Solstad Offshore says it continues to believe it will need to undergo "comprehensive" restructuring to improve its financial position, despite markets improving during the first quarter 2019.
"The long-term viability of the company’s and the group’s business depends on the company finding a solution to its financial situation," the Oslo-listed offshore support vessel owner said in a "going concern" statement its quarterly report.
"The company is in discussions with its key creditors, and the going concern assumption is based on the board’s view that the company’s efforts in this respect have a possibility of success."
Solstad said it expects such a solution to involve comprehensive restructuring of its balance sheet.
Unsustainable situation
Despite green shoots in offshore markets, Solstad said that the financial situation of both the company and the group "unsustainable as equity is negative and liquidity is under pressure".
The group's total booked equity as of 31 March was negative NOK 1.3bn ($149m).
Solstad subsidiary Solship Invest 3 struck an agreement with its creditors in March to suspend and defer payments of principal and interest until 20 June, while negotiations with financial creditors and other stakeholders continue.
That followed agreements struck in December between lenders and certain companies in the Solstad and Farstad segments of the group, through which repayments of principal and interest under the companies’ loan agreements were suspended and deferred.
"If the discussions are not successful, and in the event the group should be forced to realise its assets, there is a risk that these will be realised at a significantly lower value than their carrying amount, as value in use is higher than estimated sales values for several of the vessels," Solstad said in today's report.
First-quarter results
The world's biggest owner of high-end offshore support vessels posted a net loss before taxes of NOK 556m for the first three months, compared to a loss of NOK 543m in the same period 2018.
Revenues, however, increased significantly year on year from NOK 875m to NOK 1.1bn.
Vessel utilisation was 80% during the first three months of 2018, up by 10% compared to the same period last year.
The company’s contract backlog as of the end of the first quarter for execution during the remainder of 2019 is approximately NOK 2.6bn.
