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