as 82 percent for the third quarter of 2014, which was flat compared to the second quarter of 2014. Average daily revenues increased two percent in the third quarter to $151,000 per rig compared to the previous quarter average of $148,000 per rig. Contract drilling operating costs decreased two percent in the third quarter to $217 million compared to $222 million in the second quarter of 2014.

Net cash from operating activities was $160 million in the third quarter of 2014 as compared to $206 million for the second quarter of the year.  Capital expenditures in the third quarter totalled $72 million, bringing the total for the nine months ended September 30, 2014 to $182 million. Liquidity, defined as cash and cash equivalents plus availability under the company's revolving credit facility, totalled $873 million at September 30, 2014.   

Operating Highlights

Paragon's total contract backlog at September 30, 2014 was an estimated $2.0 billion compared to $2.3 billion at June 30, 2014.

Utilization of Paragon's marketed floating rig fleet was 100 percent in the third quarter of 2014 and in the second quarter of 2014. Average daily revenues for Paragon's floating rig fleet were $291,000 per rig in the third quarter of 2014, an improvement of approximately three percent compared to $283,000 per rig in the second quarter of 2014.

Third quarter 2014 utilization of Paragon's marketed jackup rig fleet was 79 percent, a slight increase from the 78 percent utilization achieved during the second quarter of 2014. Average daily revenues for Paragon's jackup fleet during the third quarter improved by approximately three percent to $117,000 per rig from $113,000 per rig during the second quarter of 2014. 

At the end of the third quarter of 2014, 80 percent of Paragon's available rig operating days for both floater and jackup units were committed for the remainder of 2014.  For 2015, an estimated 45 percent of the available rig operating days are committed, including 66 percent and 41 percent of the floating and jackup rig days, respectively. The calculations for committed operating days exclude available days related to two floating units, one jackup and the FPSO that are currently cold stacked.

Outlook

During the quarter, Paragon added approximately $162 million in backlog related primarily to contract extensions in the North Sea, Mexico, and West Africa.  In the North Sea, the Paragon C461 received a contract extension from early March 2015 to mid-November 2015 at a dayrate of $170,000 and the Paragon C462 received a contract extension from mid-January 2015 to late December 2015 at a dayrate of $167,000.  In Mexico, the Paragon L781 received a contract extension from mid-July 2014 to early February 2015 at a dayrate of $82,000. Paragon also reported two more contract extensions in Mexico for the Paragon M821 and M823 that were extended from late August 2014 and early September 2014 respectively to late March 2015 at their respective dayrates of $69,000 and $85,000.  In West Africa, the Paragon L783 received a contract extension from mid-October 2014 to early December 2014 at a dayrate of $145,000.  

In addition, Paragon announced today three new contracts in India for the Paragon M1161, Paragon L786 and Paragon L1112, which have contract lengths of three years each with respective net dayrates of $62,000, $53,000 and $62,000. The contracts for the Paragon M1161 and Paragon L786 are expected to start in early 2015 following rig preparation and mobilization to India while the Paragon L1112 is expected to begin its contract later in the year.  Paragon operates in India through a modified bareboat charter agreement whereby our partner receives a portion of the gross revenue with respect to these contracts.

Mr. Stilley concluded, "We have entered an environment with falling commodity prices, where customers are increasingly focused on maximizing their return on capital.  We believe this will create additional opportunities for our fleet of well-maintained and safely operated rigs. We are aggressively pursuing those opportunities and we are committed to maintain our status as a low cost provider."

About Paragon Offshore

Paragon is a global provider of standard specification offshore drilling rigs.  Paragon's drilling fleet consists solely of standard specification rigs and includes 34 jackups and eight floaters (five drillships and three semisubmersibles). Paragon's primary business is contracting its rigs, related equipment and work crews to conduct oil and gas drilling and workover operations for its exploration and production customers on a dayrate basis around the world. Paragon's principal executive offices are located in Houston, Texas. Paragon is a public limited company registered in England and Wales with company number 08814042 and registered office at 20-22 Bedford Row, London, WC1R 4JS, England. Additional information is available at www.paragonoffshore.com.

Forward-Looking Disclosure Statement

This release contains forward-looking statements. Statements regarding contract backlog, earnings, costs, revenue, rig demand, fleet condition or performance, shareholder value, contract commitments, dayrates, contract commencements, contract extensions or renewals, industry fundamentals, customer relationships and requirements, strategic initiatives, future performance, growth opportunities, market outlook, as well as any other statements that are not historical facts in this release, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to risks associated with the general nature of the oil and gas industry, risks associated with the operation of Paragon as a separate, publicly traded company, actions by regulatory authorities, customers and other third parties, and other factors detailed in the "Risk Factors" section of Paragon's registration statement on Form 10 as filed with the SEC on July 14, 2014, in Paragon's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014, and in Paragon's other filings with the SEC, which are available free of charge on the SEC's website at www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.

Conference Call

Paragon also scheduled a teleconference and webcast related to its third quarter 2014 results on Tuesday, November 11, 2014, at 8:00 a.m. U.S. Central Standard Time. The teleconference can be accessed from the U.S. and Canada by dialling 1-855-307-2986, or internationally by dialling 1-508-938-6940, and using access code: 20077331. Interested parties may also listen to the webcast through a link posted on Paragon's website at www.paragonoffshore.com, under "Events & Presentations" in the "Investor Relations" section of the website.

A telephonic replay of the conference call will be available on Tuesday, November 11, 2014, beginning at approximately 12:00 p.m. U.S. Central Standard Time, through Tuesday, November 25, 2014, ending at approximately 11:00 p.m. U.S. Central Standard Time. The phone number for the conference call replay is 1-855-859-2056 or, for calls from outside of the U.S., 1-404-537-3406, using access code: 20077331.  A replay of the conference call will also be available on Paragon's website at www.paragonoffshore.com, under "Events & Presentations" in the "Investor Relations" section of the website.

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SOURCE Paragon Offshore plc

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