Paragon Offshore Reports Third Quarter 2016 Results And Provides Fleet Status Report

  • Third quarter 2016 revenues of $125 million; net loss of $64 million or $0.72 per share 
  • Adjusted EBITDA of $21 million net of reorganization items
  • Contract drilling services costs seven percent lower compared to previous quarter
  • Cash balance at September 30, 2016 of $880 million excluding restricted cash
  • Contract backlog at September 30, 2016 of $365 million

HOUSTON, Nov. 08, 2016 (GLOBE NEWSWIRE) -- Paragon Offshore plc ("Paragon") (OTC:PGNPQ) today reported a third quarter 2016 net loss of $63.6 million, or a loss of $0.72 per diluted share, as compared to third quarter 2015 net loss of $1.08 billion, or $12.46 per diluted share.

Results for the third quarter of 2015 included a $1.15 billion, or $13.22 per diluted share non-cash charge relating to impairments on five floaters and sixteen jackups, deposits related to the construction of Prospector 6, Prospector 7, and Prospector 8 and goodwill related to the company's previous acquisition. Excluding these charges and tax benefit of loss on impairment, Paragon's adjusted net income for the third quarter of 2015 was $0.3 million, or $0.00 per diluted share (for a reconciliation to net income for all "adjusted" metrics, see the Reconciliation of GAAP to Non-GAAP Financial Measures Table).

Adjusted EBITDA is defined as net income (loss) before taxes, plus interest expense, depreciation, losses on impairments, foreign currency losses, and reorganization items, less gains on the sale of assets, interest income, and foreign currency gains.  For the third quarter of 2016, adjusted EBITDA was $20.8 million, compared to $66.0 million in the second quarter of 2016.

Total revenues for the third quarter of 2016 were $125.1 million compared to $184.9 million in the second quarter of 2016. Paragon reported that utilization for its marketed rig fleet, which excludes available days related to rigs that were stacked and not marketed during the quarter, declined to 34 percent for the third quarter of 2016 compared to 38 percent for the second quarter of 2016. Average daily revenues declined 19 percent in the third quarter of 2016 to $109,000 per rig compared to the previous quarter average of $135,000 per rig. Contract drilling services costs declined 7 percent in the third quarter of 2016 to $85.1 million compared to $91.6 million in the second quarter of 2016.

General and administrative ("G&A") costs for the third quarter of 2016 totaled $11.5 million compared to $9.8 million for the second quarter of 2016.  Reorganization costs totaled $17.2 million in the third quarter of 2016 compared to $17.5 million in the second quarter of 2016.

Net cash from operating activities was $36.6 million in the third quarter of 2016 as compared to $101.8 million for the second quarter of 2016.  Cash used for capital expenditures in the third quarter of 2016 totaled $9.6 million including changes in accrued capital expenditures.  At September 30, 2016, liquidity, defined as cash and cash equivalents, excluding restricted cash, totaled $880.0 million.

Operating Highlights

Paragon's total contract backlog at September 30, 2016 was approximately $365 million compared to $472 million at June 30, 2016. Although Paragon continues to contest the approximately $143 million of backlog associated with what we believe to be an early release of the Paragon DPDS3 by Paragon's customer Petrobras, we do not include that amount in our backlog total.

Utilization of Paragon's marketed floating rig fleet increased to 40 percent in the third quarter of 2016 when compared to the 35 percent utilization achieved in the second quarter of 2016. The increase in marketed utilization in the third quarter of 2016 reflects the removal of the Paragon MSS2 from the marketed fleet offset by fewer operating days on the Paragon DPDS3 which was released by Petrobras in August 2016 . Average daily revenues for Paragon's floating rig fleet decreased by 39 percent to $241,000 per day in the third quarter of 2016 from $399,000 per rig in the second quarter of 2016.

Utilization of Paragon's marketed jackup rig fleet was lower at 34 percent in the third quarter compared to the 39 percent utilization in the second quarter of 2016 as a number of rigs completed contracts during the third quarter.  Average daily revenues for Paragon's jackup fleet during the third quarter decreased by 12 percent to $99,000 per rig from $112,000 per rig during the second quarter of 2016. 

At the end of the third quarter of 2016, an estimated 27 percent of the company's marketed rig operating days were committed for 2016, including 8 percent and 28 percent for floating and jackup rig days, respectively.  The calculations for committed operating days exclude available days related to rigs that were stacked and not marketed during the quarter.

