1 Lamprell plc Preliminary Results 2007
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Lamprell plc Preliminary Results 2007
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Highlights • Operational highlights
• key contract wins • significant order book
• Financial highlights • strong financial performance • continued growth
• Company highlights • proposed move to Main Market, LSE • management changes to support Main Market
move • Hamriyah expansion on schedule
• Positive market trends
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Operational Highlights • Significant progress in securing new business, including
repeat business from existing clients
• Continued improvement in forward visibility of revenue • high oil price set to continue • high level of oil and gas capital expenditure • order book in excess of US$ 580m confirmed at year end
• Commencement of major Engineering, Procurement & Construction (“EPC”) projects • Two Scorpion LeTourneau Super 116E jackup drilling rigs • Two Seajacks liftboats
• Significant growth across all primary activities • Drilling rig refurbishment • EPC of jackup rigs and liftboats • Fabrication of FPSO topside process modules
• Post year end award of major jackup upgrade and refurbishment project from National Drilling Company worth US$ 51m
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Financial Highlights • Revenue: US$ 467.3m up 41.8%
• Operating profit: US$ 82.0m up 46.1%*
• Net profit: US$ 86.2m up 51.4%*
• EPS (fully diluted): 43.04 cents up 51.2%*
• Proposed final dividend: 12.25 cents per ordinary share
• Strong balance sheet with US$ 159m in cash balances
• Strong cash generation from operating activities of US$ 177m
* For the current year stated before reflecting exceptional charges for share based payments of US$ 14.7m (2006: US$ 15.6m) and for the prior year stated before charging pre IPO costs of US$ 7.5m (2007: US$ nil).
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Company Highlights Proposed move to Main Market:
• Proposed primary listing of ordinary shares on the Official List of the London Stock Exchange
• Expected to take place in Q4 2008
• Board restructuring announced in February 2008
• Peter Birch appointed NonExecutive Chairman • Peter Whitbread stepped down as Chairman, retaining his position as CEO • David Moran, currently Chief Operating Officer, will become Director of Corporate
Communications and Nigel McCue, currently a NonExecutive Director, will become COO in May 2008
• Intention to strengthen Board with appointment of further independent NonExecutive Directors
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Company Highlights Hamriyah Development:
• Marine contractor commenced dredging and quay wall construction
• Phased construction plan for Facility developed and construction planned to commence shortly
• Oilfield Engineering phased relocation from Jebel Ali commencing Q4 2008
• Operations planned to commence beginning 2009
• Increase in total capacity • increase in quayside from 550m to 1,440m • increase in land from 266,000m2 to 480,000m2
• Increased capex budget of US$ 65m
Current capacity: Land (m2) Quayside (m)
• Jebel Ali Free Zone 179,000 • Sharjah 36,000 360 • Hamriyah Free Zone 51,000 190
Total 266,000 550
Future capacity: Land (m2) Quayside (m)
• Jebel Ali Free Zone 179,000 • Hamriyah Free Zone 301,000 1,440
Total 480,000 1,440
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Operating Review
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Jackup Upgrade and Refurbishment • Continue to be Middle East’s leading jackup refurbishment
provider
• 24 jackup rigs upgraded and refurbished in 2007 • 1 semi submersible drilling rig refurbished
• Major projects completed in 2007
• Nabors Drilling 660 project, the largest ever undertaken by Lamprell with total revenue of US$ 77m • GSF 4 rig fleet mobilised to Lamprell from Gulf of Mexico en route to Saudi Aramco. Upgrades completed with revenue of US$ 64m
• Revenue largely generated from repeat business, important addition of Aban who are building a regional fleet
• Projects continue to experience increased scope and growth in value
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Offshore Construction
• Middle East leading FPSO process module fabricator
• Major projects undertaken in 2007
• BG India topside platforms amounting to US$ 60m completed ahead of schedule facilitating early production of first oil • Successful completion of 3 Kashagan barges amounting to US$ 75m and load out of first 2 units • First topside modules delivered to Saipem for Petrobras
• Expansion of Norwegian client base including Aker FP, FPS Ocean, Scana and Kanfa
• Projects continue to experience increased scope and growth in value
