Solstad Offshore ASA Reports Strong Earnings Amid Challenges

Solstad Offshore ASA ((NO:SOFF)) has held its Q3 earnings call. Read on for the main highlights of the call.

Solstad Offshore ASA’s recent earnings call painted a picture of robust operational and financial health, marked by high fleet utilization and significant contract acquisitions, especially in Brazil. The company has made notable strides in strengthening its financial position, with a marked increase in backlog and a proposed dividend, although it faces challenges such as lower demand in the North Sea and potential risks from oil price fluctuations.

Strong Fleet Utilization

Solstad Offshore maintained an impressive fleet utilization rate of 97% for both the quarter and year-to-date. This high level of operational efficiency is consistent with previous periods, underscoring the company’s ability to effectively manage its fleet and maximize productivity.

Increased Revenue and EBITDA

The company reported an increase in quarterly revenue to $73 million, up from $68 million in the previous year. Adjusted EBITDA also saw a rise to $29 million from $28 million, indicating a steady financial performance and the company’s resilience in maintaining profitability.

Significant Contract Wins in Brazil

Solstad Offshore secured several new long-term contracts in Brazil, contributing to an impressive order intake of $222 million. Notable contracts include a 3-year agreement for Normand Turmalina and a 4-year contract for CSV Normand Commander, bolstering the company’s presence in the region.

Doubling of Backlog

The firm backlog for Solstad Offshore vessels surged to $280 million, effectively doubling from the previous year. Solstad Maritime vessels also reported a backlog of $640 million, reflecting strong future revenue streams and enhanced financial security.

Improved Financial Position

The company’s book equity increased significantly to $375 million from $203 million, while adjusted net interest-bearing debt decreased to $57 million from $206 million. This improvement highlights Solstad Offshore’s strengthened financial position and reduced leverage.

Proposed Dividend Payment

Reflecting its financial stability, Solstad Offshore’s Board proposed a third-quarter dividend of USD 0.05 per share, totaling approximately $4 million. This move underscores the company’s commitment to returning value to its shareholders.

Lower Demand in North Sea

The North Sea region experienced lower than expected activity, which has affected short-term market opportunities for Solstad Offshore. This decline in demand poses a challenge to the company’s operations in the area.

Exposure to Oil Price Fluctuations

Recent developments in oil prices have introduced uncertainties into future activity levels, posing potential risks to Solstad Offshore’s operations. The company remains vigilant in monitoring these fluctuations to mitigate any adverse impacts.

Adjusted Financial Guidance

Solstad Offshore adjusted its financial guidance due to changes in expectations from Solstad Maritime. The company has reduced its expectations for contributions from associates and joint ventures, reflecting a more cautious outlook.

Forward-Looking Guidance

Looking ahead, Solstad Offshore anticipates continued strong operational performance with a fleet utilization rate of 97%. The company projects its full-year adjusted EBITDA to reach $150 million, with operational guidance set between $60 million to $70 million. However, expectations from associated companies and joint ventures have been reduced to around $50 million, indicating a more conservative forecast.

In conclusion, Solstad Offshore ASA’s earnings call highlighted a strong operational and financial performance, with significant contract wins and an improved financial position. Despite challenges such as lower demand in the North Sea and exposure to oil price fluctuations, the company’s strategic initiatives and robust backlog position it well for future growth.