Paragon Provides Fleet Status Report and Information on Going Concern Risk

Paragon also announced today that it issued a report on drilling rig status and contract information as of November 8, 2016.  The report, titled "Fleet Status Report," can be accessed on the company's website at www.paragonoffshore.com under the "Our Fleet" or "Investor Relations-Fleet Status Reports" sections of the website.  Following this current report, Paragon will issue a fleet status report once per quarter coincident with its earnings reports.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that Paragon will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The company's ability to continue as a going concern is contingent upon our development of a plan of reorganization, approval of the plan by the Bankruptcy Court and the company's creditors, and Paragon's ability to successfully implement a plan of reorganization. This represents a material uncertainty related to events and conditions that raises substantial doubt on the company's ability to continue as a going concern and, therefore, the company may be unable to realize its assets and discharge its liabilities in the normal course of business.  During the period that the company is operating as debtors-in-possession under Chapter 11, Paragon may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business (and subject to restrictions in the company's debt agreements), for amounts other than those reflected in the company's consolidated financial statements.  Further, any reorganization plan could materially change the amounts and classifications of assets and liabilities reported in the consolidated financial statements.  The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should we be unable to continue as a going concern.  Investors are urged to review the contents of the company's Form 10-Q including the discussions under "Risk Factors" when the document is filed.

About Paragon Offshore

Paragon is a global provider of offshore drilling rigs.  Paragon's operated fleet includes 34 jackups, including two high specification heavy duty/harsh environment jackups, four drillships, and two semisubmersibles. Paragon's primary business is contracting its rigs, related equipment and work crews to conduct oil and gas drilling and workover operations for its exploration and production customers on a dayrate basis around the world. Paragon's principal executive offices are located in Houston, Texas. Paragon is a public limited company registered in England and Wales with company number 08814042 and registered office at 20-22 Bedford Row, London, WC1R 4JS, England. Additional information is available at www.paragonoffshore.com.

Forward-Looking Disclosure Statement

This release contains forward-looking statements. Statements regarding contract backlog, earnings, costs, revenue, contract commitments, dayrates, and contract disputes, as well as any other statements that are not historical facts in this release, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to risks associated with the general nature of the oil and gas industry, risks associated with our restructuring, actions by regulatory authorities, customers and other third parties, and other factors detailed in the "Risk Factors" section of Paragon's annual report on Form 10-K for the fiscal year ended December 31, 2015, and in Paragon's other filings with the SEC, which are available free of charge on the SEC's website at www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.

Conference Call

Paragon has scheduled a teleconference and webcast related to its third quarter 2016 results on Wednesday, November 9, 2016, at 8:00 a.m. U.S. Central Time. The teleconference can be accessed from the U.S. and Canada by dialing 1-888-771-4371, or internationally by dialing 1-847-585-4405, and using access code: 43698043. Interested parties may also listen to the webcast through a link posted on Paragon's website at www.paragonoffshore.com, under "Events & Presentations" in the "Investor Relations" section of the website.

A telephonic replay of the conference call will be available on Wednesday, November 9, 2016, beginning at approximately 10:30 a.m. U.S. Central Time, through Wednesday, November 23, 2016, ending at approximately 11:59 p.m. U.S. Central Time. The phone number for the conference call replay is 1-888-843-7419 or, for calls from outside of the U.S., 1-630-652-3042, using access code: 43698043.  A replay of the conference call will also be available on Paragon's website at www.paragonoffshore.com, under "Events & Presentations" in the "Investor Relations" section of the website.

PARAGON OFFSHORE plc
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2016   2015   2016   2015
Operating revenues                
Contract drilling services   $ 116,674     $ 338,710     $ 516,182     $ 1,101,618  
Labor contract drilling services   4,517     6,853     16,750     21,224  
Reimbursables and other   3,887     23,410     42,201     70,023  
    125,078     368,973     575,133     1,192,865  
Operating costs and expenses                
Contract drilling services   85,109     190,536     289,446     612,610  
Labor contract drilling services   4,966     4,792     14,218     16,086  
Reimbursables   2,778     19,517     35,870     58,173  
Depreciation and amortization   50,270     95,826     181,732     280,574  
General and administrative   11,464     12,800     33,459     41,901  
Loss on impairments       1,150,846         1,152,547  
(Gain) on sale of assets, net               (12,717 )
(Gain) on repurchase of long-term debt               (4,345 )
    154,587     1,474,317     554,725     2,144,829  
Operating income (loss) before interest, reorganization items and income taxes   (29,509 )   (1,105,344 )   20,408     (951,964 )
Interest expense, net   (18,446 )   (33,900 )   (58,299 )   (93,107 )
Other, net   2,804     (983 )   1,512     1,421  
Reorganization items, net   (17,211 )       (56,602 )    
Loss before income taxes   (62,362 )   (1,140,227 )   (92,981 )   (1,043,650 )
Income tax benefit (provision)   (1,256 )   55,389     (956 )   67,301  
Net loss   $ (63,618 )   $ (1,084,838 )   $ (93,937 )   $ (976,349 )
Net income attributable to non-controlling interest               (31 )
Net loss attributable to Paragon   $ (63,618 )   $ (1,084,838 )   $ (93,937 )   $ (976,380 )
                 
