PDF - Farstad Shipping

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FARSTAD SHIPPING ASA
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This is Farstad Shipping
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1998 Positives - Negatives
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Main financial figures
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Report of the Board of Directors
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Profit and loss account
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Balance sheet
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Cash flow statement
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Accounting principles
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Notes to the account
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A u d i t o r ’s r e p o r t
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Analytical information
25
Shareholder matters
28
Strategy
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The Narket
for offshore supply vessels
32
Organisation and administration
38
Health, Safety and Environment
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Far Sovereign
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Fleet gallery
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The Farstad fleet
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Lochnagar
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In 1973, Farstad Shipping ASA began its offshore activity as one of the
pioneers in the North Sea. At that time, the Company acquired its first
supply vessel, a model UT 704, which was the first design from the
Ulstein Group. Today, it has acquired a total of 28 vessels. Currently,
there are three vessels under construction.
Buying and selling tonnage in periods where it has been profitable to
do so has been a vital part of building today’s business. The Company’s
shares have traded on the Oslo Stock Exchange since 1988. It was fully
consolidated in 1993 when all activities were consolidated under one
entity. In 1998, Farstad Shipping increased its international efforts
through a joint venture with P&O, Australia.
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Farstad Shipping aims to be one of the leading operators of large,
modern anchor handling vessels (AHTS) and platform supply vessels
(PSV) world-wide.
The Company’s fleet is managed in a manner that reflects the
customer’s expectation for high quality. All vessels rate higher than the
minimum national and international requirements with respect to
safety and environmental regulations and standards. The fleet is
maintained through a program that is designed in accordance with
recommendations from manufacturers, classification companies and
authorities as well as the Company’s own experience.
The Company’s objective is to maintain a long-term charter strategy.
Current contracts make up 80% of activities in 1999 and 65% of
activities in 2000.
The Company’s fleet consists of 32 vessels. Of these, there are 14 PSV
vessels, 17 AHTS and an additional vessel designed for laying flexible
pipelines. Geographically, there are 18 vessels in the North Sea, 6 in
Brazil, 6 in Australia and 2 in the Far East. There is approximately 700
crew.
The Company’s activities are managed from Ålesund and Aberdeen,
with a total of 40 employees. P&O Maritime Services in Melbourne
manage vessels that are employed in Australia and the Far East.
There are currently 2,750 shareholders. The share price at the end of
the year was NOK 21.00, which values the Company at NOK 950
million.
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• Another good year economically.
• No fatal accidents.
• Good operational quality.
• More new long-term contracts.
• Good contract coverage for the Company’s fleet.
• Still a high level of demand in the North Sea.
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• Continued high contracting activity.
• Financial crises in the Far East and
the Latin America.
• Declining oil price.
• Falling demand in some regions at the end
of the year.
• High Norwegian interest level.
• Strong decrease in the price of the Company’s
shares.
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FARSTAD SHIPPING ASA - GROUP
PROFIT AND LOSS ACCOUNT (NOK mill.)
Operating income ex. sale of fixed assets
Profit on sale of fixed assets
Operating expenses
Operating profit before depreciation
Depreciation
Operating profit
Net financial items
Pre-tax profit
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1998
1997
1996
1995
1994
706.7
62.0
(347.6)
421.1
(118.9)
302.2
(59.9)
242.3
598.3
75.1
(275.0)
398.5
(124.5)
274.0
(33.6)
240.4
458.8
0.2
(242.5)
216.5
(120.1)
96.4
(37.9)
58.6
442.8
72.2
(220.0)
295.0
(116.9)
178.1
(35.2)
142.9
390.2
37.3
(191.3)
236.2
(104.1)
132.1
(26.7)
105.4
BALANCE SHEET
Current assets
Fixed assets
Total assets
Short-term liabilities
Long-term liabilities
Equity capital
281.4
2,087.7
2,369.1
133.1
1,063.9
1,172.1
259.3
1,709.2
1,968.5
114.3
877.3
976.9
273.6
1,319.8
1,593.4
66.0
813.9
713.5
311.8
1,271.6
1,583.5
56.1
822.1
705.3
266.9
1,218.6
1,485.5
87.5
795.3
602.7
133.4
148.3
369.5
167.6
145.0
368.3
197.5
207.7
180.0
238.1
255.8
248.1
171.9
179.4
191.6
LIQUIDITY
Liquid assets
Working capital (1)
Cash flow (2)
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2,369.1
1,172.1
49.5%
1,968.5
976.9
49.6%
1,593.4
713.5
44.8%
1,583.5
705.3
44.5%
1,485.5
602.7
40.6%
FLEET
Book value of vessels, interest in vessels
Mortgage debt
1,866.2
1,061.8
1,579.0
875.9
1,264.7
710.8
1,224.4
736.3
1,103.3
720.7
A
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(NOK)
Share capital
(NOK mill.)
Market price at 31.12
Market capitalisation (4)
(NOK mill.)
Share price high
Share price low
Earning per share including sales profit (5)
Earning per share excluding sales profit
Cash flow per share including sales profit (6)
Cash flow per share excluding sales profit
Dividend per share (7)
RISK-amount (8)
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(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
1997
1996
1995
1994
45.3
21.00
951.9
43.00
19.80
5.30
3.94
8.15
6.78
1.00
-1.00
45.3
42.00
1,903.8
50.50
24.00
5.30
3.65
8.12
6.41
1.00
-1.00
79.3
24.25
1,099.2
24.50
14.95
1.30
1.30
3.97
3.97
0.75
0.00
113.3
14.95
677.7
15.50
12.30
3.14
1.54
5.47
3.88
0.75
0.00
113.3
13.10
593.8
13.50
10.50
2.18
1.35
4.22
3.40
0.60
-0.23
250
Current assets - short-term liabilities.
