6-K 1 h08983e6vk.txt NORTHERN OFFSHORE LTD. - 2ND QUARTER REPORT 2003 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 August 2003 -------------------- 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 SECOND QUARTER OF 2003 RESULTS FOR THE SECOND QUARTER 2003 Northern Offshore Ltd reports consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) of USD 6.6 million for the second quarter of 2003, down from USD 7.6 million in the first quarter. Revenues decreased from USD 15.3 million in the first quarter to USD 13.1 million in the second quarter. The decrease was mainly due to Energy Searcher being off-hire between March 27 and May 16. Revenues from Northern Producer were in line with the first quarter. Operating costs reduced by USD 1.1 million from USD 7.6 million in the first quarter to USD 6.6 million in the second quarter. The significant factor was the Energy Searcher's period of off-hire, which resulted in reduced operating costs in the second quarter. The net loss for the second quarter of 2003 was USD 1.7 million compared to a net loss of USD 0.2 million for the first quarter. In addition to the change in EBITDA the main reasons for the increased loss include exchange losses of USD 0.2 million on the Company's NOK denominated Notes payable. In addition, interest payable increased by USD 0.3 million as a result of changes to interest rates contained in the various loan extensions announced in May. Certain of the comparative figures have been reclassified to conform to the presentation adopted in the current period. OPERATION In the second quarter of 2003, Northern Producer's production level was 11,767 bbls/day, down from 13,476 bbls/day for the previous quarter. Production was reduced in the second quarter due to Texaco's scheduled annual two-week shutdown of production for repair and maintenance work, which took place in May. The contract with Texaco has been extended to January 2005. Texaco has further options to extend the contract and the next option becomes declarable in January 2004. Energy Searcher is currently employed under a contract with Atlantis Oman. This employment began on August 10 and is expected to continue until mid October. Thereafter, the rig will go on hire to Daewoo. The Daewoo contract is expected to last until January 2004. Management is actively pursuing employment prospects following the completion of Energy Searcher's scheduled employment. The Company's drill ships, Northern Explorer II and Northern Explorer III and the semi-submersible drilling rig Galaxy Driller, are in lay-up near Singapore, while the drill ship Discoverer 1 is laid up in Mexico. The Board sees no opportunity for short-term re-employment of any of the four laid up units. As a function of the substantial lay-up cost for the rigs, the Board is currently considering different strategic options. On July 25, the Company settled arbitration relating to a claim for damages with Inpex and as a result will be paid USD 1.2 million by Inpex in August. MARKET The market for drilling rigs remains weak. The strength in the oil price and the tight energy situation world wide has so far not resulted in any increased activity for offshore drilling. The market in Asia, which is the Company's main market, is further suffering from the fact that several of the major operators have moved additional rigs into this market. Jet Drilling has established a good reputation in the market based on the successful operation and employment of Energy Searcher. This has clearly improved the market ability of Energy Searcher. FINANCIAL SITUATION During the first six months the Company generated USD 5.5 million cash from operations and USD 4.7 million as a result of the termination of currency swap derivatives. In the same period the Company has made debt repayments of USD 9.5 million and paid fees for refinancing amounting to USD 0.7 million. As a result, net cash flow was USD 0.0 million for the half-year. Northern Offshore completed in the second quarter a financial restructuring of its debt obligations. The restructuring, which was described in the first quarter report, has extended the final maturity dates on three of our debt facilities and has improved the Company's short-term working capital situation. As a result of this restructuring and repayments made, the Company has total debt outstanding at June 30 totalling USD 177.3 million. This consists of USD denominated Notes with face value USD 143.2 million, NOK denominated Notes with face value NOK 143.0 million (equivalent to USD 19.8 million), the BNP loan of USD 7.0 million and the Avalon loan of USD 7.3 million. The operating results for the second half of the year is expected to be in line or somewhat better than the results for the first half of the year. The Northern Producer contract with Texaco for the Galley field, which is the Company's major cash flow generator, is currently running to January 2005. The rate for 2004 will in line with original agreement be reduced compared to the rate in 2003. Texaco is currently marketing the Galley field for sale. In this connection Texcao has communicated to Northern Offshore that there is substantial doubt linked to Texaco's willingness to extend the contract when the next one-year option becomes declarable in January 2004. The Board is as a result of that looking into alternative employment for the rig. As a function of the Company's financial position the Board is having a close dialogue with the Company's main creditors. The main purpose of these talks is to find a long-term financial solution where the Company's balance sheet can be improved. While we are currently projecting that we will generate sufficient cash flows to service our debt obligations through to their respective maturity dates, we are not generating sufficient cash flows to repay these loans at maturity. Therefore there continues to be substantial doubt as to the ability of the Company to continue to operate as a going concern. No adjustments have been made to this financial report relating to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. Bermuda, August 29, 2003 The Board of Directors of Northern Offshore Ltd. Contact: Tor Olav Troim Tel: 47 90 68 82 67 Jon-Aksel Torgersen Tel: 47 22 93 60 00 NORTHERN OFFSHORE LTD. UNAUDITED FINANCIAL REPORT FOR THE SECOND QUARTER 2003 (PREPARED UNDER US GAAP)

