• Maiden net profit after tax of $845K
• Normalised net profit after tax of $2.2m (ex IFRS adjustments)
• Revenue of $31.7m
• Completion of Tri-Surv Geomatics acquisition
• Successful capital raising totalling $61m
• On track to deliver estimated EPS of 6-7c/share
Perth, Western Australia: Leading engineering services company Neptune Marine Services (ASX: NMS) has consolidated its place in the market after announcing a maiden net profit after tax of $845k and a normalised profit after tax of $2.2m (ex IFRS adjustments) for the six months to 31 December, 2007. The result represents a significant turn around on the same period last year when the company posted a $1.1 million loss. Revenue for the period totalled $31.7m, representing a significant increase of over the same period last year. This result was due largely to the successful completion of pending acquisitions and the significant growth experienced by both the Fabrication and Engineering Divisions during the period.
While these figures remained in line with H1 expectations, they were impacted by several project delays that either have been completed or are scheduled for completion
in the second half of the year.
• Two NEPSYS projects in the Gulf of Mexico (GoM) - adverse weather conditions and vessel availability.
• The Apache Energy Bambra East Integrated Project – vessel availability – completed February 2008.
• Completion of the Tri-Surv Geomatics acquisition that settled in August 2007.
Total estimated revenue from these delays is estimated at $6.7 million, with an estimated EBIT contribution of $3.15 million. Concurrently, a successful capital raising project generated $61m that the company used to expand its operational capabilities both within Australia as well as into the lucrative North Sea and European oil and gas markets. Neptune’s Managing Director and CEO, Christian Lange, said the period represented a phase of both significant consolidation and further expansion for the company that continued to enjoy positive integration, cohesion and commitment to a common goal across the four business divisions. “Our enhanced management structure and ongoing strategy for growth is ensuring that Neptune Marine Services continues to develop as a leading provider of integrated engineering solutions to the international oil and gas, marine and renewable energy industries,” he said.
“These results put us a good 12 months ahead of where we expected to be at this point in time last year. Our maiden profit is a significant achievement, particularly as the group is still in the early stages of development. It represents a solid foundation on which we can build and expand into the future. “We are experiencing excellent growth, not only in Australia, but also in a number of major offshore markets that we are making inroads to.
“Both the completion of the Tri-Surv Geomatics acquisition and our expansion into the ROV market further strengthens our integrated subsea services model, while the $61m in capital raised will help fund additional growth opportunities that we are actively pursuing,” he added.
Second half weighting
A significant weighting in second half revenue and earnings is anticipated due to a number of contributing factors:
• Advance diving contracts (awarded) for a variety of projects within Australia, the United States and Europe.
• Advance orders for the NEPSYS dry underwater welding technology valued at approximately $9m.
• Significant growth in the Offshore Services division through a combination of a full six month contribution from Tri-Surv Geomatics and the expansion into the remotely operated vehicle (ROV) and vessel supply market.
• The $8m integrated services project offshore Varanus Island, Western Australia, for Apache Energy.
• The jacket leg strengthening project in the Gulf of Thailand with Mermaid Offshore Services Ltd as prime contractor to Chevron Thailand Exploration and Production Ltd.
• Contribution from the UK-based acquisition Ross Deeptech Initiatives Limited/Ross Deeptech Symons Limited that was completed 29 January 2008.
• Contribution from the Perth-based acquisition Sea Struct P/L that is anticipated to be completed during the period.
Divisional Highlights
Major highlights from the four divisions of Diving Services, Project Management & Engineering Services, Offshore Services and Fabrication Services comprised:
Diving Services
Half year revenue of $10.1m increased from a full year result last year of $8.7m. In Australia, geotech drilling and seabed probing activities completed for the Water Corporation returned better than anticipated revenues and a number of offshore projects were completed including:
• Riser installation works (WA) for Apache Energy
• MGPS maintenance (Timor Sea) for Coogee Resources
• Underwater inspections/installations for Songa Offshore, Modec, Conoco Phillips
• Emergency response in New Zealand for Diamond Offshore
In the United States, a 1.6km pipe laying project valued at more than $1m was awarded from Oscar Renda Construction and repair projects using the NEPSYS dry underwater welding technology were completed for Helix Energy and ENI. A number of offshore inspections were also completed for Diamond Offshore, Pride Offshore and Transocean.
