Downgrade in Egyptian deepwater project generates losses for Stolt Offshore
Stolt Offshore SA announced that following a critical review of all major ongoing projects, it has identified substantially poorer than anticipated performance for 2003 and cost overruns on three major EPIC contracts and several smaller projects. The company at this time expects its full year loss to be in the range of $100 million to $125 million.
The 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, according to Chief Executive Officer Tom Ehret.
"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,” stated Ehret.
“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,” he added.
"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.”
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 SA, 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.
Stolt Offshore is a leading offshore contractor to the oil and gas industry, specializing in technologically sophisticated deepwater engineering, flowline and pipeline lay, construction, inspection and maintenance services. The company operates in Europe, the Middle East, West Africa, Asia Pacific, and the Americas. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
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