THE MARINE LOG FEATURES CALENDAR FOR 2003
June 3, 2003
Red ink at Stolt Offshore
Stolt Offshore S.A. yesterdayannounced that following a review of information which became available in recent project reporting and a subsequent major project review led by CEO Tom Ehret, it has identified substantially poorer than anticipated performance and cost overruns on three major EPIC contracts and several smaller projects. In addition, it is expected that activity levels will be slightly lower than previously anticipated. As a result of these factors, Stolt Offshore at this time expects its full year loss to be in the range of $100 million to $125 million, subject to further review at the time of completion of the previously announced Blueprint for financial recovery in July. A substantial portion of this loss will be taken in the second quarter.
In light of this revised forecast, Stolt Offshore is working closely with its main banks in seeking to amend its two primary bank credit facilities to reflect the Company's current financial position, including a waiver of certain financial covenant tests until November 30, 2003. As an interim step, Stolt Offshore's banks have agreed to a 30-day "standstill" whereby they will take no actions on any potential non-compliance with its financial covenants while internal bank approvals are sought and documentation is finalized. Without a waiver of certain financial covenants, Stolt Offshore would be out of compliance with its bank credit agreements. In order to help Stolt Offshore get such waivers from the banks, Stolt-Nielsen S.A., Stolt Offshore's parent company, has offered to provide a $50 million capital infusion in the form of a subordinated loan to Stolt Offshore and extend the existing $50 million liquidity line it currently provides to November 30, 2004.
Tom Ehret, Chief Executive Officer, said, "The specific reasons for the loss include:
-- Burullus Scarab and Saffron, the first deepwater project of
its type offshore Egypt which is now complete, where a further
downgrade has been identified to provide for additional ship
utilization days, poor performance of nominated
sub-contractors and delays in claim resolution.
-- OGGS, in the harsh operating environment of Nigeria and now
80% complete, where forecasted costs have increased mainly due
to additional ship utilization days and higher than estimated
local support costs in West Africa.
-- Bonga, also offshore Nigeria, where the project is 50%
complete, forecasted costs have increased due to higher
project management and engineering, procurement and
sub-contractor, and transport and logistics costs.
-- On smaller projects, where provisions are likely to be made in
respect of risk on collection of receivables, lower activity
levels and lower ship utilization."
"Since joining the company just over two months ago, a primary focus for our new management team has been a critical review of all major ongoing projects. The project review reflects the first stage in the new management's assessment of the Stolt Offshore business. As a result of this review, it became clear that we will report a significantly worse loss for 2003 than we had originally anticipated and consequently we are working closely with our banks to put together a revised covenant package to give us sufficient headroom to manage the business for the remainder of the year.
"We have also taken aggressive action to minimize further additional deterioration of our project performance. We have begun the process of planning organizational and personnel changes, initiating a review of our asset base, which may result in the sale or write-down of certain assets and reassessing our regional market strategies. We are on track to present the Blueprint for financial recovery in July. Remedial short-term actions will continue to be implemented ahead of the completion of the Blueprint as they are required. The goals of the Blueprint will include clarification of our strategic vision, improving cash flow, reducing debt, increasing efficiency and providing us with better visibility for our financial results. Upon completion of the Blueprint, we will also commence further discussions with our banks and our main shareholder regarding a comprehensive long-term refinancing plan for the Company," Mr Ehret concluded.
Separately Stolt-Nielsen S.A. (announced that in light of the announcement of a significant loss by its publicly traded subsidiary,it now anticipates reporting a loss in 2003.
Niels G. Stolt-Nielsen, Chief Executive Officer, said, "We now have a strong team in SOSA led by its new CEO, Tom Ehret. Given time, I am now more confident than ever that Tom and his team will turn SOSA around and make it profitable. Even with the losses reported in SOSA, I expect SNSA will continue to be in compliance of its covenants. Our banks are appreciative of the organizational changes that have been made at SOSA and the continued strong support SNSA gives SOSA. I thank them for their support. "