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25

Integra Group Interim Management Statement and Financial Highlights for the 3M 2012

Integra Group  released today its Interim Management Statement and unaudited financial highlights for the three months period ended March 31, 2012. The financial data are based on management assessment only and have not been reviewed by external auditors.

Integra Group  released today its Interim Management Statement and unaudited financial highlights for the three months period ended March 31, 2012. The financial data are based on management assessment only and have not been reviewed by external auditors.

Operations of Integra Group’s Formation Evaluation segment were discontinued following a combination of the seismic businesses of Integra, Schlumberger and Geotech and were excluded from 3M 2011 financial results for comparison purposes.

3M 2012 Financial Highlights

• Sales increased by 7.2% to US$ 140.8 million (vs. US$ 131.4 million in 3M 2011)
• Adjusted EBITDA decreased by 84.7% to US$ 1.7 million (vs. US$ 11.1 million in 3M 2011)
Adjusted EBITDA margin was 1.2% (vs. 8.4% in 3M 2011)
• Net cash from operating activities was negative US$ 11.1 million (vs. negative US$ 28.1 million in 3M 2011)
• Capital expenditures were US$ 8.5 million (vs. US$ 19.7 million in 3M 2011)
• Net Debt as of June 4, 2012 amounted to US$ 189.5 million (vs. US$ 181.6 million as of December 31, 2011)

 

3M 2012 Operating Highlights

• 74,700 meters drilled (3M 2011: 63,507 meters)
• 33 active drilling rigs (3M 2011: 19 active drilling rigs)
• 583 workover operations conducted (3M 2011: 669 workover operations)
• 78 workover crews (3M 2011: 73 workover crews)
• 78 cementing operations (3M 2011: 207 cementing operations)
• 12 cementing fleets (3M 2011: 12 cementing fleets)
• 46 coiled tubing operations (3M 2011: 65 coiled tubing operations)
• 4 coiled tubing units (3M 2011: 4 coiled tubing units)
• 70 wells completed with directional drilling service (3M 2011: 75 wells)
• 20 directional drilling crews (3M 2011: 15 directional drilling crews)
• 172 downhole motors and 14 turbodrills produced (3M 2011: 112 downhole motors and 23 turbodrills produced)

 

 

Felix Lubashevsky, Integra Group’s President and Chief Executive Officer, commented:

“In the first quarter, we saw a material decline in our quarterly earnings due to two major factors; firstly, continued pressure on industry margins from rising costs coupled with lack of meaningful pricing power and secondly, significant one-time additional expenses associated with a still ongoing, complex long-term drilling projects launched in 2011. These additional expenses are estimated in the range of US$ 23-25 million in 1H 2012, of which over US$ 6 million was recognized in 1Q 2012. We have identified the nature of the incidents causing these additional expenses and are very focused on resolving the issue before the end of 2Q 2012.

We are encouraged by positive trends in our order book and our key objectives for 2012 are further cost optimization, quality improvement, cash conversions and select capacity investment to capture current market growth.”

 

 

Conference Call Dial-In Details

Date: Thursday, June 7, 2012
Time: 17:00 Moscow / 14:00 London / 9:00 New York
Title: Integra Group 3M 2012 Results
Conference ID: 86487874
UK international tel.: +44 1452 569 335
USA international tel.: +1 866 655 1591

There will also be a playback facility available until June 20, 2012. The details are:

UK international tel.:
+44 1452 550 000
USA international tel.: +1 866 247 4222
Access code: 86487874#

 

Contacts

Integra Group

Andrey Machanskis Head of Investor Relations Tel. +7 495 933 0621
amachanskis@integra.ru



Discussion of the Market Environment

Drilling services continue to experience the highest increase in demand, with associated well construction and technology services showing more gradual growth. Despite this growth in demand, excess capacity in some services remains a deterrent to material price growth in 2012. Our industry cost base is increasing due to higher employee and fuel costs, with only limited pricing power to compensate for this, resulting in a likely near-term margin squeeze for OFS players as a whole.

Results in the first quarter of the year tend to be lower compared to the rest of the year, reflecting the effects of extreme winter weather in the oil and gas producing regions of Russia, mobilization activities and new season preparations due to the nature of contracting cycle in well construction services.


Discussion of the Group’s Financial Results

Group sales from continuing operations during 3M 2012 increased by 7.2% to US$ 140.8 million compared to US$ 131.4 million during 3M 2011. The increase was driven by higher drilling volumes and consolidation of SIAM, which was partially offset by a decrease in Drilling Tools revenues due to soft pricing, lower volumes of coiled tubing operations, lower volumes in Workover resulting from weather-related idle time and weakening of the Russian ruble. Adjusted EBITDA decreased by 84.7% to US$ 1.7 million from US$ 11.1 million during 3M 2011 due to continued increase in operating costs (employee costs, rental expenses, energy/fuel and transportation expenses), which are not being compensated by better pricing, higher amount of upfront mobilization costs driven by increased volumes, recognized losses from non-productive time and penalties totalling US$ 6.3 million due to incidents on several long-term drilling turn-key projects started in 2011, continued price slump in Drilling Tools and weakening of the Russian ruble. Adjusted EBITDA margin decreased to 1.2% in 3M 2012 compared to 8.4% in 3M 2011, primarily due to an increase in costs, recognized losses mentioned above and lack of compensating price growth. Historically, our first quarter is the weakest of the year in terms of both absolute volumes and margins due to the need for seasonal mobilizations in Drilling and certain Technology Services.


