Significant recovery in activity: +18.8%
Sharp increase in EBITDA (+19.3% sequentially) to 142.1 million euros
Net loss, Group share of 21.4 million euros owing to the change in the dollar exchange rates, generating 30.5 million euros in net financial expenses
Paris, August 31, 2011
« We have arrived at the end of a downturn that has lasted since late 2008, and the market for modern offshore vessels is now turning around. BOURBON has every chance of being the first to benefit from this new turn of events thanks to a high-performance modern fleet and a worldwide network. BOURBON's operating income for the period is up 19.9% over the first half of the previous year and 145% over the previous six-month period. Net income is affected by the sharp fall in the dollar (down 11 cents) over the period. Utilization rates of the industry's modern vessels are gradually increasing as a prelude to the improvement in average daily rates we are expecting by year-end 2011 and in 2012, » says BOURBON Chief Executive Officer Christian Lefèvre. « In this context of recovery, which is starting to be reflected in our operating figures, BOURBON is actively moving ahead with its BOURBON 2015 Leadership strategic plan ».
Watch the conference
Introduction (duration: 1 min)
M. Christian Lefèvre, Chief Executive Officer
Financial Results (duration: 18 min)
M. Laurent Renard, Executive Vice President Finance & Administration
- BOURBON Financial Results (10 min)
- Marine and Subsea Services Activities Results (4 min)
- Balance sheet at June 30th, 2011 (2 min)
- Conclusion (1 min)
Activities (duration: 20 min)
M. Gaël Bodénès, Executive Vice President and Chief Operating Officer
- Focus on BOURBON Key factors (4 min)
- Focus on First Half activities (4 min)
- Operational key data (3 min)
- Market key data (6 min)
- Conclusion (1 min)
Outlook (duration: 10 min)
M. Christian Lefèvre, Chief Executive Officer
- A market reversal benefiting modern fleets (2 min)
- Estimates of investments by the oil companies raised for 2011-2015 (1 min)
- Petroleum contractors are the first to benefit from the increase in investments by the offshore oil & gas sector (1 min)
- BOURBON gears up to improve its performance (1 min)
- BOURBON Outlook: Strong capacity to grow and generate EBITDA (3 min)
- Conclusion (1 min)
Questions & Answers (duration: 20 min)
Consult the conference transcript
Good morning and as an introduction and, as you know, safety is Bourbon’s priority. As in all our meetings, we are going to start with what I call a safety moment. I’d like to tell you of the three exits, the two main entrances and the entrance on the left, and there is a meeting point that is Quentin Bauchart street. That is the meeting place. I’m now going to give the floor to Laurent Renard who is going to tell you about the financial results and Gael Bodenes will tell you about the activities for the first half of 2011 and I’ll be back to tell you what the next half year in 2012 holds in store for us. Thank you.
Good morning, everyone. Two major events marked the financial results in the first half year. The first of those was a recovery of the activity, which produced some good operating results. Secondly, the downswing in the dollar which led to a negative result.
Let’s start by looking at the environment. The cost of a barrel of oil is high, $111. This is the Brent price and you can see that from one year to the next the average is going up. The world needs oil and oil companies need to extend their reserves, so this is very good for Bourbon. The other side of the graph is not as nice because, as you can see, over the first half year as compared to the previous half year the dollar has lost eight cents. Very good results in terms of the operating income. As you can see, sequentially the operating results for the first half year, thirty six million, the second half year a little under eighteen million, and forty-three million in the first half year 2011, so an increase of 19.9% like-for-like.
So we start on the top line, which is the sales which is up by 19%. Continental offshore and sub sea, it’s mainly from that, and a significant increase – 16.6% in the gross operating income, which stands at one hundred and forty-two point one million. Now if you look at the operating income and after a low point at the end of 2010 we’ve come back to the same levels we enjoyed in the first half year in 2010. As I was saying, there’s not only the operating results. There’s also the financial result. The cost a little under sixty-two point seven in terms of financial income, which is a net income group share minus twenty-one point four. So this financial result, what is it comprised of? It includes the cost of net debt, as you can see, and sequentially we have an increase in net debt. This has to do ... this results in an increase in average debt and also an increase in financial expense and income, a little under minus thirty-two million. This half year it’s just slightly under thirty-three, so a good part of these financial expenses come from the currency differentials.
If you move on down you can see the net income from discontinued activities, so it’s not surprising there’s no longer any net income. We had twenty-one million last year. These are bulk activities and the sugar activity in Vietnam that were abandoned. Net income group share minus twenty-one point four million.
