Awilco Drilling PLC (OTCPK:AWLCF) Q3 2016 Earnings Conference Call November 17, 2016 9:00 AM ET
Jon Bryce - CEO
Ian Wilson - CFO
Good afternoon, ladies and gentlemen and welcome to the Awilco Drilling PLC's Q3 Presentation. My name is Rosie and I'll be your coordinator for today's conference. For the duration of the call you'll be on listen-only. However, at the end of the presentation, you will have the opportunity to ask questions. [Operator Instructions] I'll now hand you over to Jon Bryce to begin today's conference. Thank you.
Thanks, Rosie. And this is the Awilco Drilling Q3. I'm Jon Bryce and with me today is Ian Wilson, our CFO. So the two of us will walk you through the earnings call. For those of you who have access to our website, you will see under the IR section, today there is a presentation there, the Q3 and so basically we'll be following the Q3 on the website which might make it easier to follow.
So the agenda then for the call, we'll give you some highlights from the quarter, we'll go into the numbers in a bit more detail, the financial results. And then we'll give you an operational update followed by some feedback on the market summary, and then go into Q&A which Rosie will help manage.
So the highlights then as Page 5, if you do have the presentation, Awilco Drilling announcing a dividend in respect of the quarter of $0.20 per share. So very, very good operational performance for the quarter which helped to produce that dividend and that's been driven by revenue of $35.7 million for the quarter, EBITDA of $25.3 million, with a net profit of $17.9 million. Spending then on OpEx, for the quarter OpEx average per rig at 44,200 per day, it is important to recognize this is a blend of the two rigs, WilPhoenix is working, WilHunter was between warm and cold stack, so quite different actual levels of OpEx per rig but we'll explain that later in the call.
So total contract backlog, an excellent backlog then at the end of Q3 was $195 million, and another highlight from the quarter then as the WilHunter, you may remember that we kept the rig initially hot stacked, and then we moved it to warm stacked, and then lastly, we have now moved it to cold stack and the cold stacking preservation was completed during the quarter by the end of October. So those are the highlights from the quarter. So we'll have a look at the numbers in a bit more detail then.
So if you have the presentation in front of you, we'll start with Slide 7, which is the Q3 income statement. Ian would like to walk us through the income statement.
Yes, thanks, Jon. The contract revenue for Q3 was $35.3 million, and that will interest [ph] in the revenue deficiency of 99.1%, so it's pretty high revenue deficiency for the quarter. It's small [indiscernible] just short of 4,000 total revenue of 35.7. The rig operating expenses of $8.1 million, as Jon mentioned earlier, that's an average per day to 44,000 per rig and the WilPhoenix operating mode, that was closer to mid-60s and the WilHunter which is going through the transition from more to the cold stacking status in October, that was in the range of mid-20s.
The G&A expense is $2.1 million, that includes 300,000 in respect of the outlooks provision. So underlying G&A expense is $1.8 million, a deprecation of $3.5 million and as we further capitalize some of the projects, we will see a slight increase in depreciation in the quarters going forward. So total expense is there $30.9 million and operating profit of $21.8 million. The interest expense is $7.9 million, principally in respect to the bond and other financial items in respect of principally hedging expense and translational gains and losses, so net financial items is $2.5 million, and profit before tax of $19.3 million. Tax expense from $0.5 million, net profit of $17.9 million and underlying EPS of $0.59 per share.
Getting on to the balance sheet, Slide 8, if you have the presentation; we have rigs, machinery and equipment of $242.8 million, cumulative [ph] of $1 million under tax additions during the quarter offset by the depreciation of $3.5 million, it results from that movement to $242.8 million. As we mentioned, the tax asset of $2.6 million, total assets of $245.4 million. The trade and other receivables, $11.9 million, it represents the August revenue in connection with the Apache contract, that is also being received and the key payments in revenue, a portion of that is in the September revenue which has also been received and then there is the standby revenue which is highlighted and still in discussion with Apache of $22.8 million, that's included in that number there and we'll discuss that a bit more further on.
So no movement in the inventory and the cash balance is $50.7 million which is a result from previous quarter, largely due to the seeds of the tax credit in respect of -- and the tax payments made. The current tax of $22 million, which is very clarification that the receivable which we will receive in Q2 '17 and that will be received once we have paid the bulk off the tax payable number of $24.8 million which will be paid in Q2 '17. So the net effect will be soon after $2 million. So the total assets of $381.2 million, no movement during the quarter three with respect to the long-term which is debt for the current portion but there was a payment in the early part of October for the $5 million plus related to interest.
The trade in other creditors, accruals and provisions have been in line with prior quarter so no real issues to report there in the current tax payable that we really discussed that. So total equity and liabilities, $381.2 million.
Okay, thanks Ian. So let's look at operations in more detail. So that's section three, operational update. And on Slide 10, if you have it, we're starting with the contract status and as of today our current contract backlog of is $179 million, that's pretty simple story in terms of what the two rigs are doing; one's working, one's cold.
So the WilHunter now is cold, cold stacked in the North of Scotland, and to bring this back to market it will obviously need a reactivation and it will need an SPS and -- but we'll take a view on that as the contract opportunities appear. So at the moment, it's very little cost to cold stack in Invergordon, the WilHunter. WilPhoenix is working, still in contract with Apache; the contract runs until Q1 2018. Current day rate of $387,500 per day and at the start of 2017, it is an Apache contract but the rig vendor beats to tack out for a period of time, approximately five months but it's still an Apache contract. So that's the contract backlog of $179 million.
So some -- an update then on Slide 11, what are the main points from the quarter then, very good, very good operational uptime Q3 98.8%. Also very good was our HSE performance, so I'm very pleased the rig has worked so safely and efficiently, especially following on from the yard state where we upgraded [Technical Difficulty].
Okay, so onto Slide 17 and some general compliance; when is the market going to return well -- the sort of head statement as market uncertainty continues with respect to timing and the shape. And as I said before, there has been probably bit more tendering than we anticipated but it's still too early to say if this is the start to the change.
Scrapping it's key to rebalancing as I mentioned, decommissioning work in the UK, that's finally beginning to become visible, which is encouraging. From the work that isn't decommissioning, this sort of drilling, there hasn't been summer fixtures but it's also important to say that though this is possibly some of the operators favorite way of working, some are working or seasonal working and it's not sustainable long-term at OpEx rates, as rig owners, it just doesn't work to bring rigs out for OpEx for summer after summer. For obvious reasons for the OpEx is encouraged in the down periods in the winter and as more rigs come out, SPS it's the capital required to put them back into work. So this ongoing seasonal work for drilling at OpEx rigs, we don't see this as sustainable. So that's a comment then on the market high level.
So let's summarize then what we said in this call today; so here are five bullets for Slide 19. So we announced a dividend payable to the quarter on the back of some really good performance of $0.20 per share. We have completed the cold stacking for WilHunter, we have a contract backlog of $179 million going forward. Market uncertainty continues unfortunately with respect to the timing this year for the recovery though there are some encouraging signs. And finally then, the company still continues to evaluate market opportunities in a case by case basis, opportunities that will add value and that's on the basis of our fundamentals are good, relatively speaking with low debt, strong cash and a very good contract coverage. So those are the summary bullets.
So I'll hand you back now to Rosie, and you can manage the Q&A.
Okay Rosie, thank you very much for managing the call and for the people who dialed in, thanks for your participation. Thank you.
Ladies and gentlemen, thank you for joining today's conference. You may now replace your handset. Thank you.
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