Discussion of Segment Financial Results


 

Drilling, Workover & IPM

Technology Services

Other revenue, overheads and eliminations

Total Group

 

 

Revenue (in US$ million)

3M 2011

94.8

38.4

(1.8)

131.4

3M 2012

101.1

40.6

(0.9)

140.8

Chg (%)

6.6%

5.7%

n/m

7.2%

 

 

Adj. EBITDA (in US$ million)

3M 2011

8.1

10.1

(7.1)

11.1

3M 2012

3.1

5.1

(6.5)

1.7

Chg (%)

(61.7)%

(49.5)%

n/m

(84.7)%

 

 

Adj. EBITDA Margin (%)

3M 2011

8.5%

26.3%

n/m

8.4%

3M 2012

3.1%

12.6%

n/m

1.2%

 

 

Drilling, Workover & IPM
• In the Drilling, Workover & IPM segment, 3M 2012 revenue increased by 6.6% compared to 3M 2011. The increase was driven by higher drilling volumes coupled with limited pricing increase, which was partially offset by increased weather-related idle time in Workover resulting in lower volumes and weakening of the Russian ruble. Adjusted EBITDA margin decreased to 3.1% in 3M 2012 compared to 8.5% in 3M 2011 due to continued increase in operating expenses which are not compensated by better pricing, higher amount of upfront mobilization costs driven by increased volumes and recognized losses from non-productive time and penalties totalling US$ 6.3 million due to incidents on several long-term drilling turn-key projects started in 2011. Sequentially, 1Q 2012 adjusted EBITDA margin decreased from 5.1% in 4Q 2011 due to traditional seasonal factors (mobilization, active contracting) and recognized losses.


Technology Services

• In the Technology Services segment, 3M 2012 revenue increased by 5.7% compared to 3M 2011, driven by consolidation of SIAM, which was partially offset by a decrease in Drilling Tools revenues due to lower pricing for downhole motors manufacturing and rental, lower demand for turbodrills, lower volumes of coiled tubing operations and weakening of the Russian ruble. Adjusted EBITDA margin in 3M 2012 decreased to 12.6% from 26.3% in 3M 2011 due to lower pricing in Drilling Tools, increase in operating costs, and a decline in directional drilling profitability due to lower pricing and increased cost on rented equipment to support growth in the number of crews. Sequentially, 1Q 2012 adjusted EBITDA margin decreased from 23.2% in 4Q 2011 due to higher operating costs and continued softening of prices in Drilling Tools.

 

 

Discussion of Group’s Current Financial Position, Cash Flows and Liquidity

In accordance with IFRS, 3M 2011 cash flow and capex numbers are presented including the results of operations discontinued in 2011.

Net cash from operating activities in 3M 2012 was negative at US$ 11.1 million compared to negative at US$ 28.1 million in 3M 2011. Free cash flow (defined as net cash generated from operating activities, less purchases of property, plant and equipment) was negative at US$ 19.6 million in 3M 2012, compared to negative US$ 47.8 million in 3M 2011. This was the result of lower outflow to working capital, better collection rates and inventory management, and a 56.9% decrease in capex due to discontinuation of seismic operations and overall reduction of investment budgets due to limitations imposed by current operating cash flow.

As of June 4, 2012 the Group had approximately US$ 201.1 million of gross debt (up from US$ 195.4 million of gross debt as of December 31, 2011). Net debt as of June 4, 2012 amounted to US$ 189.5 million, up from US$ 181.6 million as of December 31, 2011.

 

 

 

Order book update

As of June 4, 2012, the total order book, which includes the value of business to be delivered in 2012 contracted and won in tenders, was US$ 641.2 million (RR 20.1 billion). Of this amount, estimated value of signed contracts was US$ 560.5 million (RR 17.5 billion). 2012 total order book (contracts signed and tenders won) is 14.1% higher in Ruble terms compared to 2011 order book calculated on June 6, 2011 (adjusted for historic order book of business classified as discontinued operations).

 

2012 Order book (as of June 4, 2012)


FX 31.3 RR/US$

Contracts signed*

Tenders won, contracts to be signed

Total order book

 

 

US$ (m)

RR (bn)

US$ (m)

RR (bn)

US$ (m)

RR (bn)

Drilling, Workover & IPM

388.3

12.2

55.7

1.7

444.0

13.9

Technology Services

172.2

5.4

25.0

0.8

197.2

6.2

TOTAL

560.5

17.5

80.7

2.5

641.2

20.1

 

 

*Signed contracts may be subject to renegotiation of volumes and/or other terms or even cancellation, and both signed contracts and tenders won may not proceed as originally planned at all.

 


Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Integra Group. You can identify forward-looking statements by terms such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “will,” “could,” “may” or “might,” or the negative of such terms or other similar expressions. These statements are only predictions and actual events or results may differ materially. Integra Group does not intend to or undertake any obligation to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in Integra Group’s projections or forward-looking statements, including, among others, general economic and market conditions, Integra Group’s competitive environment, risks associated with operating in Russia, rapid technological and market change, and other factors specifically related to Integra Group and its operations.

This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of Integra Group, nor shall any part of it nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of Integra Group.

 

Source : Neftegaz.RU