So let’s get back to the breakdown of the financial income and let’s have a look at the currency differential, the exchange difference. Just a word of explanation about the mechanism itself. The financial income is impacted by the foreign exchange differences between currency flows and it’s also impacted, as I say, from currency flows, but it’s also impacted by the changes in the market to market values of the balance sheet items in foreign currencies. Let’s take the example of accounts receivable and foreign exchange differences from flows. We have an average rate of the dollar at one point four, and the receivables that were billed previously at the average rate for the quarter, they were billed three months previously, and on an average the invoicing currency rate was one point three four. So the loss incurred amounts to six cents on the dollar for the accounts receivable in flows, and in our financial income this is translated into a loss of six cents on the dollar but that’s not the whole story. The rest of the story is that we’ve continued to invoice in the second quarter in 2011 and customers hadn’t paid us everything as of the 31st June, so on the receivables outstanding we have invoiced at a dollar rate of one point four three, so the accounting rule requires that as of 30th June we evaluate market to market these unrealised receivables, as of the day, in other words one point four five. So here we have a loss which is only a virtual loss at this point, a latent loss, which is the difference between one point four five of the mark to market as of 30th June and the one point four three of the invoicing rate of the period. Obviously, we applied the same accounting rules on 31st December 2010. Now this time we did not have a latent loss, we have a latent gain of two cents on accounts receivable as of 30th June which hadn’t yet been paid on 31st December. So we cancelled that latent gain on the first day of the fiscal year 2011, so the financial result is impacted by the mark to market as of 20th June, 30th June, and the cancellation of that on the 1st January. Apparently this particular half year we were receiving a double whammy, as it were.
Now if we look at the figures on the chart on the left you see the foreign exchange differences as they appear in our financial results during the last five half years. In purple you have profits or losses that are latent and in orange you have the realised profits and losses based on the formula I explained to you earlier of mark to market flow. So what can we say about this overview over five half years? You can see that sometimes the unrealised and realised are opposed and sometimes they’re in the same direction. Sometimes they have an absolute value that’s limited and sometimes they have an absolute value that’s significant. Is that important? Let’s look now over here and concentre on the foreign exchange differences realised. What happened actually, we have roughly the same figures, thankfully, but cumulative over the five half years, total we have logged over these five half y ears a real loss of twenty-one million Euros, and if we compare this to the cash generated over these five half years it represents four percent of operating cash.
So the net income group share has a loss of twenty-one point four. So how do we move for a loss in the second half year of 2010 of one point eight to a loss of twenty-one point four? The first point, as you have seen earlier, the operating result in EBITDA is a net growth of twenty-three million. On the other side we no longer have the net results from the discontinued operations, a little under twenty-one million. We have little under six million exchange loss realised and seventeen million non-realised losses, which may happen or not depending on what happens with the currency exchange rates after 31st. So the total of that is minus twenty-one. The operating result are very strongly. We are in the first year of the 2011 plan – the Bourbon 2015 plan. 2011 is the first year in the 2015 plan at Bourbon and our objective during the plan is a growth of seventeen percent per year. In the first half year you have the comparison at the top here with the first half year of 2010. At the bottom you have the comparison with the second half year of 2010. You can see that compared to objective of a growth of 17%, we have met that objective with 19.3%. And in terms of Subsea, and this is a question of the growth in the actual fleet, but there’s also a growth in the utilisation rate. And here we have the increase in marine services, we have an increase in the utilisation rate and in the fleet.
Now let’s look a bit more deeply into the forecast. What do we observe, here you have EBITDA compared to sales, here you have EBIT to sales and you have EBITDA to average employed. And you can see that the three curves tell the same story. Due to the change in the context we have actually had a decrease. We think that we have reached the bottom of the wave as of the end of 2010. And we said that it would increase and that’s what we’re observing in all of these three lines.
Now let’s look at marine services, here’s the income statement, we are continuing obviously to invest and participate in active growth in the fleet. We still have our utilisation rate which has increased and this has 19.6% increase in sales over the year, 3.8% increase and we haven’t yet regained the profitability we had in the first half year. Marine services as you know is broken down into three segments. We have deep offshore, continental or shallow offshore and crewboats. Now these are variations on the theme, as you’ll see there are some differences. Let’s look first of all at deep offshore. We decided to invest a bit less in this segment and deepwater offshore vessels, we were in overcapacity, at least temporarily. We had not received many ships during the period, in fact actually except a delivery for only one ship. In addition in this half year we had a significant number of programme technical or shutdowns and a slight decrease in utilisation rate due to the market, especially in the North Sea as Gaël will explain to you a bit later. So the total of sales is slightly down, minus 3% within EBITDA down 48.8.
Now continental offshore, this is a real success story, shallow water vessels, a massive influence of Liberty Ships is very clear is commercial success. And just compare the utilisation rate with the competition in this market and the figures speak for themselves. We worked a lot, better usage in Brazil in the second half year of 2010, so higher utilisation rate, increase of thirteen points of utilisation rate in Brazil and then behind that an improvement in the profitability, twenty-eight million point four, 28.4 million within EBITDA to sales ratio of 25.1 which is greater than what we observed in the first half year in 2010.