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Engineering, Procurement & Construction • Broadening of business activities to include major EPC new
build projects
• Underpins expansion of operations to include larger and more prestigious projects
• Move into EPC represents natural expansion based on expertise gained in jackup refurbishment and offshore construction
• New contracts secured in the year • 2 harsh environment Seajacks liftboats amounting to US$ 224m • 2 jackup drilling rigs for Scorpion amounting to US$ 344m
• Key driver to increasing revenue visibility
• Supports revenue growth through increased subcontracting and procurement activities. Increased engineering risk mitigated through confidence in experienced partners
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Oilfield Engineering
• Upgrade and refurbishment of 9 land rigs as well as other services contracts
• LeTourneau designed, new build land rig due for delivery Q3 2008
• Continued operation of equipment service centre to support key clients
• Revenue largely generated from repeat clients, with addition of Ensign
• Planned relocation of Oilfield Engineering to Hamriyah Free Zone
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Financials
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Summary Profit and Loss Turnover (US$ m) Turnover (US$ m)
EBITDA * (US$ m) & margin EBITDA * (US$ m) & margin
Net earnings * (US$ m) & margin Net earnings * (US$ m) & margin
• Significant revenue growth across key areas of activity rig refurbishment and offshore construction
• Completion of major projects with significant positive variations
• Increased procurement activity
• Increase in margins driven by • improved sale prices • increased variations • operational efficiencies
• Significant increase in net earnings
• Zero tax
• Well placed for continued growth in 2008
* For the current year stated before reflecting exceptional charges for share based payments of US$ 14.7m (2006: US$ 15.6m) and for the prior year stated before charging pre IPO costs of US$ 7.5m (2007: US$ nil).
$33
$61
$89
15.8% 18.6% 19.1%
2005 2006 2007
$30
$57
$86
14.2% 17.3% 18.4%
2005 2006 2007
$330
$467
$209
2005 2006 2007
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Balance Sheet • Strong balance sheet with zero debt
• Non current assets • capex spend of US$ 15.0m, largely operating equipment of US$ 6.7m • net of depreciation of US$ 7.5m
• Current assets • significant increase in cash of US$ 139.3m • increase in contract workinprogress of US$ 54.0m • offset by lower advances to suppliers of US$ 18.8m • increase related to activity
• Current liabilities • increase in amounts due to customers on contracts of US$ 108.2m • lower amounts due to related parties of US$ 8.1m • increase related to activity
2006 2007 YE YE
Non current assets 40.6 49.3
Current assets 137.8 316.7
Current liabilities (80.5) (197.5)
Net current assets 57.3 119.2
Total assets less current liabilities 97.9 168.5
Non current liabilities (8.0) (9.7)
Net assets 89.9 158.8
Equity shareholders’ funds 89.9 158.8
(US$ m)
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Cash Flow • Strong cash flow generated from operations
• Working capital movements • increase in amounts due to customers on contracts of US$ 108.2m • lower advances to suppliers of US$ 18.8m • increase due to timing/activity of US$ 13.5m • offset by an increase in contract workin progress of US$ 54.0m
• Net capital expenditure reflects capex spend of US$ 15.0m net of proceeds from sales
• Dividends includes payment of a pre IPO dividend to the previous Holding Company of US$ 5.0m
• Net acquisition includes final payment of a pre IPO acquisition of Inspec of US$ 3.0m
2006 2007 FY FY
Net profit * 56.93 86.21
Depreciation & amortisation 5.08 7.49
Working capital movements (38.86) 86.94
Others 1.01 (3.83)
Cash generated from operations 24.17 176.80
Net interest 0.85 4.25
Margin deposits (1.52) (6.46)
Net capital expenditure (21.31) (14.60)
Funds due from/to related parties 18.50 (0.10)
Dividends (26.25) (22.46)
Net acquisitions/disposals (1.00) (4.59)
Net cash flow (6.56) 132.85
Adjustment for IPO costs (7.53)
Opening net cash 30.50 16.41
Closing net cash 16.41 149.26
(US$ m)
* For the prior year stated before reflecting exceptional charges for IPO costs of $ 7.5m
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Future Strategy
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Future Strategy • Complete development of Hamriyah facility to drive
organic expansion
• Increased capacity for jackup rig refurbishment • Enables expansion into refurbishment of drill ships and semisubmersible rigs
• Expansion of EPC operations across broader product mix
