Ability Group ASA
The recent acquisitions of Drilling Production Technology AS (DPT), Triangle Technology AS (Triangle), Reservoir Evaluation Services (RES), Peak Group (Holdings) Ltd (Peak) and Technology Design Ltd (TD) have necessitated the preparation of pro forma information, with comparable numbers being prepared for the reported periods. Consequently, the reported income statement for the first half 2006 includes both actual and pro forma comparable figures for the same period in 2005.
As for the pro forma figures, Ability Group is assuming that the acquisitions mentioned above were finalized January 1st 2005. Furthermore, it is assumed that approximately 20 per cent of the total investment was financed with equity and that 80 per cent was financed with interest-bearing debt.
Key Figures
** Earnings before interest tax depreciation and amortization.
Key figures Actual Actual Actual Actual Actual
NOK 1.000 01.04 - 30.06 01.04 - 30.06 01.01 - 30.06 01.01 - 30.06 01.01 - 31.12
2006 2005 2006 2005 2005
Operating income 294,120 208,915 583,967 369,428 845,635
EBITDA* 50,454 32,417 93,204 51,031 118,463
EBIT 33,424 18,639 62,388 23,950 65,305
Profit before taxes 22,193 13,422 36,517 13,172 38,233
EBITDA-margin 17.2 % 15.5 % 16.0 % 13.8 % 14.0 %
EBIT-margin 11.4 % 8.9 % 10.7 % 6.5 % 7.7 %
Equity-to-asset-ratio * 33.1 % 28.3 % 33.1 % 28.3 % 27.8 % *Including repaid subordinated loans
Key figures Pro forma Pro forma Pro forma Pro forma Pro forma
NOK 1.000 01.04 - 30.06 01.04 - 30.06 01.01 - 30.06 01.01 - 30.06 01.01 - 31.12
2006 2005 2006 2005 2005
Operating income 402,333 339,303 793,833 606,603 1,317,469
EBITDA** 72,877 55,514 133,877 83,614 203,110
EBIT 54,891 3,052 93,291 9,052 115,181
Profit before taxes 36,830 -9,987 55,030 -15,687 60,310
EBITDA-margin 18.1 % 16.4 % 16.9 % 13.8 % 15.4 %
Main points from 2
ndquarter 2006
The Ability Group has seen continued high level of activity in all business areas during the second quarter. Petroleum Services attracted strong demand for its drilling management services. Drilling Services also experienced a high level of activity, particularly for its Riserless Mud Recovery (RMR) technology. The number of RMRs in operation doubled, from two in the first quarter to four by the end of second quarter. Within Integrity Services and Project Services, personnel and equipment were fully utilized during most of the period.
Operating income in the second quarter 2006 amounted to MNOK 294.1 compared to MNOK 208.9 in the same period in 2005. Pro forma operating income for the second quarter of 2006 amounted to MNOK 402.3 compared to MNOK 339.3 for the same period last year.
Operating profit before depreciation (EBITDA) in the second quarter 2006 was MNOK 50.5 compared to MNOK 32.4 in the second quarter 2005. Pro forma EBITDA second quarter 2006 amounted to MNOK 72.9 versus MNOK 55.5 for the same period in 2005. The pro forma figures above correspond respectively to EBITDA-margins of 18.1% and 16.4%.
Second quarter profit after taxes in 2006 was MNOK 16.0 compared to a profit of MNOK 9.7 in the same period last year. Pro forma profit after taxes for the second quarter of 2006 amounted to MNOK 26.1 compared to a deficit of MNOK 7.2 second quarter 2005. The deficit in the proforma figures is mainly due to depreciation/amortization of excess values in relation to the Peak acquisition.
Net interest-bearing debt was MNOK 659,4 at the end of the second quarter 2006, and equity-to-assets ratio was 33.1%. At the same date in 2005 net interest-bearing debt was MNOK 472.0 and the equity-to-assets ratio was 12.0% (28.3% including repaid subordinated convertible loans). Employee presence for the first six months of 2006 was 98.3% compared to an industry average of 95,9%(1)(2).
In May, Ability Petroleum Services (PS) completed the acquisition of RES, and thus added further competence and capacity within reservoir evaluation and analysis.
In June, Ability Group refinanced its interest-bearing debt with DnBNOR Bank ASA. Terms and conditions were significantly improved, with margin on NIBOR for current debt levels at 70bp.
