Post on 03-Jan-2017
This presentation has been prepared by Island Offshore Shipholding LP (“IOSH” or the “Company”, and together with its subsidiaries, the “Group”) for information purposes only and does not constitute, and shall not be construed as, any offer or invitation or recommendation to buy or sell any securities.
The information contained in this presentation has not been independently verified. No representation or warranty, express or implied, is made by the Company, its affiliates or representatives as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein, for any purpose whatsoever. Neither the Company nor any of its affiliates or representatives shall have any responsibility or liability whatsoever (for negligence or otherwise) for any loss whatsoever and howsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation. All information in this presentation is subject to updating, revision, verification, correction, completion , amendment and may change materially and without notice. In giving this presentation, none of the Company, its affiliates or representatives undertake any obligation to provide the recipient with access to any additional information or to update this presentation or any information or to correct any inaccuracies in any such information.
This presentation contains forward-looking statements, including statements about the Group’s markets and its strategy, future operations and results thereof. Forward-looking statements include statements about expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not statements of historical fact, and are sometimes identified by the words “believes”, expects”, “predicts”, “intends”, “projects”, “plans”, “estimates”, “aims”, “foresees”, “anticipates”, “targets”, and similar expressions. Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements.
The information contained in this presentation should be considered in the context of the circumstances prevailing at the time and has not been, and will not be, updated to reflect material developments which may occur after the date of the presentation.
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This presentation is subject to Norwegian law, and any dispute arising in respect of this presentation is subject to the exclusive jurisdiction of the Norwegian courts.
Important information
2
4
Overview of the Company’s situation
Market adversely affected by reduced spending and increased focus on cash flow amongst oil companies
Significant overcapacity of vessels in most segments have resulted in pressure on rates and utilization, and fierce competition between owners especially within the PSV and AHTS segments
Consequently, IOSH is evaluating measures to improve its financial position
IOSH operates a large, modern and diversified fleet with focus on RLWI, SCV, Well stimulation, AHTS and PSV segments
Leading position in the Riserless Well Intervention (“RLWI”) market, a niche market with high barriers to entry due to substantial CAPEX requirements, high intensity of technology and demand for proven track record
Background
1
Company review
2
Contract situation/
opportunities
3 Order backlog excluding options totals NOK 5.1 billion (as of Q3 2015)
Secured additional backlog, comprising extensions and new business in PSV, W2W and SCV segments
Intensified international marketing and tender activities for RLWI through new business development function. Focus on successful application of new technology to broaden range of vessel services
5
Steps to improve financial situation
Two vessels sold, strengthening the Company’s liquidity position by NOK 400 million Divestment
1
Agreed with Vard Breivik to delay delivery of Island Victory
Island Defender, Discoverer and Diligence kept and financed outside the IOSH Group removing capex commitments
Renegotiated the shipbuilding contract with Kawasaki Heavy Industries for Island Navigator, with significantly improved terms
Improved newbuilding
schedule
2
Operational measures
Lay up of 3 vessels and additional 4 vessels stacked for winter season reducing operating costs to a minimum
– Further lay ups are continuously assessed for vessels completing current term contracts
Reduced working hours with 10%
Re-negotiation of all significant vendor agreements
3
Carnegie and DNB Markets engaged as financial advisors
Terms of proposed solution agreed with secured creditors
The company has been in dialogue with a group of bondholders representing a large portion of the voting bonds and agreed the terms of a proposed solution with the bondholders as set out in the Summons dated on or about 1 March 2016
Shareholders contribution to an overall solution is subject to final acceptance of the proposal from both secured and unsecured creditors
Addressing the capital structure
4
• The Island Offshore Group owns and operates a modern and versatile fleet of advanced and high quality service vessels for the offshore oil industry
• Established by the Borgstein-side of the Ulstein-family led by Morten and Håvard Ulstein, both with a long history within the Ulstein, Vickers and Rolls Royce Marine group
• Their history within the offshore service vessel industry dates back to 1974, when they were co-investors in OSV’s through the Ulstein group
• In April 2004 the Edison Chouest Offshore Group (Gary Chouest and his family) of Louisiana, USA became partners and co-owners
• Today, the Island Offshore Group offers a range of complex services to the offshore industry including:
• Subsea installation and maintenance
• Well stimulation
• Light well intervention
• Plug and abandonment
• Supply and logistics
• Anchor handling
• Engineering and supporting services
Ownership structure Background
7
Group overview
1) General Partner
Borgstein Skipsinvest AS
Island Investment LLC
Amnor LLC (GP1 in IOSH LP)
Borgstein AS Edison Chouest
Island Offshore Shipholding LP
100% 100%
50% 50%
49.5% 49.5%
1%
8
Group structure
The ownership percentages presented above includes indirect ownerships through the General Partners
Borgstein Skipsinvest AS Island Investment LLC
Nor Management LLC
Island Offshore Management AS
(“IOM”)
Island Offshore Subsea AS (“IOSS”)
50% 50%
80%
100%
IOM serves as the end-client interface. Through a management agreement, IOM is further responsible for marine and technical operations and crewing of the Group’s fleet.
