SBM Offshore CEO to Step Down after Cost Over-runs Hit Profits

- SBM Offshore CEO to Step Down after Cost Over-runs Hit Profits

Thursday, August 18, 2011
Dow Jones Newswires
AMSTERDAM
by Robin van Daalen & Patrick Buis

SBM Offshore Thursday reported semi-annual results that bested analyst expectations, but announced plans to replace its chief executive after a large cost-overrun pushed its results into the red.

SBM, which owns and operates offshore units for the oil and gas industry, reported a net loss of $265.3 million, a big drop from the $77.6 million net profit a year ago, but somewhat higher than analyst expectations. SBM pointed to record orders and cited heavy interest for additional work from Brazil, Angola and other petroleum centers.

But company results have been tarnished by a $450 million impairment charge related to two problem projects that has weighed on shares since it was announced in July. SBM announced that "in light of recent events," Chief Executive Tony Mace would step down and it would recommend Chief Operating Officer Bruno Chabas for the top spot.

"Stepping down is a matter of taking responsibility," Mace said at a meeting without giving further detail.

SBM shares opened higher Thursday following the disclosure, but later gave up their gains following a broader market retreat. At 11:52 GMT, SBM shares were down 3.2% to EUR13.50, while the Amsterdam index was down about 2.6%.

SBM Offshore booked a $450 million impairment charge after it was unable to reach a settlement for additional compensation for cost overruns on SBM Offshore's Yme and Deep Panuke platforms which have been installed on their respective offshore locations in Norway and Canada. Legal action in the case of the Deep Panuke platform has been initiated in April against EnCana and arbitration proceedings were initiated in January for the Yme platform against Talisman But SBM said the outcome is uncertain.

Neither EnCana nor Talisman were available for comment Thursday. Talisman Chief Executive John Manzoni has publicly complained that a "poorly executed fabrication contract" has hindered the project.

ING said SBM's underlying results were "reasonable" and praised the decision to replace Mace as "a valuable step" that could spur a "fresh look" at the firm. But ING said it wanted more details on the "huge" $450 charge.

Turnover for the first six months of 2011 rose 6% to $1.46 billion, driven by fleet operations, where SBM operates Floating Production Storage Offloading (FPSO) units for its clients on a leasing basis.

Earnings before interest and taxes, or Ebit, excluding the impairment charge was $236 million, compared to $146 million a year ago. The increase was mainly driven by the solid performance of the Turnkey Systems segment, the company said.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Noble Energy Sees 44% Increase in 2Q Profits

- Noble Energy Sees 44% Increase in 2Q Profits

Thursday, July 28, 2011
Noble Energy Inc.

Noble Energy reported second quarter 2011 net income of $294 million, or $1.61 per share diluted, on revenues of $954 million. The Company's second quarter 2010 net income was $204 million, or $1.10 per share diluted, on revenues of $751 million. Net income for the second quarter 2011 includes unrealized commodity derivative gains, a gain on asset divestiture, as well as certain asset impairments. Excluding these items, second quarter 2011 adjusted net income was $263 million, or $1.44 per share diluted. Adjusted net income for the second quarter of 2010 was $198 million, or $1.07 per share diluted.

Discretionary cash flow for the second quarter 2011 was $659 million, compared to $496 million for the similar quarter in 2010. Net cash provided by operating activities was $745 million, and capital expenditures were $702 million.

