6-K 1 h01690e6vk.txt NORTHERN OFFSHORE LTD - NOVEMBER 2002 SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 6-K REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the Month of November 2002 -------------------- NORTHERN OFFSHORE LTD. ------------------------------------------ (Translation of registrant's name into English) Par-la-Ville Place, 4th Floor, Par-la-Ville Road, Hamilton HM08, Bermuda ------------------------------------------------- (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F X Form 40-F --- --- Indicate by check mark whether registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes No X --- --- [NORTHERN OFFSHORE LTD. LOGO] NORTHERN OFFSHORE LTD. REPORT FOR THE THIRD QUARTER OF 2002 RESULTS FOR THE THIRD QUARTER 2002 Northern Offshore Ltd reports a consolidated net loss of USD 0.2 million for the third quarter of 2002 and a consolidated net loss before the cumulative effect of a change in accounting principle of USD 0.9 million for the nine months ended September 30, 2002. During the third quarter of 2002 we changed the Company's accounting policy for drydocking costs from the accrual method to the expense as incurred method. We chose the expense as incurred method as we consider it to be the most reliable method for recognising drydocking costs in that it eliminates the uncertainty associated with estimating the cost and timing of future drydockings. In accordance with US GAAP we have released the accrual for future drydocking cost, which was shown as a liability of USD 6.1 million in the consolidated balance sheet as at December 31, 2001 under the old accounting policy. As a result, we have recorded the cumulative effect of a change in accounting principle as a credit to net income of USD 6.1 million on January 1, 2002. Results for the first and second quarters of 2002 have been restated as a consequence. These results compare with a consolidated net loss of USD 2.5 million for the third quarter of 2001 and a consolidated net loss before extraordinary items of USD 8.6 million for the nine months ended September 30, 2001. EBITDA amounted to USD 8.9 million for the third quarter 2002, up from USD 7.7 million in the third quarter of 2001. The increase of USD 1.2 million is mainly due to an improvement in contract earnings for the Energy Searcher, and increased day-rates for the Northern Producer from January 5, 2002. OPERATION In the third quarter of 2002, Northern Producer's production level was 13,154 bbls/day down from 19,153 bbls/day in the second quarter. A total of 127,835 bbls of this production volume was Phase II production, and therefore paid according to the tariff agreement. Reduced production was due to annual shutdown in the field for maintenance. On July 5, 2002, the contract with Texaco was extended to the end of 2003. Texaco has further options to extend the contract and the next option becomes declarable in January 2003. Energy Searcher has recently finished its contract of employment for Inpex. Inpex has raised a potential claim for USD 1.6 million against Northern Offshore in connection with the performance of this contract. We strongly deny this claim, which ultimately could be subject to arbitration. The rig is presently undergoing repair work at a yard in Singapore. We have received Letter of Intent for the Energy Searcher from Repsol for an operation starting on January 25, 2003 at the earliest. This operation is to drill one well (duration 45-50 days) with the option for Repsol to extend with another well. We are currently actively pursuing opportunities to fill the gap between finishing the yard repair work and the start of the Repsol operation. We are in discussions with a specific party about such employment. Our drill ships, Northern Explorer II and Northern Explorer III and the semi-submersible drilling rig Galaxy Driller, are still in lay-up near Singapore, while our drill ship Discoverer I is laid up in Mexico. We have offered one of the units for a two-year drilling contract in India through a conditional agreement with an Indian offshore operator. In total, six units were offered for this job. We expect a clarification of the bidding situation during the coming months. Recent technical studies of the laid up drill ships indicate that substantial investment would be needed before the ships could be put back in a ready-to-drill condition. Based on the current offshore market outlook and our financial position we do not see any opportunity to pursue such upgrading projects at this time. MARKET Activity in the Asian drilling market for conventional type units continues its negative development. More units are becoming available from existing contracts and additional units have also entered the market. The market is still dominated by short-term work. There are, however, some positive signs due to the fact that several oil companies in the region have increased their exploration budgets for 2003 and onwards. FINANCIAL SITUATION During the third quarter of 2002 we generated USD 3.4 million from operations and made net debt repayments of USD 2.5 million resulting in a net cash inflow of USD 0.9 million. After drawing USD 10.0 million under a reducing revolving credit facility provided by Avalon Holdings Ltd., as disclosed in our previous quarterly report, we made full repayment of the Energy Searcher 2nd priority mortgage loan (USD 6.0 million) and then a repayment to Avalon of USD 6.5 million under the terms of the credit facility. We repaid the balance of the Avalon credit facility (USD 3.5 million) in October. We will not have sufficient cash to meet the USD bond interest payment due on November 15. Based on our current cash flow projections we anticipate that the interest payment can be made within the thirty-day remedy period (subject to timely collections from our customers) and that therefore no event of default will occur. We currently have no working capital credit facilities available. OUTLOOK We expect no material changes in the operating result of the Northern Producer in the fourth quarter. The operating result of the Energy Searcher will show a negative development since the rig currently has no employment for the fourth quarter after completing the Inpex job. Even if we should be successful in finding employment for the rig in part of fourth quarter we do not anticipate a significant financial contribution. The main purpose of any such employment would be to reduce costs related to a lay up of the rig. We earlier informed investors that a major part of the Company's debt obligations are short-term and mature in the first half of 2003. In order to help the Board in assessing this situation and potential solutions the Board has retained investment bank Houlihan Lokey Howard & Zukin. Bermuda, November 14, 2002 The Board of Directors of Northern Offshore Ltd. Contact: Jon-Aksel Torgersen Tel: +47 22 93 60 00 Tor Olav Troim Tel: +47 90 68 82 67 NORTHERN OFFSHORE LTD. UNAUDITED FINANCIAL REPORT FOR THE THIRD QUARTER 2002 (PREPARED UNDER US GAAP)

NORTHERN OFFSHORE LTD. UNAUDITED FINANCIAL REPORT FOR THE THIRD QUARTER 2002 (PREPARED UNDER US GAAP)

MAJOR SHAREHOLDERS AS AT NOVEMBER 13, 2002: -------------------------------------------------------------------------------------------------------------------------- OSPREY MARITIME PTE 53,813,342 51.4% CITIBANK INTL. PLC. (LUX) 1,000,000 0.95% ODIN NORDEN 5,670,500 5.41% VOLDSTAD HANS KRISTIAN 896,000 0.85% ODIN NORGE 3,967,263 3.78% SCHIE STEIN H. C/O NORMARINE 831,716 0.79% FRANKLIN ENTERPRISES 3,700,000 3.53% SONG MIST SHIPPING 708,000 0.67% AKSJEFONDET GAMBAK 3,000,000 2.86% ODIN OFFSHORE 700,000 0.66% HAFSLUND INVEST 1,800,000 1.71% OTHER SHAREHOLDERS 28,593,839 27.39% ------------------------------------------------------------ TOTAL 104,680,660 100.00% --------------------------------------------------------------------------------------------------------------------------

NORTHERN OFFSHORE LTD 6-K