16 May 2014 07:00
16 May 2014
LAMPRELL PLC("Lamprell" and with its subsidiaries the "Group")
INTERIM MANAGEMENT STATEMENT
Lamprell (ticker: LAM), a leading provider of diversified engineering and contracting services to the onshore and offshore oil & gas and renewable energy industries, today publishes its Interim Management Statement for the period from 1 January to 15 May 2014.
Summary and outlook
The Company has started 2014 well and has made good progress delivering its strategy. In April, the Company announced a US$390 million contract award (excluding options) with Ensco and we are encouraged by the ongoing dialogue with a number of other prospective clients for new projects where we are in advanced discussions. With the Group's continued focus on its core markets and key strengths, the performance of the Company for 2014 remains in line with the Board's expectations.
Rights Issue
The Company announced separately today that it will pursue a rights issue which will raise gross proceeds of approximately US$120.3 million (£71.6 million) ("Rights Issue"). After the payment of fees and expenses of approximately US$8.1 million (£4.8 million) in connection with the Rights Issue, the Company intends to use the net proceeds of the Rights Issue as follows:
- US$60.0 million will be used for a yard investment programme, including a new panel line, newer welding processes, an improved electrical distribution system and improved cutting and blasting and painting facilities, as well as supporting operational systems, with an expected payback period of three to four years;
- US$10.6 million will be used to repay in full the borrowings under term loan facility B, after the repayment of US$ 49.5 million out of the proceeds of the disposal of the "Inspec" service business earlier this year; and
- the balance will be used, together with the new debt financing facility detailed below (once fully unconditional and committed), to strengthen the Group's balance sheet by providing it with a more cost effective and sustainable capital structure to enhance the Group's working capital flexibility.
Operational update
The Group has performed well since the start of the year, building on the operational successes in 2013. We have delivered two major projects during the relevant period in line with expectations, on schedule and on budget.
Lamprell successfully completed the "Qarnin" jackup rig, a LeTourneau Super 116E (Enhanced), to our largest client, National Drilling Company, in February 2014. The project represents the 15th new build jackup drilling rig that Lamprell has successfully delivered since 2006.
In April 2014, the Group delivered the 13,000 plus tonne production, utilities and quarters ("PUQ") deck to Nexen as part of the Golden Eagle Area Development in the North Sea. Our safety record on the combined Nexen project (namely the wellhead platform delivered in June 2013 and the PUQ deck) has been world class as we reached the milestone of ten million man-hours without a lost time incident. In delivering this project, Lamprell achieved a world record for the heaviest load moved by self-propelled modular trailers.
Three further new build jackup rigs, one liftboat and two offshore platforms, as well as the largest rig conversion and refurbishment project in Lamprell's history, are scheduled to be delivered in 2014 and all are currently proceeding according to plan and on budget.
We have seen a strong demand for our products and services in our core markets, as demonstrated recently by the Group securing a major order with the world leading drilling contractor, Ensco, for two Super 116E high specification jackup rigs with two options (to be exercised with six months of contract award). The contract value is approximately US$390 million excluding the options. Although Ensco has previously been a customer for our rig refurbishment business, this is the first new build jackup order from Ensco and reinforces the Group's capabilities as a high quality fabricator with a reputation for safety and reliable delivery.
Whilst market conditions remain competitive and delays in construction project awards continue to be a feature of the industry, our order book is healthy and our bid pipeline is substantial, particularly in the jackup rig market. We are in advanced discussions with a number of prospective clients for new projects, which we expect to convert into booked work in the imminent future.
Consistent with the Group's strategy and as announced on 3 March 2014, we entered into an agreement to sell the non-core "Inspec" service business for US$66.2 million. This resultedin the early repayment of a substantial part of the high cost portion of our existing debt facility.
Refinancing
The proceeds from the Rights Issue will also provide a stronger platform from which to refinance the Group's existing debt facilities. It is important for the Group to secure an optimum competitive long-term capital structure in order to maximise its long-term growth potential. Accordingly, we are also pleased to announce today that the Company has recently signed a commitment letter and detailed heads of terms in respect of, a new secured, fully-underwritten banking facility with three of our core lending banks.
The proposed funding arrangements will replace the Group's existing funded facilities with a US$350 million facility and will sit alongside any continuing bilateral unfunded facilities. In addition, the lending banks have agreed to use best efforts to arrange a further US$250 million bonding facility, part of which is committed, which may be used by the Group for project bonding requirements under new contract awards.
The proposed funding arrangements are subject to the completion of the Rights Issue in accordance with its terms, as well as final documentation and to a number of conditions precedent, all which are expected to be completed by early Q3 2014. Provided that the facilities can be finalised, this will provide the Group with significantly more flexibility within its financial covenants than is currently available under its existing facilities and the Board anticipates material savings from reduced interest margins and from lower bonding costs for our projects.
John Kennedy, Chairman of Lamprell, commented:
"It has been a good start to 2014 as we have continued to build on the successful performance and results from 2013. We are particularly pleased to have started converting our substantial bid pipeline into contract wins. We are also in advanced discussions with other prospective clients which we expect to convert into booked work in the imminent future.
With our operational performance and financial results now fully stabilised, we are focused on establishing a strong, financial platform for long-term growth through a combination of the rights issue and the refinancing of the Group's debt facility. This, coupled with our proposed productivity improvements and cost efficiencies, will give us the necessary platform to deliver our strategy and generate sustainable long-term value."
- Ends -
Presentation and Conference call:
A PRESENTATION TO INVESTORS AND ANALYSTS WILL TAKE PLACE AT 9:00AM TODAY
ATTENDANCE IS BY INVITATION ONLY
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