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Vantage Drilling Company (VTG)
Q3 2012 Earnings Call
November 09, 2012, 12:00 pm ET
Mark Howell - Associate General Counsel
Paul Bragg - Chairman & CEO
Douglas Smith - CFO
Doug Garber - Dahlman Rose
Ryan Fitzgibbon - Global Hunter Securities
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Thank you, Shannon. Good morning, everyone. Welcome to the Vantage Drilling Company's third quarter 2012 conference call. We appreciate you joining us. I am Mark Howell, Legal Director and Associate General Counsel for Vantage. With us today on the call we have, Paul Bragg, our Chairman and Chief Executive Officer and Douglas Smith, our Chief Financial Officer.
I'll open with a few brief remarks. This morning, we released our earnings announcement for the period ended September 30, 2012. This afternoon we intend to file our 10-Q. The earnings release is available on our website at www.vantagedrilling.com.
Please note that any comments we make today about our expectations of future events and projections are forward-looking statements pursuant to the Private Securities Litigation Reform Act. Forward-looking statements made in today's call are subject to a number of risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from the projections made in today's conference call. We refer you to our earnings release and SEC filings available on our website.
Vantage does not undertake the updating of any such statement or risk factor that could cause actual results to differ materially from our expectations. At the end of our prepared remarks, we will entertain some questions.
With that, I would like to turn things over to Mr. Paul Bragg.
Thank you Mark. Since our Q2 earnings call, we've accomplished some very important tasks at the company. First, we've refinanced half of our expensive debt and thereby cut our interest costs accordingly, as well as lengthening maturities. We've also debt financed the remaining CapEx for our third drillship, the Tungsten Explorer, even prior to completion and acceptance of the unit. We've added about four years of new jackup contracts over three of the units and we've added operations management contracts for additional jackup rigs, at least one most likely, two or more. However, we do not commenced operations on the Titanium Explorer at the end of the third quarter as we had planned. We will discuss that in more details in a few minutes, but I will say that we do expect to commence operations in Q4.
And looking at the numbers Q3 of 2012 was a breakeven quarter compared to about $0.03 per share loss in Q2. Q3, 2012 earnings were net $2.1 million or $0.01 per share if you exclude a non-cash charge of about $2.5 million related to early retirement of debt.
EBITDA was $52.9 million in the quarter, as opposed to $48.4 in the previous quarter. EBITDA was burdened by about $2.5 million pre-commencement costs that were recognized during the third quarter for Titanium Explorer, our second drillship, and that's even prior to the ship being in service. Similarly, we had about $2.5 million of such costs reducing EBITDA in the previous quarter.
I’ll just point this out, because generally it’s pre-commencement cost of a new asset or capitalized prior to the rig starting up it's first job; however there are a couple of items that require expensing currently. Doug Smith will review the financial results in detail in just a few moments.
From an operational perspective, Q3 was another solid quarter with operational excellence for Vantage. Our jackups again worked at 99% utilization during the quarter and Platinum Explorer achieved utilization of 98% here in the quarter.
The Titanium Explorer acquired in April 2012 and mobilized to U.S. Gulf of Mexico to commence and eight-year contract. Acceptance testing with the customer was interrupted during the quarter, first by Hurricane Isaac, which necessitated that we sell the rig out of harm’s way, wait for the storm to pass and that also further resulted in disruption of the supply chain and the vendor access to the unit for more than a week.
We then moved on and commenced the deepwater testing. Most of the testing protocol has now been completed successfully, including the third-party certification of BOP. The actual functional test of the BOP carried out more than 8,000 feet of water were unfortunately interrupted by operational issues on the customer supplied ROV, so ROV is not something that we provide in the contract. But it's a necessary item for our testing and that the cameras and robotics are essential to carrying out the seafloor testing of the equipment. We lost about 10 days of testing associated with these issues.
During the testing delays, we noted an engine issue onboard Titanium Explorer. We consulted with the engine manufacturer and eventually decided that it would be prudent to not only conduct the repairs as actual problem, but to undertake some preventative upgrade of the engine to ensure that we wouldn’t have any additional problems when we’ll commence the contract. So that’s currently being carried out on all six of the primary engines onboard the rig.
The repair and upgrade is being conducted currently with the completion projected for the third week of November that’s actually about eight days from today. We will spend a couple more days testing before we head-out to deepwater again around the 20th, of November. Following this, we plan to complete the acceptance testing and expect to commence operations under the drilling contract in December.