Nimrod Sea Assets has published results for the year ended 31 March 2016. The company made various announcements in the early part of the year. These included the decision to effectively halt any further deals and new transactions; to pay four quarterly dividends of 2 cents per share from June 2015 to March 2016, most of which came out of capital, and to return unrequired, uninvested cash of some 20 cents per share. Taking these dividend payments and the return of capital, the latter of which Shareholders received in a B share redemption in April 2016, investors have received back nearly 30% of their original investment. As at 31 March 2016 the net asset value per share was 46.07 cents. Since the Year end 20 cents per share has been distributed as described above.
The company now has six investments in Marine Asset Companies comprising in total eight vessels.
The Executive Directors do not believe a rapid rebound in the operating environment is likely and are planning for extremely poor market conditions for vessel owners in 2016 and 2017 with a slight to gradual improvement from 2018.
In February NSA wrote off its entire 99.5% stake in DSV Alliance AS, the owner of the Red 7 Alliance. Red 7 Group had defaulted in May 2015 and NSA was forced to pick-up a large number of costs covered under maritime liens that had not been paid. Twice independent brokers were engaged to support attempts to sell Alliance but the market deteriorated significantly between June and December 2015 and it became clear that no realistic path to any sort of value realisation could be achieved. At the time of writing the vessel is in the possession of the lending bank, remains unsold and is currently quayside in Great Yarmouth. The company has no further liability in respect of this investment, and DSV Alliance AS is in the process of being liquidated.
No sub-sector of oil services has suffered more than the North Sea subsea diving market. In an extremely specialised market there are currently four DSVs (“Dive Support Vessels”) in lay-up in Leith and the North Sea operations of Harkand Group, previously controlling two near new DSVs and one near completed new-build, have recently gone into administration. This reflects a massive downturn in even basic IRM, of which DSVs are the core workhorses, to below levels that were thought not possible. There is no rebound in sight and long-term this augurs poorly for the future of the North Sea as a viable production basin.
Aberdeen Offshore AS
The FS Cygnus is currently on charter to Enquest UK Ltd (“Enquest”), and while performing operationally in a near perfect manner, is still unable to earn a day-rate close to her true economic cost. There are at least 75 similar vessels in lay-up in the North Sea market alone so any hope of a significant increase in day rates would seem overly optimistic at this stage. Aberdeen Offshore AS has reached agreement with senior debt providers to delay principal payments on the mortgage while the vessel remains working for Enquest (where there is a firm charter until 9 January 2017). Unless day rates improve significantly by then the SPV will require a cash injection to continue trading and it is highly likely therefore that they will be faced with writing off this investment completely if rates remain static.
On 29 February 2016 Viking Supply AS, (charterer of the Odin Viking) announced a standstill with creditors and stated it would enter restructuring negotiations. At the current time Norseman AS is owed three months hire and we do not expect to receive any until the conclusion of a restructuring agreement. There is no certainty that a restructuring agreement will actually be concluded as current proposals all require a significant equity injection into the parent company.
The investment in the Odin Viking was purchased with the deliberate intent to expose NSA to the harsh environment asset class which in June 2014, with day rates for these assets at near record levels, seemed appropriate. However a combination of Russian sanctions and the complete abandonment of this work in the Kara Sea and Arctic regions has left assets that supported this work trading at historic lows.
A positive outcome of the restructuring discussions may see NSA retaining some value in the project however, it is currently impossible to give any more guidance as to the likelihood of success in these discussions. There is an uncalled capital commitment in the project of USD 1,978,000 which is likely to be called by the bank regardless of circumstances.
The Odin Viking currently remains in lay-up in Uddevalla in Sweden where she has been inspected by the owners and found to be in excellent condition.
Altus Subsea AS
The Altus Subsea AS project has encountered significant payment issues over the previous twelve months; largely because Marine Engineering and Diving Services FZE (“MEDS”; the charterer) has had insufficient work for the Altus Invictus. In addition NSA has had significant disputes with the minority shareholder over how to handle the late payment of charter hire. In December this came to a head and we replaced the entire Board with NSA nominees (as we are entitled to with a 51% share) and have finally been able to take a far more active role in the project.
In April 2016 MEDS won work in Qatar and they have negotiated an assignment of earnings that will go a significant way to clearing the hired amount owed. In order to do this however, they had to prepare to seize the vessel, including mobilizing a backup crew, and engage lawyers in a lengthy process. The majority of these costs are not recoverable under the charter.
The Board of Altus Subsea AS is working closely with MEDS to restructure the charter onto a more realistic payment profile that reflects current market circumstances. Such a charter is likely to see us taking more time risk but have a potentially higher IRR. However they say it is crucial that the charterer can provide them with comfort that they can cover the operating expenditure on the vessel when she is not working, for this restructuring to work. If the Board cannot get this comfort the vessel will be re-delivered to the owners and placed in lay-up for 12 months while a sale process is initiated. This risk has already been built into the discount rate used to value the investment at the year end.
Bukit Timah DIS
Swiber Holdings Ltd continues to perform all of its obligations as charterer of the three AHTS vessels and a considerable amount of cash is building up in the ownership company: USD 9.4m at 31 March 2016 where our equity stake is 26%. However the debt providing banks, as is their legal right, are blocking dividend distributions from the structure. The Executive Directors do not expect this to change for at least the next 12 months and potentially longer.
They say, Swiber is a well run company, with excellent links throughout Asia Pacific, and thus is in an excellent position to capitalise on any upturn. However Swiber is significantly leveraged, both financially and operationally, and needs more work for the bank to have increased confidence over Swiber and to allow for dividends to resume from the project.
Jane Offshore Ltd
EDT Offshore Ltd continues to perform its obligations under the charter however the EDT Jane has had poor utilisation which reflects current market conditions. In 2016 EDT reached agreement with investors in a previous sale-and-leaseback transaction to restructure the deal. The Executive Directors have therefore taken an extremely prudent view of the valuation of this asset. The EDT Jane remains an excellent asset, and is extremely well maintained, but full confidence in this project will only be restored when the vessel secures regular work.
Volstad Maritime DIS II
This investment continues to perform as planned. The Oceanic Endeavour remains on charter to CGG Eidesvik and has worked consistently throughout the year. Longer term there are concerns regarding the overall health of the seismic market but the cost structure of the charter offers some protection to the owners as the vessel has become a core part of the CGG fleet being one of the state-of-the-art vessels, globally, of its type.
NSA : Nimrod Sea Assets results reflect oil price woes