Loss per share                
Basic and diluted   $ (0.72 )   $ (12.46 )   $ (1.08 )   $ (11.39 )
                                 

PARAGON OFFSHORE plc
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
    September 30,   December 31,
    2016   2015
ASSETS        
Current assets        
Cash and cash equivalents   $ 879,963     $ 773,571  
Restricted cash   26,047     3,000  
Accounts receivable, net of allowance for doubtful accounts   138,121     266,325  
Prepaid and other current assets   73,730     110,027  
Total current assets   1,117,861     1,152,923  
         
Property and equipment, net   972,557     1,111,098  
Restricted cash   36,249     25,030  
Other long-term assets   42,041     73,796  
Total assets   $ 2,168,708     $ 2,362,847  
         
LIABILITIES AND EQUITY        
Current liabilities        
Current maturities of long-term debt   $ 30,659     $ 40,629  
Accounts payable and accrued expenses   69,665     85,374  
Accrued payroll and related costs   39,570     48,246  
Other current liabilities   64,130     109,640  
Total current liabilities   204,024     283,889  
         
Long-term debt   178,500     2,538,444  
Deferred income taxes   5,188     9,373  
Other liabilities   30,937     37,731  
Liabilities subject to compromise   2,343,963      
Total liabilities   2,762,612     2,869,437  
         
Total shareholders' deficit   (593,904 )   (506,590 )
Total liabilities and equity   $ 2,168,708     $ 2,362,847  
                 

PARAGON OFFSHORE plc
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
    Nine Months Ended
    September 30,
    2016   2015
Cash flows from operating activities        
Net loss   $ (93,937 )   $ (976,349 )
Adjustments to reconcile net loss to net cash from operating activities:        
Depreciation and amortization   181,732     280,574  
Loss on impairments       1,152,547  
Gain on sale of assets       (12,717 )
Gain on repurchase of long-term debt       (4,345 )
Other changes in operating activities   156,841     (52,959 )
Net cash provided by operating activities   244,636     386,751  
         
Cash flows from investing activities        
Capital expenditures   (36,201 )   (156,753 )
Change in accrued capital expenditures   (8,612 )   (11,768 )
Proceeds from sale of assets       29,316  
Acquisition of Prospector Offshore Drilling S.A. non-controlling interest       (2,185 )
Change in restricted cash   (34,266 )   (17,297 )
Net cash used in investing activities   (79,079 )   (158,687 )
         
Cash flows from financing activities        
Net Activity - Revolving Credit Facility       11,000  
Additional Borrowings - Revolving Credit Facility       532,000  
Net proceeds from Sale-Leaseback Financing       291,576  
Repayments on Sale-Leaseback Financing       (8,365 )
Repayment of Term Loan Facility       (4,875 )
Repayment of Prospector Senior Credit Facility   (59,165 )   (265,666 )
Repayment of Prospector Bonds       (101,000 )
Purchase of Senior Notes       (6,546 )
Net cash used in financing activities   (59,165 )   448,124  
Net change in cash and cash equivalents   106,392     676,188  
Cash and cash equivalents, beginning of period   773,571     56,772  
Cash and cash equivalents, end of period   $ 879,963     $ 732,960  
                 

PARAGON OFFSHORE plc
(DEBTOR-IN-POSSESSION)
OPERATIONAL INFORMATION
(Unaudited)
 
    Three Months Ended
    September 30,   June 30,
    2016   2015   2016
Rig fleet operating statistics (1)            
Jackups:            
Average Rig Utilization   32 %   60 %   36 %
Marketed Utilization (2)   34 %   64 %   39 %
Operating Days   1,001     1,891     1,126  
Average Dayrate   $ 98,824     $ 116,071     $ 112,007  
Floaters:                        
Average Rig Utilization   13 %   83 %   18 %
Marketed Utilization (2)   40 %   100 %   35 %
Operating Days   74     459     96  
Average Dayrate   $ 241,379     $ 259,844     $ 398,910  
Total:                        
Average Rig Utilization   29 %   64 %   34 %
Marketed Utilization (2)   34 %   69 %   38 %
Operating Days   1,075     2,350     1,222  
Average Dayrate   $ 108,574     $ 144,158     $ 134,586  
                         

(1) We define average rig utilization for a specific period as the total number of days our rigs are operating under contract, divided by the product of the total number of our rigs, including cold-stacked rigs, and the number of calendar days in such period. Information reflects our policy of reporting on the basis of the number of available rigs in our fleet.(2) Marketed utilization excludes the impact of Paragon cold-stacked rigs for each comparable quarter, respectively.

