Results for the 4th quarter 2006

Farstad Shipping achieved an operating income of NOK 549.5 million for the 4th quarter (NOK 481.5 million inclusive profit from sale of vessels of NOK 64.4 million in the 4th quarter 2005). The operating costs for the period increased by NOK 26.2 million compared to the 3rd quarter this year. This increase is due to a combination of increased number of vessels, increased crew expenses and increase in estimated pension obligations.

 

The operating profit (EBIT) was NOK 208.3 million (NOK 190.2 million inclusive sales profit) after depreciation of NOK 77.3 million (NOK 69.8 million). Net finance was negative NOK 51.9 million (negative NOK 49.6 million). A currency gain of NOK 0.1 million (NOK 29.7 million) is realized during the quarter and an unrealized currency gain of NOK 16.6 million (loss of NOK 56.5 million) is booked due to the adjustment of the company's long-term liabilities in foreign currency. NOK 33.9 million is booked as financial expenses connected to an increase of the company's leasing liabilities.

 

The profit after taxes was NOK 143.7 million (NOK 154.4 million inclusive sales profit of 64.4 million). The Group's cash flow*) for the period is NOK 217.1 million compared to NOK 267.0 million inclusive sales profit for the same period in 2005.

 

Results as per 31.12.2006

The operating income at 31.12 was NOK 1,940.9 million (NOK 1,815.7 million inclusive sales profit of 161.9 million). The operating costs were NOK 953.8 million (NOK 861.0 million) and ordinary depreciations NOK 286.4 million (NOK 281.4. million). The operating profit (EBIT) was NOK 700.7 million (NOK 673.3 million inclusive sales profit of 161.9 million).

 

Net finance was negative NOK 125.9 million (negative NOK 184.2 million) following an unrealized currency gain of NOK 22.7 million (loss NOK 264.8 million). A realized currency gain of NOK 22.7 million is booked (gain NOK 192.8 million). The profit after taxes was NOK 543.3 million (NOK 501.4 million inclusive sales profit of 161.9 million). The Group's cash flow*) for the period is NOK 838.5 million, compared to NOK 1,035.4 million inclusive sales profit for the same period in 2005.

 

*) Pre-tax profit + depreciation and deferred maintenance + change on revaluation of long-term liabilities in foreign currency.

 

 

Financing and capital structure

In the balance sheet at 31.12.06, interest-bearing mortgage debt and leasing liabilities together total NOK 4,141.7 million (NOK 3,832.9 million at 31.12.05). Of the company's debt 26.6% is in USD, 11.7% in GBP, 57.0% in NOK, 2.0% in AUD and 2.7% in EUR. Interest-bearing current assets at 31.12.06 were NOK 973.6 million (NOK 1,192.6 million).

 

The Group's booked equity at 31.12.06 was NOK 3,533.7 million (NOK 3,086.0 million) corresponding to NOK 90.61 (NOK 79.13) per share. Equity ratio was 43.8% (42.4%).

 

Based on the valuation of the vessels (charter-free) from 3 independent brokers at 31.12.06, the value-adjusted equity capital per share before tax was calculated at NOK 170.87 NOK 115.28). This gives a value adjusted equity ratio of 59.5% (51.7%).

 

The quarterly report has been prepared in accordance with today's International Financial Reporting Standards (IFRS) and interpretations, and the IAS 34 standard for quarterly reporting. The accounting principles used are in accordance with principles used in the last annual report.

 

• Far Sailor (AHTS, UT722, 1997) and Far Senior (AHTS, UT722L, 1998) have both been extended for 2 years with Petrobras in Brasil.
• The newbuild tbn. Far Spirit (PSV, VS470) has been chartered by BP Angola for a period of 2 years plus 1 year option. Delivery from the yard at the end of March 2007.
• Lady Grete (PSV, UT755L, 2002) will start on a 3 year contract (plus 1 year option) working for Reliance in India.
• Lady Sandra (AHTS, KMAR404, 1998) will start on a 13 month contract (plus options) supporting a exploration drilling program for Peak.
• Far Strider (PSV, VS483, 1999) has been extended for 1 year plus 1 year to Chevron Texaco.

 

AHTS Far Strait (UT712L) was delivered from Aker Brevik in December. After trading the spot market in the North Sea for approx. 1 month the vessel left for Australia to start on a long-term contract for Woodside. Also Far Stream (UT712L) left the North Sea during the quarter to start on long-term work in Australia. AHTS Far Scout (UT722L, 2001) has this period traded the spot market in the North Sea.

 

In October an agreement was reached with Aker Yards AS, Tomrefjord to build 4 AHTS of the type UT731CD for delivery in 2009 and 2010. The vessels are designed for tomorrow's market of anchor handling tug supply vessels and powered with 25000 BHP.

 

After the turn of the year (at the end of January) AHTS  Far Crusader (1983) was delivered to the new owners. AHTS BOS Turquesa (Farstad owns 50%) was delivered from the yard in Brazil in February and immediately started on its 8 years contract for Petrobras.

 

Farstad Shipping has a fleet of 48 vessels (27 AHTS, 21 PSV) and 12 vessels under construction. (7 AHTS, 1 CSV, 4 PSV). One AHTS (1983-built), Far Centurion, will be delivered to the new owners in March, whilst 5 newbuilds are scheduled for delivery during 2007.

 

The contract coverage of the Farstad fleet is approx. 90% for the 1st half year of 2007 and approx. 60% for the 2nd half of 2007. The contract coverage for 2008 is approx. 35%. These figures do not include charterers' options to extend certain contracts.

 

The Market

The market balance for the supply vessel fleet is still good despite of a net increase of 85 large and medium-sized vessels in 2006 (approx. 14%). Of these 61 were PSV vessels. In 2007 the PSV fleet is expected to increase by 53 units, while the number of AHTS is expected to increase by 40 vessels. The demand for supply vessels is increasing in most markets. However, we are expecting a correction in the market for PSV vessels as a consequence of the large number of vessels that will still be under construction at the end of 2007. The rate level for the AHTS fleet is expected to be good also in the near future, but the construction activity has strongly increased in this segment in the past year. There are now 135 large and medium-sized AHTS on order. High oil prices, the oil companies increased focus on exploration, and the contracting of new rigs are positive for the demand in this segment.

 

Shareholder matters

The company's share has during the quarter been traded between NOK 116.50 and NOK 139.00 and was NOK 135.50 at the end of the year. The share price at 31.12.06 values the company to approx. NOK 5.3 billion. The number of shareholders is approx. 1,400. Foreign shareholders own approx. 16% of the shares.