--------------------------------------------------------------------------------------------------------------------------- Income Statement ~~1st~~2nd ~~quarter~~Quarter ~~2003~~2nd ~~1st~~Quarter ~~quarter~~6 ~~2002~~months 6 months 12 months 2003 2002 2003 2002 2002 (USD `000s) --------------------------------------------------------------------------------------------------------------------------- Revenues 1513,~~263~~130 1516,~~892~~350 28,393 31,933 69,299 Operating Expenses -76,~~625~~567 -7,~~753~~259 -3714,~~344~~192 -14,703 -36,170 Op. profit before depreciation (EBITDA) 76,~~638~~563 89,~~139~~091 3114,~~955~~201 17,230 33,129 Depreciation -3,~~533~~530 -4,~~066~~129 -7,063 -8,195 -16,705 Impairment losses - - - - -21,625 Operating profit/-loss 43,~~105~~033 4,~~073~~962 7,138 9,035 -65,~~375~~201 Interest income 346 116 49 17 82 Interest expense -4,~~439~~778 -4,~~594~~567 -9,217 -9,161 -18,860 Foreign exchange gain/-loss and other 81-25 48-199 56 -151 -423 financial items Net loss before tax -~~250~~1,724 212 -~~472~~1,974 -25260 -24,~~576~~402 Taxes -114 -~~237~~184 -15 -421 -453 Net loss before extraordinary items -~~249~~1,738 28 -~~709~~1,989 -26681 -24,~~029~~855 Cumulative effect of a change in accounting ~~principle~~- - - 6,102 6,102 principle --------------------------------------------------------------------------------------------------------------------------- Net income/-loss -~~249~~1,738 28 -1,989 5,~~393~~421 -1918,~~927~~753 --------------------------------------------------------------------------------------------------------------------------- Average number of shares outstanding 104,680,660 104,680,660 104,680,660 104,680,660 104,680,660 Per share amounts: USD EBITDA per share: USD 0.0706 0.09 0.08 0.3107 0.32 Net income/- loss before cumulative effect of -0.02 0.00 -0.02 -0.01 -0.2524 a change in accounting principle Cumulative effect of a change in accounting - - - 0.06 0.06 principle --------------------------------------------------------------------------------------------------------------------------- Earnings/-loss per share: USD -0.02 0.00 -0.02 0.05 -0.1918 --------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------- Balance Sheet 30th June 30th June 31st Dec (USD `000s) 2003 2002 2002 --------------------------------------------------------------------------------------------------------------------------- Drilling units and production platform 142,018 179,111 149,071 Other non-current assets 1,181 1,138 836 Other current assets 9,809 17,866 17,137 Cash and cash equivalents 3,289 1,678 3,291 --------------------------------------------------------------------------------------------------------------------------- Total assets 156,297 199,793 170,335 --------------------------------------------------------------------------------------------------------------------------- Notes payable 163,025 162,291 163,783 Secured loans 14,264 31,332 23,856 Other liabilities 8,019 9,739 9,842 Stockholders' deficit -29,011 -3,569 -27,146 --------------------------------------------------------------------------------------------------------------------------- Total liabilities and deficit 156,297 199,793 170,335 ---------------------------------------------------------------------------------------------------------------------------

Certain of the comparative figures have been reclassified to conform to the presentation adopted in the current period. NORTHERN OFFSHORE LTD. UNAUDITED FINANCIAL REPORT FOR THE SECOND QUARTER 2003 (PREPARED UNDER US GAAP)