Substantial amount of 3rd party contracts are with IOM
IOSS is a technology and engineering company and is responsible for RLWI operations
Affiliated companies
50%
Island Offshore Shipholding LP
IO VIII KS IO LNG
Invest KS IO III KS IO X KS
IO Pioneer KS
IO XII Ship AS
Contender
Crusader
Spirit
Empress
Earl
Express
Endeavour
Patriot
Commander
Chieftain
Challenger
Vanguard
Valiant
Crown
Wellserver
Constructor
57% 62% 70% 51%
Centurion
Pride Frontier
IO LNG KS
70%
Dragon
Ocean Int.
Dawn
Duke
Duchess
Clipper
100%
Captain
51%
Performer
Condor
Victory (NB)
Island Offshore UK Limited
Island Offshore Subsea UK
Limited
Island Venture 4 AS
100%
100% 100%
Island Navigator I
KS
Navigator (NB)
100%
Island Offshore International Shipping AS
99%
50%
9
Fleet overview
RLWI = Riserless Light Well Intervention, SCV = Subsea Construction Vessel ,PSV = Platform Supply Vessel, AHTS = Anchor Handling Tug Supply vessel. 1) Average charter free valuations from 2 independent shipbrokers per 30.06.2015
RLWI
4 vessels and 1 on order
Specializes in developing and implementing innovative engineered solutions for RLWI to obtain increased oil recovery
3 of 4 vessels on long-term contracts
Statoil did not exercise their option for two of the vessels, may negatively effect earnings in Q4 2015
~18% of EBITDA 2014
Backlog: NOK 3,016 mill.
Avg. age: 7.3 years
Value1: NOK 3,494 mill.
SCV
4 vessels
Operates a fleet of advanced and versatile vessels with subsea capabilities
Island Spirit in lay-up for the winter season due to poor market conditions
~27% of EBITDA 2014
Backlog: NOK 448 mill.
Avg. age: 5.5 years
Value1: NOK 1,525 mill.
Well Stimulation
3 vessels
Operates 3 well stimulation vessels especially equipped for transporting and handling liquid cargo and chemicals for use in well stimulation operations
~14% of EBITDA 2014
Backlog: NOK 997 mill.
Avg. age: 5.8 years
Value1: NOK 1,215 mill.
AHTS
2 vessels and 1 on order
Operates 2 mid size AHTS vessels with UT 787 CD design
The vessels are equipped for deep water anchor handling with fully integrated work ROV support and subsea capabilities
Satisfactory earnings in Q3 following award of subsea construction work
~12% of EBITDA 2014
Backlog: NOK 3.8 mill.
Avg. age: 8.0 years
Value1: NOK 1,040 mill.
PSV
16 vessels
North Sea fleet of advanced and flexible PSV vessels
Currently 3 vessels are laid up due to the weak market
With the market continuing to be soft and volatile, further lay-ups are continuously being evaluated
~29% of EBITDA 2014
Backlog: NOK 674 mill.
Avg. age: 4.3 years
Value1: NOK 3,825 mill.