Key highlights for the second quarter 2011 include:

• Sold 174 million cubic feet per day (MMcf/d) of natural gas in Israel, up 44 percent from the second quarter last year
• Produced a record 59 thousand barrels of oil equivalent per day (MBoe/d) in the DJ basin
• Drilled longest-ever horizontal Niobrara well in the DJ basin with a 9,100 foot lateral in the Wattenberg field
• Announced a discovery at Santiago in the deepwater Gulf of Mexico and increased Galapagos net production impact to over 10 thousand barrels of oil per day
• Accelerated startup of Aseng, offshore Equatorial Guinea, with first oil production now expected by year-end 2011
• Completed transfer of assets and exit from Ecuador
• Increased liquidity to over $3.6 billion, with $1.5 billion in cash at the end of the period

Charles D. Davidson, Noble Energy's Chairman and CEO, commented, "The second quarter was another strong quarter for Noble Energy. With our performance to date, we now expect sales volumes for the year will fall in the top end of our original guidance range. The second half of the year will be very active for our Company with further expansion of the DJ basin horizontal Niobrara play and active rig programs in all of our key offshore regions. We continue to make excellent progress on our major development projects with Aseng in Equatorial Guinea now well ahead of schedule and our exploration success at Santiago being integrated into the Galapagos project plans. In addition, we anticipate testing multiple exploration opportunities in West Africa, the Eastern Mediterranean, and the deepwater Gulf of Mexico before the end of the year."

The Company's total sales volumes for the second quarter 2011 averaged 215 MBoe/d. Production volumes were 216 MBoe/d, with the difference attributable to crude oil and condensate underliftings in Equatorial Guinea. Excluding the 2010 sale of certain onshore U.S. assets, as well as the impact of the Company's exit from Ecuador, sales volumes were up 3 percent from the second quarter 2010. Growth in the DJ basin and Israel more than offset timing differences in Equatorial Guinea liftings, as well as natural decline in the Company's various other onshore U.S. and deepwater Gulf of Mexico assets.

International sales volumes were 100 MBoe/d, up slightly from the second quarter last year despite lower liquid liftings in Equatorial Guinea and the termination of the Company's activities in Ecuador. Strong power generation demand and lower competing imports led Noble Energy's natural gas sales in Israel to be up substantially from the prior year. In the North Sea, field performance at Dumbarton and Lochranza accounted for increased oil volumes. The Company's 2010 volumes included 27 MMcf/d of natural gas in Ecuador, where its production sharing contract was terminated in late 2010.

Noble Energy's U.S. volumes were 115 MBoe/d for the second quarter of 2011, down versus the prior year period as a result of the 2010 sale of approximately 6 MBoe/d of Mid-continent and Illinois basin oil assets. In the DJ basin, second quarter 2011 volumes averaged over 59 MBoe/d, up 8 percent from the same period in 2010. The increase is attributed to the continued acceleration of the Company's vertical and horizontal drilling programs in Wattenberg. A third-party processing facility expansion came online in June 2011, which is allowing for further field production growth.

The Company's barrel of oil equivalent (Boe) realizations were up significantly for the second quarter 2011 versus 2010. International natural gas as a percentage of total Company volumes grew to 32 percent for the second quarter 2011, with global liquids representing 39 percent, and U.S. natural gas the remaining 29 percent.

Total production costs per Boe, including lease operating expenses, production and ad valorem taxes, and transportation were $7.92 per Boe, up approximately 5 percent from the second quarter 2010. The increase was largely attributable to higher production and ad valorem taxes caused by stronger commodity pricing. Lease operating expense was $5.06 per Boe and depreciation, depletion, and amortization was $12.01 per Boe for the second quarter 2011. Exploration expense for the quarter included recognition of dry hole cost on the Kora well, offshore Senegal and Guinea-Bissau. General and administrative expenses were up primarily related to increased staffing for the development of the Company's major development projects. Noble Energy's adjusted effective tax rate was 33 percent, with 52 percent deferred. Deferred taxes for the second quarter 2011 were impacted by the resolution of prior year tax reviews.

The Company recorded asset impairments totaling $131 million in the second quarter 2011, resulting from field performance at Oliver Creek in East Texas and Iron Horse in Wyoming, combined with a low natural gas price environment. Other operating income/expense includes a $26 million gain on the divestiture of assets, primarily a result of the Company's transfer of assets and exit from Ecuador. The gain and asset impairments are excluded from net income in determining adjusted net income. Also included in other income/expense is a $7 million deferred compensation income item relating to the quarterly value change of Noble Energy stock held in a benefit program.