Now another story again with the crewboats, a very significant increase in the fleet, 27 ships over 12 months, increase in utilisation rate 3.5% up, for a revenue is a consequence of 113.6 which is an increase if 19.8% in revenue. But more significant direct costs because of a campaign of re-modernisation of our surfers. So the EBITDA is 22.6 million which is roughly on the same order as we had at the preceding year.
Now the subsea activity, another very wonderful story for the subsea services. Two major ships came into the fleet, very high utilisation rate 94.2%, in other words an increase, the previous year’s level is very, very good, this is even better, plus 8.8 points, profitability measured by EBITDA on capital employed, 16.3%, significantly higher than what we enjoyed the previous year. A very nice story here as well for this half year in subsea services.
Now let’s look at the overall figures, the balance sheet and capital employed. We observed that the capital employed from one year to the next is basically stable. This is the consequence as you can see, the fleet under construction doesn’t change much. In the framework of Bourbon 2015 we have modified the payment profile on the shipbuilding activities in terms of capital employed because we are only going to be paying 25% of the ship by the time it’s actually built and previously we were paying 75% at the time of construction. Capital expenditure is under control as at 30th June 2011, 37% of Bourbon’s, 2015 CAPEX had not yet committed. And you will observe that the cash out for the half year was much lower than seventy-five million Euros and much lower in the second half year, of previous half year, 341 million in the first half year 2010. And that that increased it was from one billion seven hundred and sixty-five million to one billion nine hundred one million, we have benefitted from some spinoffs, disposals, we had not fully liquidated the sale of the bulk transporters. We delivered two additional ships at the beginning of the year and we also, we sold off our Gulfmark shares as well, this generated sixty-four million in cash generated by the operations. The dividends were paid in June, was an out flow of fifty-three million and an out flow of one hundred and seventy-five million for investments which produces a net debt of one billion nine hundred million.
Now operational net debt, one million three hundred and sixty-eight shareholders’ equity, one billion nine hundred million net debt as of 30 June 2011 and vessels under construction for a net operating debt of one billion one hundred and seventy-five million. Ultimately what conclusions may we draw from these factors? First of all the operating results are significantly up. Secondly the net income has been impacted by the change in €uro/Dollar parity and thirdly the new financial strategy will gradually have a positive effect on cash flows in the coming years. Ladies and gentlemen, thank you for your attention. I’m going to be handing you over to Gaël Bodenes who is going to be talking about our activities over this half year period.
Well thank you Laurent. Well ladies and gentlemen, good morning. As you’ll be able to see the activities are on the rise and favour the type of activities Bourbon’s involved. I’m going to give you the key points for the half year’s activities and I’ll give you a segment by segment analysis of our operating income and I’ll conclude telling you about what the market holds in store for us in the future. So the first part, the key factors, well the safety first and so again, you know safety is in line with our objectives. And so were worked, you know, 18.1 million hours during this first half years and our results certainly have improved in the second half year to reach a ratio of 0.71 recorded by million hours worked. And we just received the congratulations of EXXON in Angola because our vessels on the block 15 have realised more than 1,000 days of operations without any accidents. So if we look at the evolutions of our employees, are pretty much in line with the groups and with objectives in the number of vessels that we’ve delivered. So we have hired 610 new employees over the first half year, three or four persons per calendar day over the first half year. So what needs to be stressed and the speeding up of our average in terms of training so again in line with our Bourbon 2015 objectives. So we’ve had more of 100% increase compared with the first half year last year. So we have the photo of a surfer simulator that we made operational in Indonesia in order to actually comply with the requirements of our clients.
So talking of our clients, three factors have to be stressed. Have we got enough petroleum? So we’ve had increased our revenues with EXXON, that goes from eight to ten percent. And then we have the increase off of the revenues with the Nationale of Petrobras, that goes from five to seven percent, mainly linked to the Brazil contract of our Liberty that we’ve made operational at the end of last year. And third point, and a remarkable point that is, the increase of the activities with Saipem, and it’s true that you know our commercial success of our Liberty in the shallow waters where we operate about 10 vessels for Saipem and maintenance in Nigeria. So on this half year we’ve also had a new client, CGGVeritas, we’ve signed a five year contract for six assistance vessels for seismic operations and they will be built specifically in the naval shipyards in Dubai and they will be delivered for the end of 2012 in the Granweld shipyard. So our fleet is growing and we’ve taken delivery of 21 vessels this half year, so one deepwater and twelve crewboats and eight shallow water offshore. So on the right-hand side of the slide you have the photo of the first Bourbon evolution that is on the way to Angola. And below you have a photo of the last one of the crewboat vessels of the Surfer 1400, this is the new generation of our 140 surfers and with an improvement of the comfort of the passengers and an improvement in the fuel consumption of this vessel as our clients had required us to do.