In July, Ability Group ASA listed on the Oslo Stock Exchange. The total transaction size was MNOK 1.118.7, of which MNOK 500.0 was a primary issue.
Applied accounting principles
This quarterly report is prepared in accordance with International Financial Reporting Standards (IFRS) and the standard for quarterly reporting (IAS 34). The quarterly accounts are based on the current IFRS standards and interpretations. Changes in standards and interpretations may result in other figures. The same accounting principles as for the most recent financial statement are applied throughout this document.
Income statement – 2 quarter 2006
In line with the first quarter, operating income for the second quarter of 2006 rose substantially to MNOK 294.1 which is the highest ever achieved in the Ability Group’s history for a single quarter. All of the business areas are seeing increased activity levels compared with the same period of 2005.
(1) Based on figures from Statistics Norway for Q1 2006 (2) Excludes Peak, RES and Technology Design
AGR achieved higher pro forma operating profit (EBITDA) margins for the second quarter 2006 (18.1%), compared with second quarter 2005 (16.4%). The increase relates primarily to high activity within the equipment intensive businesses and drilling management.
Net financial expenses were MNOK 11.2 in the second quarter 2006 compared with MNOK 5.2 in the same period 2005. Pro forma financial expenses for the second quarter of 2006 were MNOK 18.1 versus MNOK 12.9 for the same period last year. The MNOK 18.1 reflected primarily an unrealized loss on a financial investment in Sonoran Energy Inc. of MNOK 3.0 as well as establishment costs related to refinancing in connection with the listing of MNOK 4.0. Additionally, the pro forma figure does neither take into account the repayment of the subordinated convertible loans in connection with the listing (MNOK 217.0) nor the improved terms from the refinancing in June this year.
Profit before taxes amounted to MNOK 22.2 for the second quarter of 2006. Taxes in the second quarter of 2006 were MNOK 6.2, which resulted in a profit after taxes of MNOK 16.0 for the period. For the same period last year these figures were MNOK 13.4, MNOK 3.8 and MNOK 9.7 respectively. Pro forma figures for the second quarter 2006 were MNOK 36.8, MNOK 10.8 and MNOK 26.0.
Earnings per share for the second quarter were NOK 0.30 compared with NOK 0.23 in the second quarter of 2005. The share split (1:5) is taken into account in these figures. Additionally, approximately 1.6 million and 10.6 million shares were issued in relation with the acquisition of Peak and the listing respectively. Pro forma earnings per share for the second quarter 2006 were NOK 0.40 compared with NOK –0.11 for the same period in 2005.
Balance Sheet at the end of 1
sthalf 2006
The group had a total balance of MNOK 2.094.4 at June 30 2006 compared with MNOK 1.116.9 at 31 December 2005. The increase was mainly due to company acquisitions, investments in RMR equipment and machinery and equipment for the Mongstad factory, as well as increased working capital, reflecting a generally high activity level.
Net interest-bearing debt for the group was MNOK 659.4 at the end of the first half 2006 compared to MNOK 645.0 at the end of 2005. The average current interest rate is 3.75 per cent.
At 30 June 2006 the Group’s equity was MNOK 694.1 compared with MNOK 142.8 at the year-end 2005 and MNOK 111.8 at the same time last year. The equity-to-assets ratio was 33.1 percent.