• 77% utilization Q3 2015 in line with 1H 2015 but weaker than previous years due to
• Planned maintenance and upgrade activities
• Soft offshore supply market resulting in lay up of 3 PSV vessels
• Utilization has improved for both AHTS and RLWI vessels in Q2 and Q3
• Fierce competition, especially within PSV segment, is expected to continue until ship owners contribute by laying up additional vessels
• Island Offshore will continuously evaluate further lay ups as vessels complete current term contracts
• The RLWI units Island Frontier and Island Wellserver are winter stacked from mid-October as until 1st April 2016 as Statoil have not declared its options for 165 days work
• 9 of the vessels in the fleet operate in the spot market, mainly in the PSV and AHTS segment
Comments
10
Operational update – fleet utilization (as of Q3 2015)
Utilization (%)
93 95 91 90 88 90 90
86 87 92
96
85 78 78 77
0
20
40
60
80
100
120
Q112
Q212
Q312
Q412
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Q414
Q115
Q215
Q315
11
Vessel contract coverage as of Q3 2015
Note: The RLWI contracts with Statoil for Frontier and Wellserver only guarantees 200 days utilization per year. Navigator to be delivered between 31.01.18-31.01.19 depending on contract status. Agreement for delivery of Island Victory in Q2 2018 yet to be formalized
Contract Option Framework agreement
Delivery
Expiry
30.03.2020
30.03.2020
13.10.2021
13.12.2019
13.12.2021
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
IO III Contructor RLWI
IOSHLP Frontier RLWI Stato il Stato il Stato il Stato il
Wellserver RLWI Stato il Stato il Stato il Stato il
Champion PSV
Centurion Well Stim
Crown W2W
Pride SCV
Clipper PSV
Navigator THD
IO VIII Spirit SCV
Express PSV
Empress PSV
Earl PSV
Endeavour PSV
Commander PSV
Chieftain PSV
Challenger PSV
Patriot Well Stim
IOX OI III SCV
Duke PSV
Duchess PSV
Dawn PSV
Dragon PSV
Performer LWI
Condor PSV
IOXII Vanguard AHTS
Valiant AHTS
Victory DWIV
IOLNG I Captain Well Stim
IOLNG Crusader PSV LNG
Contender PSV LNG
20192016 2017 2018
Order backlog (NOK million)
12
Order backlog of NOK 5.1 billion as of Q3 2015 (ex options)
IOSH Group Firm contract split inside / outside IOSH
433
1455
1114 960 886
156 136
170
495
812
673
589
989 1010
0
500
1000
1500
2000
2500
Q4 2015 2016 2017 2018 2019 2020 2021
Contracted Option
235
798
630 626 632
156 136
198
655
484
334 254
0
200
400
600
800
1000
1200
1400
1600
Q4 2015 2016 2017 2018 2019 2020 2021
Contracts outside IOSH Contracts inside IOSH
• The consolidated cash position was NOK 204 million at the end of Q3 2015
• Value adjusted book equity is estimated to NOK 4,154 million, equal to a ratio of 33%
• Vessel values down approximately 9% on average since year end 2014
Key financials Comments
13
Key financials
1) Adjusted for CIRR loans/deposits
2010 2011 2012 2013 2014 Q1-Q3
2015
Profit and loss
Operating income 1 520 1 708 1 954 2 181 2 740 1 743
Expenses -970 -1044 -1180 -1294 -1 469 -921
EBITDA 550 663 774 886 1 270 822
EBIT 379 479 552 636 970 563
Net profit (before tax) 175 312 350 360 406 88
Balance sheet Fixed assets 5 521 7 413 8 411 9 219 10 912 11 187
Cash 55 129 36 432 390 204
Total assets 5 916 7 893 9 102 10 388 12 810 12 734
Equity 1 600 1 922 2 300 2 640 2 949 3 028
Non current liabilities 4 129 5 818 6 423 7 296 9 059 8 896
Current liabilities 163 140 237 330 696 679
Total equity and liabilities 5 916 7 893 9 102 10 388 12 810 12 734
Net interest bearing debt1 4 129 4 316 5 108 5 781 7 830 7 188
Key credit ratios
Equity ratio1 27.0 % 29.3 % 29.5 % 29.7 % 25.0 % 26.0 % NIBD / EBITDA1 7.5 6.5 6.6 6.5 6.2 6.3
EBITDA margin 36.2 % 38.8 % 39.6 % 40.6 % 46.4 % 47.2 %
• RLWI and Well Stimulation have shown considerable growth through 2009-2013
• As of Q3 2015, RLWI and Well stimulation represent ~50% of revenue and 40% of EBITDA
• Revenue and EBITDA contribution has gradually shifted from offshore supply to more advanced vessel segments