--------------------------------------------------------------------------------------------------------------------------- ~~Balance~~Cash ~~Sheet~~Flow ~~31st~~Statement ~~Mar~~2nd ~~2003~~quarter ~~31st~~2nd ~~Mar~~quarter 6 months 6 months 12 months 2003 2002 ~~31st~~2003 ~~Dec~~2002 2002 (USD `000s) --------------------------------------------------------------------------------------------------------------------------- ~~Drilling~~Operating ~~units~~activities ~~and~~Net ~~production~~income/-loss ~~platform~~-1,738 ~~145~~28 -1,~~544~~989 ~~183~~5,~~362~~421 ~~149~~-18,~~071~~753 ~~Other~~Adjustments ~~non~~to reconcile net income/-~~current~~loss ~~assets~~to ~~732~~net ~~1,332~~cash ~~836~~provided ~~Other~~by ~~current~~operating ~~assets~~activities: 11Depreciation 3,~~941~~530 114,~~747~~129 157,~~963~~063 ~~Cash~~8,195 ~~and~~16,705 ~~cash~~Amortisation ~~equivalents~~of ~~10,384~~capitalized ~~3,516~~loan ~~3,291~~fees 213 168 321 336 568 Impairment losses - - - - 21,625 Cumulative effect of a change in accounting - - - -6,102 -6,102 principle Unrealised foreign currency exchange -gain/loss 664 3,741 -811 4,034 6,238 Change in fair value of derivative instruments -328 -3,320 815 -3,638 -5,340 Changes in working capital items: Decrease/-increase in trade accounts receivable -485 -1,745 1,504 -4,971 -3,109 Increase/-decrease in trade accounts payable 939 -1,570 -1,493 -1,399 -395 Decrease/-increase in net receivables and -356 1,378 -356 1,126 350 payables with related parties Other working capital items -4,023 -4,647 459 -2,301 -1,748 Net cash provided by operating activities -1,584 -1,838 5,513 701 10,039 Investing activities Purchases of furniture and equipment -6 - -10 - - Purchase and upgrading of production and - - - -60 -49 drilling vessels Proceeds from termination of derivatives 4,673 - 4,673 - - Net cash provided by/-~~---------------------------------------------------------------------------~~used ~~Total~~in ~~assets~~investing ~~168~~4,~~601~~667 ~~199,957~~- ~~169~~4,~~161~~663 -60 -49 activities Financing activities Proceeds from the issuance of loans - - - - 10,000 Repayment of loans -9,498 - -9,498 -6,500 -24,236 Financing fees paid -680 - -680 - - Net cash provided by/-used in financing -10,178 - -10,178 -6,500 -14,236 activities Net increase/-~~----------------------------------------------------------------------------------------------------~~decrease ~~Notes~~in ~~payable~~cash ~~162,779~~and ~~159~~cash -7,~~377~~095 ~~163~~-1,~~783~~838 ~~Secured~~-2 ~~loans 23~~-5,~~682~~589 30-4,~~823~~246 ~~23,857~~equivalents ~~Other~~Cash ~~liabilities~~and ~~11,000~~cash ~~13,674~~equivalents ~~9,841~~at ~~Stockholders'~~beginning ~~deficit~~of ~~-28~~10,~~860~~384 -3,~~917~~516 ~~-28~~3,~~320~~291 7,537 7,537 period --------------------------------------------------------------------------------------------------------------------------- ~~Total~~Cash ~~liabilities~~ and ~~deficit~~cash ~~168~~equivalents at end of period 3,~~601~~289 ~~199~~1,~~957~~678 ~~169~~3,~~161~~289 1,678 3,291 ---------------------------------------------------------------------------------------------------------------------------

Certain of the comparative figures have been reclassified to conform to the presentation adopted in the current period.