Egenkapitaloppstilling / Equity reconciliation
NOK 1.000 01.04 - 30.06 01.01 - 30.06 01.04 - 30.06 01.01 - 30.06
2006 2006 2005 2005
Egenkapital ved periodens begynnelse / Equity at opening balance 153 146 142 834 89 884 70 795
Konsernets resultat i perioden / Profit after taxes 15 979 26 291 9 664 9 484 Exchange differences (765) (765) -
-Emisjon / Share issue 549 619 549 619 12 209 27 487
Egenkapitaleffekt ved opptak av konvertibelt lån / Equity effect of convertible loans (23 924) (23 924) (1) 3 990
Egenkapital ved periodens slutt / Equity at period end 694 055 694 055 111 756 111 756
Netto rentebærende gjeld / Net interest-bearing debt Faktisk/Actual Faktisk/Actual Faktisk/Actual
NOK 1.000 30-06-2006 30-06-2005 31-12-2005
Konvertible lån / Convertible loans 0 151.406 167.272
Langsiktig gjeld til finansinstitusjoner / Long term debt to credit institutions 802.320 392.900 460.452
1. års avdrag langs. renteb. gjeld / Installments 2006 on interest-bearing debt (short term) 0 24.400 83.800
Sum rentebærende gjeld / Total interest-bearing debt 802.320 568.706 711.524
Likvide midler / Cash and cash equivalents 142.895 96.662 66.495
Cash-flow 1
sthalf 2006
The Group had a total net cash-flow of MNOK 119.5 for the second quarter of 2006 compared with MNOK 58.4 for the same period last year. Cash-flow from operating activities amounted to MNOK 82.1, while cash-flow from operating activities in the second quarter 2005 was MNOK 69.8. During the second quarter of 2006, cash-flow from investment- and financing activities were MNOK –577.8 (of which MNOK 530.3 related to acquisitions) and 615.2 MNOK respectively. Cash flow from financing includes effects of refinancing and shares issues in relation to completed acquisitions and listing. For the same period for 2005 these figures were MNOK –25.2 and MNOK 13.9. Cash and cash equivalents amounted to MNOK 142.8 at 30.06.06. Cash-flow Statement NOK 1.000 01.04 - 30.06 01.04 - 30.06 01.01 - 30.06 01.01 - 30.06 01.01 - 31.12 2006 2005 2006 2005 2005
Net cash-flow from operating activities 82 113 69 776 76 659 67 970 113 060
Net cash-flow from investment activities -577 819 -25 276 -616 997 -141 263 -341 597
Net cash-flow from financing activities 615 167 13 854 616 668 150 646 275 723
Net changes in cash and cash equivalents 119 461 58 354 76 330 77 353 47 186
Cash and cash equivalents at period start 23 364 38 308 66 495 19 309 19 309
Cash and cash equivalents at period end 142 825 96 662 142 825 96 662 66 495
Events after the Balance Sheet Date
In July, Ability Petroleum Services (PS) completed the acquisition of Peak, and thus added further competence and capacity as well as geographical reach within drilling management. Peak operates primarily in the UK, but has initiated expansion both in Australia and the Middle-East.
During July and August, Peak was assigned to drill three new wells in the southern North Sea, one for Serica Energy Plc, one for Silverstone Energy SNS and one for Granby Oil & Gas Plc. This reflects an increasing demand for outsourced drilling management services.
In July, Ability Group ASA, through its subsidiary Ability Subsea AS, received a letter of award from Shell Australia for the provision of RMR services for its Western Australia exploration, a strong recognition of the RMR technology value proposition for our customers.
In August, Peak Group (Asia Pacific) Pty Ltd, a subsidiary of Ability Group ASA. received a signed letter of award from Wilcraft Ltd for the provision of the jack-up drilling unit “Wilcraft” to drill eleven (11) wells over an estimated period of 13 months at a day rate of USD 255,000. The contract includes an option for Peak to extend the duration of the contract with up to a maximum of 24 wells, with a maximum total contract duration of 24 months.
Segment information
The Group reports segmented information on the following business units; Petroleum Services, Drilling
Services, Integrity Services and Project Services. Furthermore, the Group reports information regarding
allocation of operating income on geographical areas.
Business segments (1):
Note (1): For comparable figures, please see Appendix C
As the table above shows, the first half of 2006 yielded positive EBITDA for all the business segments.
Petroleum Services achieved a strong 7811% growth in EBITDA (pro forma) for the second quarter of
2006 compared to the same period last year. Currently, we are working with a prospect list of more than 140 wells. With regards to operations in Norway, preparation work for the Bredford Dolphin and the operations at Maersk Giant has continued. Petroleum Services also saw high activity levels internationally through Peak. During the first six months, Peak completed six drilling operations with the Stena Clyde (Australia), while four drilling projects where conducted (with the Bredford Dolphin) in the North Sea (UK) in the same time period.
Drilling Services is experiencing a stable increase in demand for its technology, primarily the RMR.
EBITDA contribution first half 2006 from the RMR increased by approximately 70% compared to the first half 2005. During May/June, three additional RMRs became available to operations (six in total). Also, final tests on the machinery at the Mongstad factory are currently being conducted. However, Drilling Services has had some increased costs related to increased maintenance and administration (MNOK 2.0). Furthermore, a large cleaning project (Ekofisk) had an EBITDA contribution of MNOK 3.9 in first half 2005 compared with same period in 2006. During the first six months of 2006, MNOK 50.0 was invested on RMR equipment.