So now if we look at the position for the fleet as of June 30th. So we have two major evolutions in line with our commercial objectives and our vision of the market. And so plus eight vessels in Western Africa, so 298 vessels that are operating and plus eight vessels in the South East Asia and the fleet goes from 25 to 33 vessels otherwise in the Middle East and North Sea and the American Continent operational fleet remains stable.
So we have 423 vessels that are operating, 150 on operationals, so a total fleet of 423, so 538 total, so what’s specific about a fleet that’s highly modern with a 5.6 average age. And I’d like to remind you that we will have … will be at full speed in our 2015 improvement plan, we’ll have about 600 vessels. There’s a few examples of commercial development activities under the new Marine Services contracts first. So the PSV and a deep offshore, very dynamic with the higher increase of the daily rate and the utilisation rate into the North Sea. As an example we have a PSV with Statoil to Angola with BP and four in Sakhaline Asia, you know, with a Gazflot which is Gazprom subsidiary. And a contract – interesting contract, and that’s the AHTS for PEMEX in Mexico and following the Macomdo it makes the water to have anti-pollution services. So we have modified one of our AHTS and we’ve been able to sign a long term contract for this company. Another interesting contract is in Thailand with the Chevron and what they wanted to do was to check the reality of the fuel consumption efficiency and so we had six months of trial period and the trials have been very positive because they were underway with negotiating an extra contract, so we have four assistance and salvage operations. And here you have a photo for the Abeille Languedoc towing the Union Neptune off Oleron island. Now regarding the Subsea Services, so we’re continuing on development with wind farm with the Bourbon Enterprise working at the Fluor in England, has now gone to Germany with a contractor with the Bard until the end of the year. So Nigeria and Ghana we have signed contracts – short term contracts for a smaller MPSV, another interesting contract. We have the BP contract that we’d modified in order to improve the capacity of the cranes that have gone from 100 to 150 tons.
So we’ve seen the key points of activities and so you know, what about our operating income, as Laurent said, they are on the rise and we have a 15% increase in the utilisation rate in the deepwater. In the shallow water we have an increase of 94%. So again our daily rate are also on the rise. And our availability rate for the supply IMR are above 94%. And the crewboat activity is somewhere around 92%.
So I’d like to remind you that the availability rates – technical availability rate by 2015 will have to be 95%. Now regarding the supply is already above 94% IMR results. And so the first exchange – standard exchanges are being operational and we’re seeing the effects. And so we look at the crewboat availability rate that’s at 92%. We have to concentrate our efforts in this activity by industrialising our working methods. So on the photo we have an example of our technical base in Congo so you know, where we actually have a classification drydock in series in order to actually limit the downtime during drydock.
So before going into detail of the operating income on a segment by segment basis I’d like to start by explaining these four slides that are based on the same principle. So you have a diagram showing us in blue, since the beginning of 2010 up until 30th of June of this year, the utilisation rates and in red the average daily rates and bottom right you have a chart showing you sequentially the utilisation rates and the average daily rates between the last half year last year and the first half year of this year. And then they have the commercial objectives – our commercial objectives in this very segment. So if we look at the deepwater offshore segment, so slightly down, two percent that is, and so mainly due to drydock and also the … so now the activity has taken up again in July/August and the utilisation rates in North Sea are above 90% with the daily rates that have practically doubled.
And regarding the average daily rates of our activity in the offshore segment and are constant, around $19,000 are our commercial objective always. And this segment is to maximise utilisation rates.
So shallow water offshore, utilisation rates has increased by 15%, there’s a sharp increase due to the Brazil where we have signed contracts and mostly due to the commercial success of our Liberty vessels in Asia as well as in Western Africa. So the utilisation rates goes from 72% to 87.5% and the average daily rates are also increasing with an increase of 500 around an average of $500, so again our objective is to aim for short term contracts and to optimise rates.
Now let’s talk about the crewboat, activity is stable with the utilisation rate, that’s slightly on the rise at 1.75% up and the rate that’s up by $300 and mainly due to the pick up of activities of our FSIV, fast supply intervention vessels, our larger crewboats. And there was a slack in February and now they’re back in activity. And the objective is to increase the utilisation rates at appropriate prices.
And a good performance for this first half year of the subsea services activity and the utilisation rate is up again almost by three percent with daily average rates that remain stable. So this segment has benefitted of the signing of our contract with BP and our commercial objective is to focus on integrated services for his activity and to develop new geographical areas.
