More red ink for Bourbon as vessel impairments bite

French offshore vessel provider Bourbon Offshore recorded a bigger loss in 2017 when compared to 2016 dragged down by lower revenues and vessel impairments amid a third year of cyclical downturn.

Bourbon on Thursday posted a net loss of €576.3 million for 2017 from €279.6 million loss in 2016. The company explained that this result reflects the crisis in the sector, its impact on asset values, and the risk of non-recovery of certain receivables.

During 2017, Bourbon recorded a vessel impairment loss of €196.8 million, €167.2 million of which was for the nonsmart fleet and provisions of €30 million, including €24.5 million for customer receivables.

The continued downswing in activity in 2017 led to the working fleet being reduced to 334 vessels and the number of stacked vessels being increased by an extra 52 units.

Adjusted revenue in 2017 amounted to €860.6 million, down 21.9% on the previous year and revenues of €1.1 billion. This was due to a working fleet utilization rate that was stable at 82.4%, and a fall in the average daily rate of around $1,000/day to $8725.

Going concern

Bourbon’s total capital has been reduced from €2.85 billion at the end of 2016 to €2.13 billion at the end of 2017.

The €722.2 million reduction in capital employed in 2017 was due to a €626.1 million decrease in the value of fixed assets following the recognition of nonrecurring impairment losses, asset disposals and normal depreciation and amortization; and a €96.1 million decrease in working capital due to lower revenue and a reduction in customer payment delays.

As a result, shareholders’ equity now stands at €643.6 million, versus €1.255 billion at the end of 2016. There was also a slight reduction in net debt of €103.1 million year-on-year. Furthermore, the group was unable to comply with various covenants defined in its loan documentation as of December 31, 2017.

Under IFRS, this breach of covenants at year-end requires the company to reflect the payability of its debt by reclassifying it as a current liability, even though its lenders have not requested repayment. The amount thus reclassified totaled €1.121 billion at the end of 2017.

While discussions are ongoing, BOURBON has asked its lenders to postpone exercising their rights under the loan agreements, particularly the right to repayment. To date, the group is still waiting for several replies, but is confident that it will obtain these agreements for postponement.

The group has therefore decided to enter into further discussions with its lenders, both in France and abroad, to balance the servicing of its debt with the expected gradual market recovery and the corresponding upturn in the group’s performance.

Bourbon noted that this situation raises a material uncertainty with regards to the going concern, the company is however confident in its ability to find a balanced solution with its lenders – often long-standing partners – that suits all parties and allows the company to adapt its financing to its future development.

No change in activity in 2018 

With the oil price climbing by more than 25% over the last three quarters, stabilizing at around $60- 65/barrel, the growth in cash generated by the oil companies points to a gradual resumption of investments. While investments in company acquisitions, shale oil, onshore projects and renewable energy clearly seem to have resumed, investment growth in the offshore sector is expected to be gradual in 2019.

Prices will be held down by vessel overcapacity in the PSV and AHTS segments. Performance for 2018 is therefore expected to be similar to 2017 in terms of activity.

Separation of CEO & Chairman roles 

Bourbon also announced on Thursday its intention to separate the functions of Chairman of the Board and CEO.

Therefore, Gaël Bodénès was appointed Chief Executive Officer and Jacques de Chateauvieux remains Chairman of the board. The board also confirmed Astrid de Bréon in her duties, as Chief Financial Officer.

Offshore Energy Today Staff