(London & Dubai, 3 September 2018) ADES International Holding (“ADES” or “the Group”), the London- listed company providing offshore and onshore oil and gas drilling and production services in the Middle East and Africa through its subsidiaries, announced today its results for the six-month period ended 30 June 2018.
Revenue decreased 9.3% year-on-year to USD 79.7 million in 1H2018. Compared to its previous period, revenue grew by 14.3% from USD 69.7 million in 2H2017.
Gross profit decreased 7.4% year-on-year to USD 39.2 million in 1H2018 from USD 42.3 million in 1H2017.
Adjusted EBITDA increased by 4.5% year-on-year to USD 49.5 million in 1H2018 from USD 47.4 million in 1H2017. This includes a one-off bargain purchase gain of USD 11.7 million related to acquisitions concluded in 1H2018. Factoring out this one-off gain, Normalised EBITDA recorded a 20.3% year-on- year decrease to USD 37.8 million in 1H2018. Meanwhile, normalised EBITDA saw a 13.4% increase in the first six months of 2018 when compared to 2H2017.
Net profit grew by 10.5% year-on-year to USD 21.4 million in 1H2018 from USD 19.3 million in 1H2017 supported by the bargain purchase gain and despite a one-off USD 4.2 million finance charge recognised in 1H2018 related to transaction cost of previous syndication facilities.
Earnings per share was down 9.1% year-on-year due to an increase in total number of shares relatedto ADES' two capital increases following the IPO and the Nabors rigs acquisition.
Cash balances including cash equivalents stood at USD 119.2 million at 30 June 2018, supported by funds raised at the IPO and continued operations.
Exemplary safety record achieving over 2.3 million man hours with a Recordable Injury Frequency Rate(“RIFR”) (per 200,000 working hours) of 0.62, below the IADC worldwide standard rate of 0.65 as of 30 June 2018 on the back of a combined c.34,000 hours of training delivered across its three markets for the first half the year.
1H2018 utilisation rate of 80%, which takes into account the implemented recertification and upgrading projects on Admarine III in Egypt and Admarine 262 & 655 in the KSA. Had recertification and upgrade works not taken place, ADES' utilisation rate would have reached 90% in 1H2018, in-line with company'ssix-year average utilisation rate that is above the current average Middle East Jack-up utilisation rate of 65% (5). The Group's utilisation rate nonetheless saw a slight rise in the first six months of 2018 compared to 70% recorded in 2H2017.
Contract renewals for Admarine VI with General Petroleum Company (GPC) for a two-year period with the option to extend the contract for a further two years, marking the third consecutive renewal for Admarine VI.
Contract extensions for Admarine II and Admarine IV with the Gulf of Suez Petroleum Company (GUPCO) for a further nine and six months, respectively.
Finalised the acquisition of three operational offshore jack-up rigs located in the KSA from NaborsIndustry Ltd (“Nabors”) in June 2018, bringing the number of the Group's offshore rigs under contract to 14.
Current Trading and Outlook
The Group signed a definitive agreement with Weatherford International plc (“Weatherford”) for theacquisition of 31 onshore drilling rigs in July 2018, which is expected to conclude before year-end.
Total backlog is expected to reach USD 1.35 billion by year-end, with the Weatherford acquisition expected to generate c. USD 750 million and renewals expected to contribute an addition c. USD 200 million, during the upcoming 6 months.
(5 Source): Clarksons Research – Offshore Drilling Rig Monthly (May, 2018)
HALF-YEAR 2018 RESULTS
The two acquisitions are expected to generate a combined annual revenue of USD 210 million, which would exceed total annual revenues in FY17 alone, while the above renewals are expected to add a further USD 40 million once executed.
Post completion of the Weatherford acquisition, ADES expects Net Debt to be less than 2.5x annualized EBITDA.
Continued tendering activities in existing markets, including KSA and Algeria, as well as in newly penetrated markets such as Southern Iraq. ADES will also continue leveraging its increased tendering capacity resulting from strategic agreements with leading shipyards, its agreement signed with Vantage drilling to provide deep-water drilling assets and from the Weatherford deal, expected to close before year-end, with 11 of the 31 acquired rigs currently uncontracted.
During 2H2018 ADES expects to record solid revenue growth driven by the Nabors acquisitions, which have already started generating revenue and with their impact to be weighted towards 2H2018 earnings, as well as an increase in utilisation of existing fleet rigs including Admarine III, Admarine 262 and Admarine 655.
Commenting on the half-year performance, Dr. Mohamed Farouk, Chief Executive Officer of ADES International said:
“Our performance during the first half of the year reflects ADES' increasing efficiency and ability to extracthigher value from its operations. Despite the temporary pullback on our top-line due to upgrades and recertification works on a number of rigs, the Group's gross profit margin expanded one percentage point to 49.2% in 1H2018 as opposed to 1H2017, while ADES' bottom-line grew 10.5% year-on-year to USD 21.4 million. Yet it is important to note that our revenues and EBITDA increased by 14% and 13%, respectively in the first six months of 2018 compared to 2H2017.
At the time of listing in May 2017, our intended use of proceeds was to fully capitalise on our proven, low- cost structure and differentiated operating model, and to rapidly scale-up operations in a soft oil market. Our goal was simple: to deliver risk-adjusted returns to our shareholders and safeguard long-term business continuity. I am pleased to report that following a transformational period in ADES' development we have delivered on every front. Over the course of the previous 18 months and following our successful IPO, we secured two debt facilities totalling USD 590 million, finalised the acquisition of three ultra-shallow offshore drilling jack-up rigs from subsidiaries of Nabors, and significantly expanded our onshore capabilities by signing a definitive agreement with Weatherford for the acquisition of 31 onshore drilling rigs – which once finalised will see our total backlog reach USD 1.35 billion. In parallel, we continued to pursue organic growth opportunities through the renewal of existing contracts, new contract awards and increased tendering activity. We are pleased that we are delivering on this strategy in all respects, which together with our pursuit of smart acquisitions deliver a robust value-accretive business model and investment proposition.
Following a period of aggressive growth, our Group today is well-equipped in terms of assets, manpower,and regional footprint to fully capitalise on the market's uptrend. We are also cognisant that the sudden growth in business and expansion in operational capacity needs to be managed in a sustainable manner. To this end, management will implement a comprehensive strategy aimed at the successful integration of our newly acquired assets and personnel into the enlarged ADES Group, ensuring we stay true to our promise of delivering top-quality services in accordance with the highest safety standards.”