So when we’re talking about new geographical areas, well what about the state of the market and the future? So generally speaking we are seeing the benefit for the oil companies and during this first half year we’ve been able to invoice an organisation of vessels when they have two vessels moving between two areas. We haven’t been able to do these types of operations in the last two years. And nevertheless there’s some geographical disparities and within our over-capacities of vessels in Northern Sea for the larger AHTS’s and a little bit in Asia with the smaller AHTS’s so there’s a persistent over-capacity. And if we look at the American continent it’s very dynamic in the deepwater offshore activity mostly due to Brazil, despite high operating costs, whereas in Mexico Pemex replaces it’s shallow water fleet with modern vessels. And so in Northern Sea a pick up of activities in July and August and an increase in long term contracts and new projects especially in the Norwegian sector. In the Mediterranean and Middle East a pick up of activity, mostly in the Mediterranean and in Egypt. It remains stable in the Middle East and India. And again in Saudi Arabia a call for tenders are increasing in Asia. There’s a development of deepwater offshore, especially a strong demand for PSVs. And shallow water substitutions continue.
And now if we look at the growth of factors and the drivers. So the activities are continuing, between the second half year of 2010 we had 221 drilling apparels under contract. In the second half year we will be up to 234 and sequentially first in term of this year and the second term we have plus nine rigs. So medium term, so the investments of the oil companies by 2015 are important, 469 billion and 40% for the deepwater offshore. And if we look at the vision of our direct clients and the drilling companies, so they have ordered in the first half year 2010, you know, one drilling rig, second half year seven drilling rigs. And the first half year of this year 30 drilling rigs have been ordered. And I do remind you that you need about two years – two and a half years to build a drilling rig.
So in the same way for shallow water offshore short term we’re on the rise again and there’s quite a few rigs have been de-stacked, you know so we have plus 22 rigs that are under contract and medium term investments – overall investments are important but especially the offshore represents 60% of investment, shallow water offshore is a segment that we should not neglect. And then if you look at the vision of the drilling companies, you know, one drilling rig ordered in the first half year 2010 and 19 ordered in the second half year of 2010 and 31 drilling rigs ordered in the first half year 2011. Then again the market has definitely picked up.
In the same way in the subsea activities, there’s a steady growth. So by 2015 plus 47% will have to be installed and plus 45% of laying infrastructures will have to be installed in deep waters. And you have a photo of the Bourbon Emerald. So we have utilised our water injection well, I mean this is a world first because this type of operation is usually done, you know, from a drilling rig and you know, why it’s interesting to do it from vessel is to save and to reduce the cost for our clients.
Now let’s look at the deepwater offshore offer. So 1,490 vessels – there are 1,490 vessels in deepwater offshore, 1,169 are our current fleet and 321 on order, 79 have been ordered during this first half year and 72% of PSVs. And orders by Bourbon account for eight percent of all orders worldwide. And during the first half year we’ve ordered 20 new PSVs average size that will be deliverable from 2013.
And the shallow water offshore offer, so 1,813 vessels and current fleet 1,647, about 700 are more than 25 years of age. And an important point that needs to be stressed, I mean if you look at the utilisation rate over the world the fleet for vessels that are over 25 years of age were below 50% utilisation rate, were at 44% and as it confirms the requirements are from our clients to have a modern vessel with a high productivity level. So 166 vessels are on order and 22 are being ordered the first half year 2011. The orders by Bourbon account for 30% of all orders worldwide and in line with the 16% for the investments of the oil companies planned by 2015. And in H1 we’ve ordered five new 150 Bourbon Liberty which is a new version of the Bourbon Liberty 100 and six seismic support vessels are under contract with CGGVeritas.
So to conclude, the business is starting to reflect the capital expenditures announced by the oil companies and in our activities. And the deepwater offshore shallow water is characterised by a pick up of drilling activity along with the new orders of rigs. And the subsea activity is still on the increase and the deepwater offshore production and the aging of the subsea installations require more and more subsea operations. Our operational objective is to contract all the vessels and to maintain a high availability rate for the fleet. So our commercial objective is to benefit from the growth of charter levels on the market while maintaining a high vessel utilisation rate. So however you’ve seen the market is on the rise we are in line you know with our modern fleet, with high productivity level of all segments. And so let’s look at the strategy and outlook. And I’m going to give the floor now to Christian Lefèvre our Chief Executive Officer. Thank you very much for your attention.
Thank you Gaël. As you can observe our operational performance is improving. As you’re going to see that Bourbon has a huge growth capacity and a huge capacity for generating value. There is an overturn … there’s a market reversal in 2011 for modern vessels after a downturn that lasted since late 2008. This is more pronounced for PSV and IMR vessels as you saw in the utilisation rates. It’s sensitive and significant for small and mid sized AHTS. But it is not yet evident for a large AHTS as Gaël explained to you, since the month of July. The utilisation rate, despite utilisation rates have more than doubled in the North Sea. Bourbon approaches this new market turnaround in a favourable position. With a modern new fleet we have the most modern fleet in the industry, high productivity for clients and we also benefit from the series effect. We are the only that have put together big series of ships.