NEPSYS
Commitment to the ongoing and extensive investment in the research and development of the NEPSYS technology resulted in higher than budgeted R&D spending during the period. The main contributor to the increased spending was an intensive program of diver training involving both Australian and US personnel and the achievement of improved weld qualification standards to the stringent and internationally recognised American Bureau of Shipping (ABS)standard. While attaining the qualification required a significant commitment of both time and resources, it represents an excellent achievement that further emphasises the superiority of the technology over conventional practices.
Additional R&D conducted on the NEPSYS process resulted in a number of design and material/equipment improvements associated with the habitat, electrode port, dryer and heater, gas delivery, amperage control and knife switch. Major advances were also made in electrode coating and expansion of sufficient consumables. In addition, the development of a new semi automated process that could be applied to repairs conservatively valued at $5-6m returned promising results in testing.
Project Management & Engineering Services
Half year revenue of $5.7m increased from a full year result last year of $3.5m. The period was dominated by the ongoing pipeline engineering works carried out for the Coogee Resources Montara project located in the southern Timor Sea, 650km west of Darwin. Additional pipeline design work was also carried out for the offshore Kupe Gas Project located to the south of New Zealand's Taranaki Peninsula. Offshore WA, engineering and installation requirements for pipeline span rectification works were completed for Roc Oil Company.
Offshore Services
Half year inaugural revenue of $6.7m. Master Service Agreements with industry majors, Santos and Conoco Philips was a major highlight of the period as was the completion of a 95km pipeline geophysical survey for the Apache Energy Reindeer Development, offshore WA. The identification of additional opportunities for the Neptune group resulted in the establishment of a ROV and vessel sub-division that commenced negotiations for the acquisition of appropriate assets.
Fabrication Services
Half year revenue of $9.2m increased from a full year result last year of $3.6m. The demand for on and offshore fabrication, welding, piping and associated services remained high during the period with a variety of projects completed for a comprehensive client list. Measuring 27m long x 23m wide x 3.5m high, the Enfield Subsea Spool for Technip Subsea 7 AP was fabricated and assembled at the Australian Marine Complex before being transferred to barge for transport to the North West Cape off Exmouth, WA. Site works for the Stage 5 Looping MLV’s associated with the Bunbury to Perth Natural Gas Line were completed for Saipem as were ballast pipe spooling and ballast pump replacement works onboard the Ocean Bounty for Diamond Offshore and various pipe spooling and crossover projects for Expro Group.
Outlook
Christian Lange commented that the immediate and longer term forecasts for the company were very positive. “The outlook for the oil & gas sector remains robust. Over US$106bn is to be spent on the global subsea market over the next five years, representing a 65% increase on the previous five years to 2003/07. This sector growth underpins our longer term confidence and the fact that Neptune is operating in a high growth market. “We have some excellent organic growth prospects and we continue to evaluate other opportunities for growth that deliver value for our shareholders. “Looking to the immediate future, we have a major integrated project to complete offshore WA as well as numerous and significant advance orders in place for both our conventional and NEPSYS diving and welding services in Australia, the United States, Asia and New Zealand,” he explained. “Beyond that, we have expansion in our Offshore Services Division as we reap the benefits of full contributions from our Tri-Surv acquisition and our move into the provision of support vessels and ROVs. “Add to that the additional contributions from our UK subsidiary, Ross Deeptech Initiatives, and our latest pending local subsidiary, Sea-Struct P/L, and we remain very much on course to delivering our anticipated EPS of 6-7c/share for the full year 2008.”
