Ezion reports losses, completes talks with bankers and cuts rig orders as well as capex

EZION Holdings reported on Thursday that it has sunk deeper into the red for the fourth quarter ended December 31, 2016 due to more impairment losses.

The company, which provides service rigs and offshore logistics support services to the oil and gas industry, will cancel taking delivery of 4 service rigs and cut its capital expenditure by US$270 million as it completes talks with bankers.

For Q4, Ezion reported a deeper net loss of US$66.6 million, compared to a net loss of US$63.5 million a year ago. For the full year 2016, it sank into the red with a net loss of US$33.6 million, compared to a net profit of US$36.8 million in 2015. Revenue for the quarter fell 14.3 per cent to US$84.8 million, from US$72.6 million. For the whole year, it slipped 9.4 per cent to US$318.2 million.

The group's "other operating expenses" in Q4 includes impairment losses on plant and equipment and provision for trade receivables amounting to US$70.9 million, in addition to the US$81.1 million impairment losses made a year ago. This brought the accumulated impairment losses for Q4 2016 and Q4 2015 to US$152.0 million.

Impairment losses for Q4 2016 were made due to some of the projects that were committed at higher oil prices and the difficult and uncertain market conditions of the global oil and gas industry.

The group said it had completed discussions with all its bankers to cut its net annual principal repayment to match its operating cash flows upon the completion of the legal documentation of the loan extension. In addition, Ezion has also successfully renewed its working capital facilities with all its principal bankers, despite challenges facing the marine and offshore oil and gas Industry.

"The company believes this will improve the overall liquidity of the group and its financing cash flows in the near to medium term,'' Ezion said.

Ezion said in a separate statement that it would be shaving its capital expenditure by about US$270 million with the cancellation of 4 units of service rigs to help "conserve the cash position of the group".

"The indefinite postponement of the service rigs would reduce the significant cash outflows required to take delivery of the service rigs and also the burden of the additional financial liabilities on the balance sheet with the drawing of additional bank loans required for taking delivery of the service rigs,'' Ezion said.

At the end of 2016, the group's current assets decreased by 10 per cent, or US$60.8 million, to US$547.9 million compared to a year ago. Total liabilities decreased by US$180.8 million, or 9.7 per cent, to US$1.7 billion.

Ezion said it was in discussions for possible disposal for one of its service rigs and inviting potential partners to co-own some of its asset to further strengthen its balance sheet.