Now you’ll see on this chart that one illustration of this market reversal is a gradual increase in the utilisation rate of modern vessels by the industry and this is a prelude to the improvement in daily rates Bourbon is expecting by late 2011 and 2012. So first high utilisation rate and then higher day rates that we are expecting to be up by the end of 2011, beginning of 2012. Here you have the utilisation rate for ships under six years old are very much up, on the contrary the old fleet industry, ie ships that are more than 20 years old is collapsing. We are near 50%. And you can see that customers attach a great deal of value to Bourbon’s fleet, especially the PSV fleet they were offering to our customers with ships that are electric diesel DPII and with a high sludge capacity because the utilisation rate goes up faster than the industry does.
There is three percent in additional growth or fifteen percent growth in exploration and production investments planned in 2011. A lot of growth in EP exploration and 2011 will be more or less 15% and for 2011-2015 the average CAPEX is 469 billion US dollars. In Africa, in West Africa specifically the number one region where Bourbon is active this investor was 90 billion dollars and this is mainly deep offshore and ultra deep offshore. On the contrary in Asia, investment will be in shallow offshore and the deep offshore was just starting and has started for the last 12 months. And we have had considerable success in Asia because Asia, including five Bourbon Liberty ships were delivered to Asia in the first half year. The oil petroleum contractors are the first to benefit from the increased investments by the offshore oil and gas sector.
The number of drilling rigs under construction is on the order of 140. The number of drilling rigs under contract is more than 500. The order books for offshore construction companies have significantly increased over the companies, there are a few examples here of the public data. In parallel Bourbon is gearing up to improve its performance on our four major areas, safety and operations.
Here you have a little illustration that aligning our procedures to the demands of our clients, we’re handing over safety champion diplomas for ESSO Angola and the Luiana PSV. Qualification of crews here, you have the debriefing after a simulated training programme. Increasing a vessel availability is possible because we have a series of ships that we have ordered equipment for and that we can actually perform innovative maintenance to a standard exchange of parts. And also considerable efforts in cost cutting which … and we’ve done a lot of savings in terms of fuel. Here you have an illustration of a diesel-electric propulsion and in transit our diesel-electric can run with one single generator that’s fed into the main process which it makes it possible to reduce consumption by 30%.
So what is Bourbon’s outlook? Well there’s a strong capacity to grow and generate EBITDA through another increase in vessel utilisation rates especially Marine Services. We have seen that in Marine Services and mainly in deep offshore we are at 86.7% utilisation rate. We have made considerable advances there and also through an increase in charter rates which are expected by the end of 2011 and then 2012. There’s already a significant increase in PSV deep offshore segment. And also through growth in the fleet, 115 vessels are on order for delivery before the end of 2014, including 27 vessels to be delivered by year’s end 2011 and 40 to be delivered in 2012. And also three or four percent of reduction in operating costs at costing rates, in other words excluding inflation over the period 2011-2015.
Now let’s have a look at the Bourbon 2015 Leadership Investment Strategy, it is currently completed to the tune of 63%. We have 87 ships in the plan on order that will be delivered up until the end of 2014. But we can also count on the 28 vessels from our preceding plan that were ordered several years ago and that will be delivered in the second half year of 2011 and also in 2012. These ships will be participating and contributing to our growth and to the increase that we forecast in sales.
Now let’s look at the utilization rates. They will be ramping up with the improvement in the market and at the top of the cycle in 2008 our average utilisation rates were 91.5%, today that figure stands at 83.8%. So there is still room for improvement there. So how sensitive is EBITDA to the utilisation rate? In 2012 a two percent improvement in the average utilisation rates would represent an improvement in EBITDA of 20 million Euros. As to the average daily rates, historically, the average daily rates for long-term contracts between the bottom and top of the cycle go from single to double. Along the same lines in 2012, a 10% increase in the daily, the average rates on 50% of the Bourbon fleet would produce an increase in EBITDA of 50 million Euros. So 50% of the fleet is under contract and so that price doesn’t change in 2012.
So what’s the outlook? Well there is a positive market reversal in 2011 and the outlook has been confirmed for an increase in investments by the oil companies. The order books of offshore drilling and construction contractors are filling up faster. And thanks to Bourbon’s modern fleet and its sales network that is worldwide, Bourbon is poised to be the first company to benefit from this positive new economic cycle. And the utilisation rate of our fleets is increasing. The prices are good and are expected to increase late in 2011 and in 2012 so we can see the increase in PSV offshore rates is already there. These four points mean that Bourbon has a strong capacity to grow and generate EBITDA looking forward. Thanks to these presentations, you have all of the information you may require to quantify the market improvement. I’d like to invite you to ask any questions you may wish and we’ll certainly be happy to answer those. Thank you for your attention.
I have a couple of questions. If you look at slide 50, obviously the sensitivity is for 2012 but this is not a kind of a forecast or a guidance for Bourbon. But I think you have understood that.