UPDATED GUIDANCE

Noble Energy has raised its full year 2011 sales volume guidance to range from 215 to 218 MBoe/d, with the primary driver being higher natural gas volumes in Israel. For the third quarter 2011, the Company expects volumes to average 215 to 220 MBoe/d. Onshore U.S. volumes should be up versus the second quarter, with crude oil and natural gas growth from the DJ basin offsetting natural declines in other onshore natural gas areas. The deepwater Gulf of Mexico is expected to have lower sales volumes as result of natural decline and the impact of a Swordfish gas well that recently watered out. Higher volumes in Equatorial Guinea and strong demand for natural gas in Israel should contribute to increased international volumes.

The Company also adjusted its 2011 total capital program to approximately $3.0 billion. Over a third of the $300 million increase is related to new high-impact international exploration opportunities, with the remainder supporting the expansion of the Wattenberg horizontal Niobrara program, the acceleration of major projects in Equatorial Guinea, and the addition of a new near-term gas development project in Israel.

The addition of the offshore Senegal and Guinea-Bissau opportunity, as well as the updated timing of a Cyprus exploration well (now planned to spud in the fourth quarter) comprises the majority of the higher exploration capital for 2011.

The Company continues to expand its Niobrara drilling program at Wattenberg, with plans to bring a fifth horizontal rig into the field in the middle part of the third quarter. As a result of the additional rig and continued efficiencies, the Company anticipates drilling around 85 horizontal Niobrara wells in the DJ basin in 2011, up approximately 20 percent from original estimates. Offshore Israel, the Company is proceeding with development of the Noa field in the third quarter of 2011 (first production is expected in the second half of 2012).

In Equatorial Guinea, the Company is continuing to progress its liquid developments at Aseng and Alen. First production at Aseng is now expected by year-end 2011.

Noble Energy has modified its full year exploration expense guidance to range from $380 to $440 million as a result of the new exploration opportunities in West Africa (Senegal and Guinea-Bissau) and Cyprus. In addition, income from equity method investees has been increased to between $165 to $185 million, up from original guidance as a result of strong global liquid prices.

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Ensco Sees Decrease in 1Q11 Profits

Ensco Sees Decrease in 1Q11 Profits

Thursday, April 21, 2011
Ensco plc

Ensco reported diluted earnings per share from continuing operations of $0.45 for first quarter 2011, compared to $1.12 per share in first quarter 2010. There were no discontinued operations in first quarter 2011. Earnings from discontinued operations in first quarter 2010 were $0.21 per share that included a $34 million pre-tax gain from the sale of two jackup rigs. Diluted earnings per share were $0.45 in first quarter 2011, compared to $1.33 per share in first quarter 2010.

Chairman, President and Chief Executive Officer Dan Rabun stated, "Our planned acquisition of Pride International is on track and we look forward to realizing the benefits of the combination for customers, employees and shareholders. We successfully completed our debt offering to fund the cash portion of the acquisition and have commenced integration planning to ensure a smooth transition."

Mr. Rabun added, "During the quarter we were honored to be ranked first among offshore drilling contractors in total customer satisfaction by EnergyPoint Research, an independent research firm that measures customer satisfaction in the global oilfield. We earned top scores in eleven separate categories. This recognition validates the commitment of our employees who serve our customers around the world each and every day."

Chief Operating Officer Bill Chadwick commented, "Ensco has a long-established strategy of high-grading our fleet by investing in new equipment. During the first quarter, we ordered two ultra-premium harsh environment jackups and secured options for two additional rigs of the same design with similar terms. The new jackup rigs will be capable of operating in water depths up to 400' and their unique design will significantly increase the area of operability in the Central North Sea and other harsh environment regions."

Mr. Chadwick added, "ENSCO 8503 successfully commenced drilling operations in French Guiana with Tullow under a sublet agreement and we contracted ENSCO 7500 with Petrobras in Brazil. Our rig crews in the U.S. Gulf of Mexico are performing extremely well and ENSCO 8501 has commenced operations under the first post-moratoria new deepwater well permit approved by regulators."

