Polarcus Third Quarter Results 2020

Delivering tight cost control in a challenging market - Seite 2

During the quarter, the V. Tikhonov charter was extended into Q4 2023 which largely compensates for the loss of future bareboat charter revenue from Ivan Gubkin (now Polarcus Amani) that was redelivered earlier than scheduled.

Operating cost continued to be tightly managed. With increased flexibility in the cost base introduced during the last six months, gross cost of sales dropped to USD 22.6 million compared to USD 23.5 million in the previous quarter and USD 63.0 million in Q3 2019. General and administrative costs reduced to USD 2.3 million compared to USD 2.8 million in the previous quarter and USD 3.1 million in Q3 2019. The cost management measures implemented since Q1 2020 resulted in a Segment EBITDA that improved sequentially to USD 3.4 million for the quarter.

Cash from operations in the quarter was negative USD 2.6 million impacted by negative working capital movements of USD 5.8 million. Total cash at quarter-end was USD 32.4 million compared to USD 44.8 million at the end of the previous quarter.

Polarcus continues to secure new projects despite the challenging market conditions, with four new awards announced since the end of Q2 2020. Backlog at 30 September 2020, together with the value of awards announced after the quarter-end, is estimated at USD 139 million compared to USD 141 million at the end of Q2 2020. The Company’s fleet is 50% booked to the end of H1 2021.

OUTLOOK

Continuing restrictions on economic activity worldwide to mitigate the effects of COVID-19 have negatively impacted the Company’s earnings over the past six months. This challenging market environment has led to a more uncertain outlook with subdued demand for seismic services, lower day-rates and extended payment terms. These market conditions continued through Q3 2020 and a recovery in tender activity, whilst underway, has been slow.

Sentiment related to oil price and COVID-19 restrictions will be an important factor for medium-term demand levels as E&P companies work with more compressed budget cycles. A negative or neutral sentiment enduring through Q4 2020 will likely mean that visibility of demand for the Company’s services for at least H1 2021 will remain limited. However, recent discussions with clients do indicate that E&P investment is currently expected to increase during 2021.