This is a simulation, you can see the market is improving and the utilisation rate and the prices, the day rates are going to go up. How fast they’re going to go up and what will be the rate of increase is always difficult to know. What we have given you here is a simulation – an example.
So perhaps to help us get some kind of a compromise between these two approaches, if I made an attempt to do this, to have a kind of a qualitative idea of what the increase – the sequential increase might be in the second half year 2011, for example, if you have day rates what should I use, two or three percent on an average compared to H1 2011, does that seem to be reasonable to you or would it be more likely to be plus five or plus six?
Well we’re not being given guidance of this type. The prices will go up that’s very sure. We’d rather limit our comments to that and give you a few simulations on the possible effects of the price increases and daily rate increases.
And the last was a technical question. Could you explain what’s included in the 4.5 million Euros for minority shareholdings?
That’s a technical question which is not hard to answer. We have partnerships you know we have a policy for partnerships with certain countries. And this is the case in Nigeria and Angola where we distribute, you know, our profits like everyone else does.
Any other questions? A gentleman at the back.
I’d like to get back to the currency effect, I find your sensitivity very significant in the first half year, do you have any hedging policy in place? I thought you had 1.25 hedging for 2011. I have a hard time understanding this very strong impact due to currency fluctuations and could you just go briefly over your hedging policy?
I’d be happy to. Let me first say that the hedging policy does not impact the financial result, the elements that were given to you, the 30 million. You’re talking about financial results so what’s going on technically? We have invoicing that does affect the EBITDA. If we did set up the term sales the foreign market would impact the EBITDA on the invoicing. So at the time when we receive the funds in financial terms they have a mark to market effect. But we have an impact on the flow in the actual half year. But the hedging doesn’t actually intervene in that. As been said, our hedging policy over 2011 we had done some forward selling. And we have set up future sales that impact only the EBITDA, the average rate that the hedging was a made was 1.29.
I have a question about your debt, I know it’s not necessarily a source of concern for you and you’ve ordered 30 ships in the first half year in 2011 but could you nonetheless go over the next steps, you know, the next reimbursals, what will be your refinancing policy? Then when you look at your credit line a little more than 300 million Euros today if you project it into the year the covenant are not being respected, so what’s your strategy with respect to that? Thank you.
Lots of questions. If I forget something remind me. First of all the debt – the debt is one billion six hundred million but you have to consider things in just proportion. That debt is financing a fleet in operation, that is in our books valued as two billion three hundred million. With respect to the actual value of the independent brokers, we have a latent capital gain on the fleet on the order of nine hundred million which is greater than the latent capital gain that we announced. That’s logical because the recovery is there and our ships are worth more and more and there are more and more ships so the capital gain would increase, so that’s important. It means as well that there’s at least eight hundred million of assets operational that are not under any type of mortgage. Now as to the average maturity of the debt because I think that was your second question. The maturity is six years. So we are paying off these loans and we finance that without any difficulty. So what’s our policy with respect to these renewals? I already said, in December, it’s still the case today and as Christian explained to you we have an investment programme that is significant, we’re moving to 456 – 600 vessels. And even if we have payment profile of 25/65 compared to 75/25, nonetheless we still are in a significant CAPEX phase, so net debt is going to continue to increase in the coming months as you say. So we have both an increased need for funding. So how does it work today? Well things are going very well. We have banks that are following us and have followed us for a great deal of time, they continue to trust us. The French banks as you know, the hard core is our French banks. They’re not the worst off in the world so things are okay. This being said the world is in a state of change and we have decided to diversify our banking sources. We have started in Shanghai with a 400 million dollar loan which has not yet been totally set up because the loan will only start using that line of credit at the time of the first deliveries of the 2015 plan. So we have that 400 million which is still sitting there. And this is still the case in the third club deal that we signed in March 2009 under market conditions which were quite specific. And the specific has become normal, so we have already enlarged our banking resources with HSBC and Barclays. We are continuing to do this. We’re working with Standard chartered in Asia. We have investment projects for ships that will be working in Malaysia, Indonesia and so forth and so that’s about it. The covenants are … we have not broken our covenants on the 30th of June. We’ll do everything we need to avoid that in the future.
I have another question about dollar hedging. When you say that there was hedging that impacted positively, the EBITDA being in each one 2011, could you quantify that and give us the detail of where that appears, does it appear in the other under other or is this a lot of true subdivisions?
No, it’s not in other, I’ve told you a lot about hedging already in our policy in the rates and so forth. Things are going well in EBITDA, it’s impacted in fact on every line and every segment it appears.
You don’t want to give the figure?
I think that you had planned to publish the reduction in costs expected for the horizon 2015 plan on a half yearly basis. I know, okay. Could we have an idea of that trend, have you realised the objective of four percent in the first half year?
