Loyz Energy second-quarter profit improves to S$1.6m

With delivery of 3 wells in US.

Loyz Energy recorded a profit after income tax of S$1.6M in 2Q FY2014 as compared to a loss after income tax of S$1.6M in 2Q FY2013.

Revenue and cost of sales for 2Q FY2014 mainly relate to the recognition of drilling revenue and cost upon the delivery of three wells in the United States, being Schlak 3, Mansur 33-1-L and Mansur 33-1-N, in United States.

Other credits increased by S$5.8M, from S$0.1M in 2Q FY2013 to S$5.9M in 2Q FY2014 mainly due to the waiver of loan by non-controlling interest in connection with the acquisition of Loyz Rex Drilling Services, LLC, Rex US Ventures LLC.

Administrative expenses increased by S$1.3M, from S$1.0M in 2Q FY2013 to S$2.3M in 2Q FY2014
mainly due to employee share based payment expenses of S$0.7M and the increase in staff costs of S$0.6M in relation to the expansion of operations in the United States.

Finance costs for 2Q FY2014 of S$0.3M comprised mainly interest on the HSBC and OCBC term loans as disclosed under note 1b(ii). Other expenses increased by S$0.4M, from S$0.7M in 2Q FY2013 to S$1.1M in 2Q FY2014 mainly due to an increase in depreciation charge of S$0.4M in relation to the two drilling units.

The Group’s non-current assets increased by S$1.6M, from S$114.7M as at 30 September 2013 to S$116.3M as at 31 December 2013. The increase was mainly due to an increase in property, plant and equipment of S$0.1M mainly as a result of major maintenance activities performed on the two drilling units. There was also an increase in exploration, evaluation and development assets and oil and gas properties of S$1.5M due to 3D seismic work performed in Australia and additional expenditure incurred for the New Zealand permit.

The Group’s current assets increased by S$5.0M, from S$13.6M as at 30 September 2013 to S$18.6M as at 31 December 2013. The increase was mainly due to an increase in cash and cash equivalents of S$8.9M (please refer to the explanation of cash and cash equivalents below). This was partially offset by a decrease in trade and other receivables of S$3.7M which was mainly due to recognition of deferred drilling cost as cost of sales upon the delivery of three wells, Schlak 3, Mansur 33-1-L and Mansur 33-1-N, in the United States.

The Group’s non-current liabilities decreased by S$5.8M, from S$22.1M as at 30 September 2013 to S$16.3M as at 31 December 2013. The decrease was mainly due to the reclassification of loans, which fall due within 1 year, amounting to S$5.9M, from non-current to current liabilities. The Group’s current liabilities decreased by S$1.8M, from S$34.4M as at 30 September 2013 to S$32.6M as at 31 December 2013. The decrease was mainly due to: (i) a decrease in trade and other payables of S$0.4M due to settlement of payables due to suppliers for the operations in Australia and New Zealand; (ii) recognition of deferred drilling revenue, amounting to S$6.8M, as revenue upon the delivery of three wells, Schlak 3, Mansur 33-1-L and Mansur 33-1-N, in the United States; and (iii) repayment of bank loans amounting of S$0.6M. These are partially offset by the reclassification of bank loans, which fall due within 1 year, amounting to S$5.9M from non-current to current liabilities.

The Group reported a negative working capital of S$14.0M as at 31 December 2013 and S$20.8M as at 30 September 2013.

The Group’s net cash used in operating activities for 2Q FY2014 was S$6.1M. Major movements mainly comprised (i) cash generated by a decrease in trade and other receivables of S$3.7M, (ii) cash generated by a decrease in prepayments of S$0.2M, (iii) cash absorbed by a decrease in trade and other payables of S$0.4M, (iv) cash absorbed by a decrease in other liabilities of S$6.7M, and (v) an operating loss before working capital changes of S$2.8M.

Net cash used in investing activities for 2Q FY2014 of S$1.9M was mainly due to the payment for upgrades and maintenance for the two drilling units, the addition of a motor vehicle, the payment for the 3D seismic work performed in Australia and additional expenditure incurred for the New Zealand permit.

Net cash from financing activities for 2Q FY2014 of S$13.1M was mainly due to the proceeds from the issuance of shares pursuant to a private placement in October 2013, partially offset by the repayment of bank loans and interest, as well as the increase in cash pledged.

As a result of the above and taking into account of the foreign currency translation adjustments of S$0.1M, cash and cash equivalents increased by S$5.2M, from S$5.0M as at 1 October 2013 to S$10.2M as at 31 December 2013.