Annual Report

Board of Directors Report
Marine Subsea is an international oil service company with a focus on the
West African Offshore market. The Group owns a fleet of 6 units in operation
and 2 under construction, including 2 multipurpose/well intervention
vessels, 5 offshore support units and 1 semisubmersible crane vessel.
In addition, the company has secured a service contract for a deepwater
drillship.
Marine Subsea AS has its head office at Lysaker in Norway. In addition to
corporate head office functions such as finance and investor relations, the
Norwegian organisation provides commercial, technical and operational
services to the company’s subsidiaries. The company has administrative,
commercial and technical management functions in Cyprus, a local organisation
in Luanda, offering fleet management and support services, and a
leading technical subsea construction/well intervention team in Aberdeen.
Marine Subsea’s policy is full equality and opportunities between men
and women. The company bases remuneration on education/training,
experience and performance. The Oslo office had 12 employees at year
end, 4 women and 8 men. Including all three subsidiaries, the group has
a total of 56 employees.
Financial Overview
On 16th December 2009, Marine Subsea raised its vessel financing, took
delivery of the deepwater multipurpose/intervention vessel Sarah and completed
its financial restructuring. Marine Subsea is now fully financed with a
debt maturity profile that matches the long-term nature of its contracts.
Standard Bank Plc and Eksportfinans ASA underwrote a loan of USD 222
million, of which USD 111 million was drawn-down in connection with
the delivery payment for Sarah and USD 111 million was committed for
October 2010 for the delivery of the second multipurpose/intervention
vessel, Karianne.
At the same time, Marine Subsea’s three outstanding bonds were
converted to 2 new bonds with a total value USD 314 million. The new
bonds have a 10-year maturity date and interest may be accrued in the
first 2 years.
The Company had 2 offshore support barges, the African Caribe and the
African Fjord, in operation and on contract throughout 2009. African
Installer was put in operation in April 2009 and generated income while
being towed to Mexico. Since late June, the barge has been generating
full charter hire. However, the charterer of African Installer defaulted on
its payment obligations and the Company had to make a provision in the
amount of USDm 7,4 on bad debt. Marine Subsea is in the process of
pursuing a claim of USD 9,1 million against the previous charterer. African
Installer is now being towed to Malta, where it will go on a 6 month
contract with Geocean.
Marine Subsea took delivery of its remaining 2 barges upon completion of
the restructuring process in December 2009. The African Worker arrived
in Angola in late February 2010 and has commenced a three year contract
with Total. The African Lifter arrived in Angola in March 2010 and is currently
tendering for a contract with 5 years duration at market rates.
The Sarah vessel arrived in Angola in March 2010 and is on a 10 year back
stop contract with Sonangol.
For 2009, Marine Subsea recorded operating revenues of USD 100,7
million and an operating profit of USD 3,3 million. Adjusting for one-off
items of USD 10,4 million, the underlying operating profit amounted to
USD 13,7 million. Net financial expenses for the year amounted to USD
42,9 million, mainly due to non-cash effects resulting from the bond loan
restructuring and a write-down of the equity in the joint venture with
Consafe MSV AB and Sonangol. Marine Subsea recorded a net loss for the
year of USD 41,6 million.
Total capitalised expenditures for 2009 were USD 167,9 million, mainly
relating to the Sarah, the African Worker and the African Lifter. Marine
Subsea’s total assets as at 31st December 2009 were USD 544,6 million,
while interest bearing debt was USD 456,5 million.
Book equity for the parent company at 31.12.2009, was USD 59,6 million,
of which zero was available for dividend payments, according to the
Norwegian Corporation Law. The Board of Directors proposes that the net
loss of USD 24,8 million for 2009 is recognized against retained earnings.
The company worked throughout 2009 to secure financing that was
necessary to take delivery of the Sarah vessel as well as 2 barges. This
process was successfully completed in December 2009. However, due to
substantial expenses relating to the refinancing process and the mobilization
of the new vessels, the company experienced tight liquidity during the year
and the Board expects this situation to continue into 2010.
The Board confirms that the annual accounts are prepared under the
assumption that Marine Subsea AS will continue as a going concern. However,
it should be noted that there are uncertainties related to the estimated
cash flows.
Financial Risk
Marine Subsea’s revenues are invoiced to customers in USD, while
operating expenses are incurred in USD, EUR and NOK. The remaining
commitment to Ulstein yard for the construction of the Karianne vessel
is hedged through a forward contract to buy NOK and sell USD. The USD
will be made available under the Karianne loan facility upon delivery of the
Karianne. Marine Subsea uses no other derivative financial instruments
to hedge the currency risk exposure. The Group’s interest expenses arise
from USD denominated loans.
The profitability and cash flow of Marine Subsea’s operations will be
dependent upon the market conditions for construction support vessels
and well intervention vessels in West Africa. Both intervention vessels are
currently on long term back-stop contracts with Sonangol, while 4 barges
are on contracts ranging from 6 months to 3 years.
Health Safety, Environment and Quality
Marine Subsea has high focus on Health, Safety, Environment and Quality
(HSEQ) including Security and has therefore employed a full time Director
HSEQ on group level, who reports to the Managing Director and is a
member of the Corporate Management Team. It is our belief that all
accidents are avoidable and no harm to environment and any harm to
or loss of assets is achievable. This is one of our core values.
16 Marine Subsea Annual Report 2009