• Continued focus on client relations and maintaining/increasing market share of jackup rig refurbishment and offshore construction markets
• Continuing to review opportunities for geographic expansion
• Maintain cash flow positive business model to support growth and capital investment strategy
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Outlook
• Strong market conditions expected to prevail for medium term • sustained high oil price • continuing worldwide demand for limited oil and gas
service capacity
• High levels of drilling and development activity in Middle East and India, both on and off shore, set to continue
• Global EPC demand remains strong for Lamprell target market
• Drilling contractors continue to relocate jackup rigs to Middle East
• Continued high demand worldwide for deep water FPSO’s
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Appendix Market Overview
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Company Overview • Established for over 30 years
• Flotation in October 2006 on London AIM
• Principal areas of expertise
• Jackup rig upgrade and refurbishment: leader in the Middle East
• Engineering, Procurement & Construction of jackup rigs and liftboats
• New build construction for offshore oil and gas industry
• Land rig upgrade and refurbishment
• Continuing organic expansion opportunities
• New facilities in Hamriyah Free Zone
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Buoyant Energy Environment • Oil price has remained at a historically high level
• International oil majors continue long term investment in offshore developments
• National Oil Companies drive ahead with aggressive plans to raise domestic and international E&P
• Middle East offshore developments highly visible up to and beyond 2012
• India now a considerable market alongside Saudi Arabia, Qatar and UAE
• UAE is now firmly positioned to take advantage of aggressive offshore development and maintains its position as a leading construction, service and support area for the Middle East and Indian markets
• Arabian Gulf leads world energy supply accounting for one quarter of current production and proven reserves in excess of 60%
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Major Rig Markets • Middle East jackup utilisation remains high
and a trend that is set to continue in the mid term
• A jack up rig deficit in the Middle East is forecast to continue through 2008 with 86 rigs available versus demand up to 111 in late 2008
• The Indian market is a predominant force in world offshore utilisation with a rig count that is predicted to double in the next five years
• Sector is facing a prolonged drilling cycle with strong demand for oil from Asian and Middle East sources. Day rates remain strong.
• Forecasts predict demand will continue to absorb new arrivals to the sector with delayed deliveries from Asian yards a developing theme. All of 17 new deliveries in 2008 are contracted leaving no excess supply
• UAE now seen as a location for undertaking large semisubmersible upgrade and refurbishment projects and the building of new drilling jack up rigs
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FPSO Market • Floating production to maintain a pivotal position within the
offshore industry over the next 5 years and beyond
• Highly visible sector with significant growth potential for Lamprell. The Middle East region has emerged as a major hub for complete FPSO conversion
• 175 FPSO projects to come on line before 2013
• A peak in activity is forecast in 2013 with projects valued at $7.7bn
• Floating solutions as the new deepwater development preference with strongest geographical growth from West Africa, Asia and virgin territories such as Gulf of Mexico
• Cross pollination of FPSO technology expected going forward with the refinement of Floating Liquefied Natural Gas technologies
• Multiple new operators/providers entering the market
• Construction yard capacity is a major limiting factor
FPSO Capex
0
2,000
4,000
6,000
8,000
10,000
2006 2007 2008 2009 2010 2011 2012 2013
Actual Year of Spend
US $b
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Land Rig Market • Worldwide rig count 11.8% increase per year
over the past five years
• Rig count up in Middle East by 14% and North Africa rig up 18% over the last 12 months
• Aramco remain the major Middle East growth engine with a 42% increase in rig count forecast before the onset of 2010
• Aramco overall drilling budget in excess of $5bn up to 2009
• Refurbishment market sustainable mid to long term
• UAE seen as potential hub for major oilfield equipment services for Middle East and North Africa
Rig Count
73
34
17
73
29
41 44
20
90
37
17
85
32
56 52
20
0
10
20
30
40
50
60
70
80
90
100
Kuwait Iran Oman Pakistan KSA Yemen Libya Algeria
October06 August07