Revenues in first quarter 2011 were $362 million, compared to $449 million a year ago. Jackup segment revenues decreased $55 million and deepwater segment revenues declined $32 million.

Total operating expenses in first quarter 2011 increased 10% to $281 million, from $255 million last year. Contract drilling expense grew 5%. Depreciation expense rose by 15% driven by growth in the deepwater segment. General and administrative expense was $30 million, compared to $21 million in first quarter 2010, primarily due to increases in professional fees related to the Pride International acquisition.

Segment Highlights

Deepwater

Deepwater segment revenues were $98 million in first quarter 2011, down from $130 million a year ago. Revenue for ENSCO 7500 declined year to year since the rig was in a shipyard during first quarter 2011, but operated during first quarter 2010. This revenue decline was partially offset by the addition of new ultra-deepwater rigs to the fleet. In first quarter 2011, the average day rate was $304,000 and utilization was 77%, down from $411,000 and 99%, respectively, a year ago.

Contract drilling expense was $41 million in first quarter 2011, down from $45 million in first quarter 2010. The decrease was primarily due to lower expenses for ENSCO 7500 while in the shipyard, offset in part by the addition of ENSCO 8502 and ENSCO 8503 to the fleet.

Total Jackup Segments

Revenues from the jackup fleet totaled $263 million in first quarter 2011, down from $318 million a year ago. The decline was primarily due to a seven percentage point decrease in utilization to 72% and a $15,000 decline in the average day rate to $97,000. Contract drilling expense increased 10% year to year, mostly due to the acquisition of ENSCO 109 in July 2010.

Increasing volume of legislation costs businesses £2bn

23 March 2011 Last updated at 06:33 GMT

By Eddie O'Gorman BBC NI business reporter

Businesses have lost out on more than £2bn in the last decade due to an increasing volume of legislation, according to business lobby group the CBI.

Nigel Smyth's comments come ahead of the Chancellor, George Osborne's first annual Budget statement on Wednesday.

Mr Smyth said additional support for growth and job creation, and less red tape, particularly relating to employment were the main preoccupations for Northern Ireland business.

Nigel Smyth of the CBI says businesses are having to deal with an increase in legislation

He said that business organisations had been lobbying hard to encourage government to reduce barriers to high-growth companies in order to create employment.

"This includes doing something to relieve the regulatory burden," he said.

"But they are also having to cope with increasing costs such as the carbon reduction commitment, which from being an incentive, has now turned into a carbon tax."

Mr Smyth said that Northern Ireland companies were competing in global markets now, and many of their competitors were not having to deal with the same level of regulation.

As a result they had a lower cost base than companies based in the UK, he said

He said: "The danger is that some of these highly successful, highly productive companies will simply move to locations where the cost base is not so high."

Dr Esmond Birnie, the chief economist for PricewaterhouseCoopers in Northern Ireland, believes that any tax increases in the Budget would have a serious effect on the local economy.

"February's unemployment is up 6.3% year-on-year," Dr Birnie said.

"That is the highest increase of all 12 UK regions, and we are forecasting that local economic growth will not exceed one per cent in 2011.

"It means that further tax increases could have a disproportionate impact on economic growth and business confidence."

On the bright side, it is thought that the 1p rise in fuel duty due on 1st April might be postponed because of the recent steep increase in oil prices, while personal tax allowances are set to go up by £1,000 to £7,475 for 2011/12.

It is estimated that this should reduce the tax liability of 23 million taxpayers by an average of £200 a year.
The Chancellor has already promised to increase personal allowances to £10,000 by 2015.

An announcement is also expected on the subject of corporation tax, or company profits.

Many economists and Northern Ireland business people have been arguing strongly that a reduction from the current rate of 28% closer to the rate of 12.5% which exists in the Republic, would do much to encourage inward investment.

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