PARAGON OFFSHORE plc
(DEBTOR-IN-POSSESSION)
CALCULATION OF BASIC AND DILUTED LOSS PER SHARE
(In thousands, except per share amounts)
(Unaudited)
 
The following table sets forth the computation of basic and diluted loss per share:
 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2016   2015   2016   2015
Allocation of loss:                
Basic and diluted                
Net loss   $ (63,618 )   $ (1,084,838 )   $ (93,937 )   $ (976,380 )
Earnings allocated to unvested share-based payment awards (1)                
Net loss attributable to ordinary shareholders - basic and diluted   $ (63,618 )   $ (1,084,838 )   $ (93,937 )   $ (976,380 )
                 
Weighted average shares outstanding - basic and diluted   87,876     87,077     87,360     85,703  
                 
Weighted average unvested share-based payment awards   3,929     6,947     4,731     6,023  
                 
Loss per share                
Basic and diluted   $ (0.72 )   $ (12.46 )   $ (1.08 )   $ (11.39 )
                                 

(1) No earnings were allocated to unvested share-based payment awards in our earnings per share calculation for the three and nine months ended September 30, 2016 and 2015 due to a net loss in each respective period.          

PARAGON OFFSHORE plc
(DEBTOR-IN-POSSESSION)
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
(Unaudited)
 
The following table sets forth the reconciliation of net loss to adjusted net income (non-GAAP):
 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2016   2015   2016   2015
                 
Net loss   $ (63,618 )   $ (1,084,838 )   $ (93,937 )   $ (976,380 )
Adjustments:                
(Gain) on repurchase of long-term debt               (4,345 )
(Gain) loss on sale of assets               (12,717 )
Loss on impairments       1,150,846         1,152,547  
Tax impact of loss on impairment       (66,341 )       (66,341 )
Adjusted net income (loss)   $ (63,618 )   $ (333 )   $ (93,937 )   $ 92,764  
                 
Allocation of adjusted net income (loss):                
Basic and diluted                
Adjusted net income (loss)   $ (63,618 )   $ (333 )   $ (93,937 )   $ 92,764  
Earnings allocated to unvested share-based payment awards (1)               (6,091 )
Adjusted net income (loss) to ordinary shareholders - basic and diluted   $ (63,618 )   $ (333 )   $ (93,937 )   $ 86,673  
                 
Weighted average number of shares outstanding - basic and diluted   87,876     87,077     87,360     85,703  
                 
Weighted average unvested share-based payment awards   3,929     6,947     4,731     6,023  
                 
Adjusted earnings (loss) per share                
Basic and diluted   $ (0.72 )   $     $ (1.08 )   $ 1.01  
                                 

(1) No earnings were allocated to unvested share-based payment awards in our earnings per share calculation for the three and nine months ended September 30, 2016 and the three months ended September 30, 2015 due to a net loss in each respective period.

PARAGON OFFSHORE plc
(DEBTOR-IN-POSSESSION)
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (Cont'd)
(In thousands)
(Unaudited)
 
    Three Months Ended
    September 30,   June 30,
    2016   2015   2016
Operating revenues            
Contract drilling services   $ 116,674     $ 338,710     $ 164,464  
Labor contract drilling services   4,517     6,853     5,485  
Reimbursables and other   3,887     23,410     14,986  
    125,078     368,973     184,935  
Operating costs and expenses            
Contract drilling services   85,109     190,536     91,631  
Labor contract drilling services   4,966     4,792     4,193  
Reimbursables   2,778     19,517     13,308  
Depreciation and amortization   50,270     95,826     59,556  
General and administrative   11,464     12,800     9,821  
Loss on impairments       1,150,846      
    154,587     1,474,317     178,509  
Operating income (loss) before interest, reorganization items and income taxes   (29,509 )   (1,105,344 )   6,426  
Interest expense, net   (18,446 )   (33,900 )   (12,836 )
Other, net   2,804     (983 )   (2,054 )
Reorganization items, net   (17,211 )       (17,549 )
Loss before income taxes   (62,362 )   (1,140,227 )   (26,013 )
Income tax benefit (provision)   (1,256 )   55,389     904  
Net loss   $ (63,618 )   $ (1,084,838 )   $ (25,109 )
             
Adjustments:            
Depreciation and amortization   50,270     95,826     59,556  
Loss on impairments       1,150,846      
Interest expense, net   18,446     33,900     12,836  
Other, net   (2,804 )   983     2,054  
Reorganization items, net   17,211         17,549  
Income tax provision (benefit)   1,256     (55,389 )   (904 )
Adjusted EBITDA   $ 20,761     $ 141,328     $ 65,982  
                         
For additional information, contact:For Investors & Media:Lee M. AhlstromSenior Vice President - Investor Relations, Strategy and Planning+1.832.783.4040

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