• Strong PSV and SCV revenue and EBITDA contribution in 2014 partly due to sales gain of the vessels Island Champion and Island Pioneer
Revenue split
EBITDA split
14
Segment contribution
20% 22% 16% 16% 20% 28% 24%
18% 12% 14% 11% 10%
10% 6%
18% 13%
11% 11% 14% 18%
17%
45% 49%
50% 50% 45% 34% 42%
0% 4% 9% 12% 11% 11% 10%
0 %
20 %
40 %
60 %
80 %
100 %
2009 2010 2011 2012 2013 2014 Q1-Q32015
PSV AHTS SCV RLWI Well Stim
25% 27% 14% 15% 20% 29% 19%
28% 16% 20% 13% 11%
12%
4%
19% 17%
11% 12% 14%
27%
26%
28% 35%
42% 45% 39% 18%
38%
0% 5% 13% 16% 16% 14% 13%
0 %
20 %
40 %
60 %
80 %
100 %
2009 2010 2011 2012 2013 2014 Q1-Q32015
PSV AHTS SCV RLWI Well Stim
• Agreement with Vard to defer delivery of 3 PSV newbuildings (outside IOSH Group) and 1 AHTS
• Capex includes Island Victory and Island Navigator
• NOK 53 million capex in 2016 might be postponed
• The DWIV, Island Victory, is expected to be further postponed to Q2 20181
• Capex for Island Navigator reduced from initial USD 355 million to USD 305 million
• USD 2.5 million paid October 2015. Another USD 10 million to be paid at either 6m after contract or at the latest 12m after delivery
• To be delivered between 31.01.18-31.01.19 depending on contract status
• Fully financed through Japanese financing institutions
• Maintenance capex according to condition of class and maintenance programs for components
Committed capex (NOK million) Comments
15
Capex commitments
32 48 76 97 20 53
997
0
200
400
600
800
1000
1200
Q4 2015 2016 2017 2018
Maintenance Newbuildings
1) Agreement for postponed delivery of Island Victory in Q2 2018 is yet to be formalised
Debt Maturity profile – Post deferrals of instalments and bond amendments (NOK million)
16
Debt maturity profile
Note: Assumes maturity of mezzanine debt in December 2018. NOK 470 million Tranche A bonds mature in October 2018 and NOK 230 million Tranche B bonds mature 6 months later. NOK 80 million 2nd Lien loan in Island Performer maturing in 2016 not included as the loan is in process of being repaid.
IOSH IOSH Group
120 160 201
249
626
219
470
0
200
400
600
800
1000
1200
1400
1600
2016 2017 2018
Installments Balloons Mezzanine Bond
512 560 630
418
1446
274
470
0
500
1000
1500
2000
2500
3000
2016 2017 2018
Installments Balloons Mezzanine Bond
17
Financing structure (Q3 2015)1
1) Excluding any intercompany debt in subsidiaries 2) NOK 115m is related to financings of vessels owned by IO X KS, which again IOSH L.P. has provided to IO X KS as an internal loan 3) NOK 127m unsecured loan from Island Venture 4 LLC , related to the financing of Island Performer 4) Including NOK 197m loan from Island Offshore Management 5) Pledge of participating interest of Island Offshore VII KS and Island Offshore LNG KS and pro rata guarantees by Limited Partners
Island Offshore Shipholding LP
IO VIII KS IO LNG
Invest KS IO III KS IO X KS
IO Pioneer KS
IO XII Ship AS
Contender
Crusader
Spirit
Empress
Earl
Express
Endeavour
Patriot
Commander
Chieftain
Challenger
Vanguard
Valiant
Crown
Wellserver
Constructor
57% 62% 70% 51%
Centurion
Pride Frontier
IO LNG KS
70%
Dragon
Ocean Int.
Dawn
Duke
Duchess
Clipper
100%
Captain
51%
Performer
Condor
Victory (NB)
Island Navigator I
KS
Navigator (NB)
100%
Island Offshore Shipholding LP • 1st Lien bank facility: NOK 2,046m • 2nd Lien seller credit / mezzanine: NOK 219m2
• Unsecure bond: NOK 700m • Unsecured seller credits / mezzanine: NOK 242m3
• Intercompany loans: NOK 359m4
Guara
nte
ed b
y I
OSH
IO VIII KS • 1st Lien bank facility: NOK 774m • 2nd Lien bank facility: NOK 39m
IO X KS • 1st Lien bank facility: NOK 1,878m • 2nd Lien seller credit / mezzanine: NOK 20m
IO XII Ship AS 1st Lien bank facility: NOK 360m
IO III 1st Lien bank facility: NOK 398m
IO LNG Invest KS • 1st Lien bank facility: NOK 246m • Security pledge mezzanine: NOK
230m5
IO LNG KS • 1st Lien bank
facility: NOK 456m
TBN-SPC Firm commitment from Japanese financial institutions of up to 90% of construction cost, on a non-recourse basis