~~---------------------------------------------------------------------------------------------------------------------------~~MAJOR ~~Cash~~SHAREHOLDERS ~~Flow~~AS ~~Statement~~AT ~~1st~~AUGUST ~~quarter~~26, 2003: ~~1st quarter 2002 12 months 2002 (USD `000s)~~ -----------------------------------------------------------------------------------------------------------------~~----------~~ ~~OPERATING~~WORLD ~~ACTIVITIES~~SHIPHOLDING ~~Net~~LTD ~~income/-loss -249 5~~53,~~393 -19~~813,~~927~~342 ~~Adjustments~~51.40% toVOLDSTAD ~~reconcile~~HANS ~~net~~KRISTIAN ~~income/-loss to net cash provided by operating activities: Depreciation 3~~1,~~533 4~~096,~~066~~000 ~~16,705~~1.04% ~~Amortisation~~ODIN ofNORDEN ~~capitalized loan fees 108 168 568 Impairment losses - - 21~~5,~~625~~470,500 ~~Cumulative~~5.22% ~~effect~~CITIBANK ofINTL. aPLC. ~~change~~(LUX) ~~in accounting principle - -6~~1,~~102 -6~~000,~~102~~000 ~~Unrealised~~0.95% ~~foreign~~ODIN ~~currency~~NORGE ~~exchange -gain/loss -1~~4,~~475 294 6~~167,~~238~~263 ~~Change~~3.98% inTR0IM ~~fair~~TOR ~~value~~OLAV ~~of derivative instruments~~ 1,~~143 -319 -5~~000,~~340~~000 ~~Changes~~0.95% inFRANKLIN ~~working~~ENTERPRISES ~~capital items: Decrease/-increase in trade accounts receivable 1,989 -~~3,~~226 -1~~700,~~935~~000 ~~Increase/-decrease~~3.53% inSCHIE ~~trade~~STEIN ~~accounts~~H. ~~payable -2,432 171 -395 Decrease~~C/~~-increase~~O inNORMARINE ~~net receivables and payables with related - -251 351 parties Other working capital items 4~~831,~~480~~716 ~~2,308~~0.79% ~~-1,749~~AKSJEFONDET ~~Net~~GAMBAK ~~cash provided by operating activities 7,097~~ 2,~~502 10~~000,~~039~~000 ~~INVESTING~~1.91% ~~ACTIVITIES~~SONG ~~Purchase~~MIST ~~and~~SHIPPING ~~upgrading~~LTD of production and drilling vessels - - - Purchases of furniture and equipment -4 -23 -49 Net cash used in investing activities -4 -23 -49 FINANCING ACTIVITIES Proceeds from the issuance of loans - - 10708,000 ~~Repayment~~0.67% ofHAFSLUND ~~loans~~INVEST -AS -61,~~500 -24~~800,~~236~~000 ~~Net~~1.71% ~~cash~~OTHER ~~provided~~SHAREHOLDERS ~~by/-used in financing activities - -6~~29,~~500 -14,236 Net increase/-decrease in cash and cash equivalents 7,~~093 -4,~~021~~839 ~~-4,246~~27.85% ~~Cash and cash equivalents at beginning of period 3,291 7,537 7,537~~ -----------------------------------------------------------~~----------------------------------------------------------------~~ ~~Cash~~TOTAL ~~and cash equivalents at end of period 10~~104,~~384 3~~680,~~516~~660 ~~3,291~~100.00% -----------------------------------------------------------------------------------------------------------------~~----------~~

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NORTHERN OFFSHORE LTD. ---------------------- (Registrant) By: /s/ Tor Olav Troim -------------------------------- Tor Olav Troim Director Date: September 10, 2003

MAJOR SHAREHOLDERS AS AT MAY 20, 2003: -------------------------------------------------------------------------------------------------------------------------- OSPREY MARITIME LTD 53,813,342 51.40% CITIBANK INTL. PLC. (LUX) 1,000,000 0.95% ODIN NORDEN 5,470,500 5.22% TR0IM TOR OLAV 1,000,000 0.95% ODIN NORGE 4,167,263 3.98% VOLDSTAD HANS KRISTIAN 996,000 0.95% FRANKLIN ENTERPRISES 3,700,000 3.53% SCHIE STEIN H. C/O NORMARINE 831,716 0.79% AKSJEFONDET GAMBAK 3,000,000 2.86% TYCOON INDUSRTI AS 715,000 0.68% HAFSLUND INVEST AS 1,800,000 1.71% OTHER SHAREHOLDERS 28,186,839 26.98% ------------------------------------------------------------- TOTAL 104,680,660 100.00% --------------------------------------------------------------------------------------------------------------------------

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