Integrity Services currently has close to full utilization for both equipment and personnel. The increase
period last year, relates mainly to a generally high activity level within inspection and maintenance planning and strong performance within the pipeline inspection business.
Project Services also has close to full utilization of its personnel both within the manning business and
for project related services. Operating income (external) for the first half of 2006 ended at MNOK 291.1 compared with MNOK 217.4 last year. EBITDA increased from MNOK 11.1 in the first half of 2005 to MNOK 15.1 in the same period 2006.
Geographical segments:
The increase in revenue from Europe, excluding Norway, stems primarily from Drilling Services and the RMR activity in the Middle East and Russia. In addition, Drilling Services experienced increased activities in Canada (CTS operations).
Bergen, 28 August 2006
Appendix A
Balanse / Consolidated Balance Sheet Actual Actual Actual
NOK 1.000 30.06.2006 30.06.2005 31.12.2005
Anleggsmidler / Fixed assets
Utsatt skattefordel/ Deferred tax asset 0 204 66
Patenter, forskning og utvikling / Patents, research and development 176 576 61 696 50 564
Goodwill / Goodwill 937 930 450 810 563 044
Tomter, bygninger og annen fast eiendom / Land and buildings 33 649 3 242 23 845
Maskiner og annet driftsløsøre / Machinery and other equipment 203 871 91 377 132 331
Finansielle anleggsmidler / Financial fixed assets 594 1 358 1 747
Sum anleggsmidler / Total fixed assets 1 352 620 608 687 771 597
Omløpsmidler / Current assets
Varer / Inventory 9 091 1 422 3 363
Kundefordringer / Accounts receivable 514 646 189 973 228 848
Andre fordringer / Other receivables 65 176 34 401 27 178
Markedsbaserte aksjer / Shares held for trading purposes 9 951 0 19 412
Likvider / Cash and cash equivalents 142 895 96 662 66 495
Sum omløpsmidler / Total current assets 741 759 322 458 345 296
Sum eiendeler / Total assets 2 094 379 931 145 1 116 893
Egenkapital / Equity
Innskutt egenkapital / Paid in capital 657 068 91 491 131 372
Opptjent egenkapital / Other equity 36 987 20 265 11 462
Sum egenkapital / Total equity 694 055 111 756 142 834
Langsiktig gjeld / Long-term liabilities
Avsetning for forpliktelser / Provisions 17 594 4 696 5 246
Utsatt skatt/deffered tax liability 43 729 0
Konvertible lån / Convertible loans 0 151 406 167 272
Langsiktig gjeld til finansinstitusjoner / Liabilities to credit institutions 802 320 392 900 460 452
Sum langsiktig gjeld / Total long-term liabilities 863 643 549 002 632 970
Kortsiktig gjeld / Short-term liabilities
Kortsiktig gjeld / Short-term liabilities 536 681 270 387 341 089
Sum kortsiktig gjeld / Total short-term liabilities 536 681 270 387 341 089
Sum gjeld / Total liabilities 1 400 324 819 389 974 059
Appendix B
Kontantstrømsoppstilling / Cash-flow analysis
NOK 1.000 01.01 - 30.06 01.01 - 30.06 01.01 - 31.12 01.04 - 30.06 01.04 - 30.06
2006 2005 2005 2006 2005
Netto kontantstrøm fra operasjonelle aktiviteter / Net cash-flow from operational activities 76 659 67 970 113 060 82 113 69 776 Netto kontantstrøm fra investeringsaktiviteter / Net cash-flow from investment activities (616 997) (141 263) (341 597) (577 819) (25 276) Netto kontantstrøm fra finansieringsaktiviteter / Net cash-flow from financing activities 616 668 150 646 275 723 615 167 13 854 Netto endring i betalingsmidler / Net changes in cash and cash equivalents 76 330 77 353 47 186 119 461 58 354 Betalingsmidler ved periodens begynnelse / Cash and cash equivalents at start of period 66 495 19 309 19 309 23 364 38 308 Betalingsmidler ved periodens slutt / Cash and cash equivalents at end of period 142 825 96 662 66 495 142 825 96 662