We’ll be publishing the point on the cost and the cost variations in Shanghai on a yearly basis in March. The trend is favourable but we will be publishing that only on a yearly basis.
Okay, another question about the CAPEX commitments, 63% of the budget has been committed and you look at the results per division, is there enough flexibility in your plan to reallocate the rest of the budget to subsea which is much more profitable compared to the support?
Yes, there is some flexibility, we have had built in series ships, PSV, our deep offshore PSVs which have a higher utilisation rate and its future is a glowing one because most drilling platforms and deep offshore, they have dynamic positioning and to serve these you have to have PSV ships. We also have ordered a series of ships for shallow water because we believe in the substitution for the success of Bourbon Liberty Series has shown that to be the case. We still have 10 ships – subsea ships, they will be delivered and the first is currently being delivered very soon indeed. Under the forward plan we have kept a little flexibility and we do not exclude recommending a few subsea ships if required, perhaps a different type of ship but we’ll see.
I have a question about the impact of the serious order on cost. I understand that for the moment you don’t yet have that impact, especially for the continental offshore. Do you have a standardised EBITDA level for this type of offshore application?
You know that our EBITDA, the target EBITDA in 2015 in our plan, the margin per sales is 45%, very naturally the highest capital consuming activities are the ones with the biggest margin, so subsea ships and deep offshore ships and shallow water ships require a little less capital and produce a little less margin. So we want to have then our margins … we’ll probably have a margin between 35 and 40% for those.
I have a question about the rights, we observe an improvement in 2011 compared to 2010. Should we expect this type of progression in the second half year compared to the first half year? You were talking about increasing DDI more substantially than what we’ve seen so far for next year so should we perhaps expect a real improvement?
At the moment we have observed this is favourable, that’s what we’re expecting. As you know in our industry the utilisation rate goes up first and then the market improves afterwards. And usually we say that when utilisation rate goes up, it depends on the segment but you know, depending on the age of the fleet you reach 80/85% and the chartering rates go up very quickly at that point. So all of this needs to be weighted because the market is more regional, and when the market goes up, you don’t move as many ships between the regions because that is a significant source of cost and that is paid by the shipper – by the charterer when the market is poor and by the customer when the market is bad. So the market is stable … I’m sorry, when the market goes up. So all of that is stabilised when the ships move a bit less, we cannot say at this point what, you know, the progress will be in the second half year 2012 or in 2012 but it’s certainly, you know, based on what we’re already observing in the first part of the half year, the prices are going up.
In the North Sea you mentioned your rise in July and August, are you a 100% exposed to the spot market or not? Are you going to be benefitting from anything short term?
Two ships are on the spot market in the North Sea, either middle-term or spot, two or three months.
One last question. I’d like to respond to the question about hedging. You benefited in the first half year from an exchange rate at 29, today what’s your hedging rate and what do you already have in your order book?
In the second half year we have a rate that’s not quite as good as 1.29
and the hedging rate doesn’t cover all of the sales obviously.
That’s just one small part of the revenues.
So you know back on the Forex exchange, I mean they’re closing at 1.45 in June so at 1.45 on December 31st of 2011. And no impact on the foreign exchange?
Well it’s slightly more complicated than that, I mean there are two factors and there’s the flow factor and the mark to market, you know, for the balance sheet [1:06:01.1] cancelling of the mark to market as of the 30th of June. So on the second factor the mark to market aspect is true, it gives the same rate at the end of June and at the end of December, there will be no impact now regarding the flows, if you have 1.45 on the 30th of June and 1.20 during the first half you accept that the 31st of December there will be a favourable impact and it will be highly significant. Yes, the money’s coming in during that same period of course, and vice versa.
Any other questions, one last question?
Yes, you know back to the crewboat division, the crewboat and they said, you know, a significant contribution and also a stabilisation of the EBITDA is quite disappointing and you justify with additional costs, you know, what can we expect, you know, on the progression in the next coming months? And the last point, and what about the number of contracts, you know, and how many, you know, progression of contracts and on the … and for the crewboats?
I’ll answer your question. And so we’ve had, I would say … I would call it a stagnation of the EBITDA and due to the increase of the income per vessel and the prices are pretty stable but … and our costs turned out to be higher than expected and we feel that … and the coming half year there will be a stabilisation, I mean perhaps not as soon as the next half year but we hope that we’ll be back to a better margin – operating margin on this segment in the future.
And the contract rate, you’ll find in the Appendix on the segment by segment basis on page 56 on the crewboat activity, it’s 68.1% for the crewboat fleet.
Another question? No? Well if there are no other questions I’d like to thank you for being here this morning, we’ll meet for the publication of the revenues for for the third term on the 10th of November 2011, you know, the revenues of the fourth term will be published on the 8th of February 2012 and the presentation of the results for 2011 on the 7th of March 2012.
Thank you very much and see you very soon