Egenkapitaloppstilling / Equity reconciliation
NOK 1.000 01.04 - 30.06 01.01 - 30.06 01.04 - 30.06 01.01 - 30.06
2006 2006 2005 2005
Egenkapital ved periodens begynnelse / Equity at opening balance 153 146 142 834 89 884 70 795 Konsernets resultat i perioden / Profit after taxes 15 979 26 291 9 664 9 484 Exchange differences (765) (765) - -Emisjon / Share issue 549 619 549 619 12 209 27 487 Egenkapitaleffekt ved opptak av konvertibelt lån / Equity effect of convertible loans (23 924) (23 924) (1) 3 990 Egenkapital ved periodens slutt / Equity at period end 694 055 694 055 111 756 111 756
Appendix C
Virksomhetsområder / Business segments Petroleum Services Drilling Services Integrity Services Project Services Group / Elimin. TotalDriftsinnt., ekst. / Operating revenue, external 57 492 33 445 56 399 146 784 - 294 120 Driftsinnt., int. / Operating revenue, internal 2 721 574 3 167 (2 775) (3 687) -Driftskost. f. avskr. / Op. ex. before depr. (37 734) (15 228) (38 931) (136 816) (14 957) (243 666) EBITDA 22 479 18 791 20 635 7 193 (18 644) 50 454 Avskrivninger / Depreciation (577) (8 165) (7 122) (1 161) (5) (17 030) Nedskr. og avsetn./ Write downs and provisions - - - -EBIT 21 902 10 626 13 531 6 032 (18 649) 33 424 Netto finansposter / Net financial items 72 (1 194) 8 588 105 (18 801) (11 230) Resultat før skatt / Profit before taxes 21 974 9 432 22 101 6 137 (37 450) 22 194 Skattekostnad / Taxes (6 153) (2 641) (6 188) (1 718) 10 485 (6 216) Konsernets resultat / Profit after taxes 15 821 6 791 15 913 4 419 (26 965) 15 978
Eiendeler / Assets 1 065 446 399 498 376 042 485 937 (232 544) 2 094 379
Gjeld / Liabilities 372 787 103 999 114 839 265 733 542 966 1 400 324
Virksomhetsområder / Business segments Petroleum Services Drilling Services Integrity Services Project Services Group / Elimin. Total
Driftsinnt., ekst. / Operating revenue, external - 38 106 41 063 129 746 - 208 915 Driftsinnt., int. / Operating revenue, internal - 131 5 474 1 510 (7 115) -Driftskost. f. avskr. / Op. ex. before depr. - (21 365) (27 821) (123 120) (4 192) (176 498) EBITDA - 16 872 18 716 8 136 (11 307) 32 417 Avskrivninger / Depreciation - (7 643) (4 959) (1 168) (8) (13 778) Nedskr. og avsetn./ Write downs and provisions - - - -EBIT - 9 229 13 757 6 968 (11 315) 18 639 Netto finansposter / Net financial items - (119) (66) 443 (5 475) (5 217) Resultat før skatt / Profit before taxes - 9 110 13 691 7 411 (16 790) 13 422 Skattekostnad / Taxes - (2 551) (3 834) (2 075) 4 701 (3 758) Konsernets resultat / Profit after taxes - 6 559 9 857 5 336 (12 089) 9 664
Eiendeler / Assets - 378 410 211 323 263 027 78 385 931 145
Gjeld / Liabilities - 72 475 64 331 134 484 548 099 819 389
Virksomhetsområder / Business segments Petroleum Services Drilling Services Integrity Services Project Services Group / Elimin. Total
Driftsinnt., ekst. / Operating revenue, external 130 375 38 057 41 101 129 770 - 339 303 Driftsinnt., int. / Operating revenue, internal - (783) 5 450 1 550 (7 117) -Driftskost. f. avskr. / Op. ex. before depr. (107 292) (21 413) (27 810) (123 129) (4 145) (283 789) EBITDA 23 183 16 861 18 741 8 091 (11 262) 55 514 Avskrivninger / Depreciation (32 730) (7 692) (10 996) (1 136) (8) (52 562) Nedskr. og avsetn./ Write downs and provisions - - - -EBIT (9 547) 9 269 7 745 6 955 (11 270) 3 052