Pre-tax profit - taxes paid + depreciation + change in revaluation of liabilities + losses on receivables.
Equity capital as a % of total assets.
Total share outstanding x share price.
Pre-tax profit - taxes paid, divided by average number of shares outstanding.
(2) divided by the average shares outstanding.
For 1995 and 1996 by write-downs of the share capital in 1996 and 1997.
01.01. of the year shown in the actual column.
OPERATING INCOME
CASH FLOW
(EXCL. PROFIT ON SALES)
(BEFORE TAX AND PROFIT ON SALES OF VESSELS)
mill. NOK
100
200
80
150
60
100
40
50
20
0
1. quarter
2. quarter
3. quarter
4. quarter
E
1998
DEFINITIONS:
CAPITAL
Total assets
Equity capital
Equity ratio (3)
H
0
mill. NOK
1. quarter
2. quarter
3. quarter
4. quarter
1993
1994
1995
1993
1994
1995
1996
1997
1998
1996
1997
1998
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Per Norvald Sperre (52),
Chairman of the Board
High Court lawyer.
Law degree from Oslo, 1972. Experience from banking etc. Established his own law firm
in 1977. Holds a number of Board appointments in industry and shipping.
Sverre A. Farstad (46),
Director
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Business degree - Heriot Watt University, Edinburgh, Scotland.
Managing Director of Farstad Shipping ASA. Chairman of the Board of Tyrholm &
Farstad AS. Various Board appointments and other positions in banking, insurance and
the Shipowners Association.
Bjørn Havnes (52),
Director
Engineering degree, University of Newcastle upon Tyne.
Associate Director in AS Toluma, Oslo. Various shipping experience from 1973, with
the last 15 years mainly being in offshore. Previously responsible for marketing in
Wilhelmsen Offshore Services (service vessels) and Wilh. Wilhelmsens rig division.
Bjarne Sælensminde (52),
Director
Business degree NHH, Bergen.
Underwriter, Regional Manager Vesta Forsikring AS, Marine & Energy Division.
Varied finance- and shipping background. Previously Director of A/S Investa’s shipping
and offshore section.
Sigmund Borgundvåg (60),
Director
Engineer/marine architect.
Design manager in the Ulstein Group since 1972. Designer of Ulstein’s UT 700 series
offshore service vessels.
Per Erik Dalen (45),
Director
Managing Director in MMC GROUP.
Managment experience from aviation, shipbuilding and manufacturing of equipment for
fishing industry. Various Board appointments.
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DEVELOPMENT 1998
Farstad Shipping ASA is pleased to announce that the financial results for
1998 are above expectations. The combination of having a majority of the
fleet on long-term contracts, yet some vessels available to reap the benefits
of a tight spot market, has given results that are on level with the record
year 1997. The Company’s international efforts continued in 1998. Only
30% of revenues in 1998 came from the Norwegian sector. Investments
that are complete as well as those investments that are in process put the
Company in an excellent position to meet future market changes. The
Board of Directors is satisfied with the development that took place in
1998.
RESULTS AND DIVIDEND
In 1998, Farstad Shipping achieved revenues of NOK 768.7 million,
including gains from the sale of vessels of NOK 62.0 million. The
corresponding numbers for 1997 were NOK 673.4 million and NOK 75.1
million, respectively. Net income before tax was NOK 242.3 million,
compared to NOK 240.4 million in 1997. Net cash flow for the concern
during this period was NOK 309.3 million, or NOK 6.82 per share. The
corresponding cash flow per share in 1997 was NOK 6.47.
Net finance costs totalled NOK 59.9 million (NOK 33.6 million). An
adjustment in the Company’s mortgage debt in USD caused an unrealised
currency loss of NOK 10.1 million (NOK 3.4 million).
Operating costs were NOK 347.6 (275.0 million). Operating margins
before depreciation and finance, excluding gains from the sale of vessels,
was NOK 359.1 million in 1998 (NOK 323.3 million). Ordinary
depreciation in 1998 totalled NOK 118.9 million (NOK 124.5 million).
The Company changed the depreciation schedule in 1998, extending the
useful life of the vessels from 20 to 25 years, which is standard in the
industry. With this change, 1998 earnings were boosted by NOK 30
million.
The Board will propose the following use of the parent company’s profits of
NOK 323,674,036
Charged to reserve funds
Dividend per share 1.00
NOK 278,344,666
NOK 45,329,370
*) Cash flow here defined as EBIT + depreciation + disagio (loss from adjusting the value of
debt in USD)
(NOK mill.)
400
200
0
92
93
94
95
Operating income
(before profit on sales
of vessels)
10
96
97
98
Cash flow
(before tax and profit on sale
of vessels)
(NOK)
8
6
4
9
2
0
92
93
94
Cash flow per share
(excl. profit on sales
of vessels)
95
96
97
98
Cash flow per share
(incl. profit on sales
of vessels)
FINANCING AND CAPITAL STRUCTURE
Interest earning short-term assets made up NOK 141.2 million at the end of
1998. Interest carrying mortgage debt made up NOK 1,061.8 million at the
end of 1998. Of the mortgage debt at the end of the year, 66% is
denominated in USD; the rest is in NOK. Debt denominated in USD is
serviced with revenues from long-term contracts that are paid in USD. In
1998, there was a mortgage debt reduction of NOK 155.7 million.
Equity totalled NOK 1,172.1 million at the end of 1998, equal to NOK
25.86 per share. At the end of the year, the Company received estimates on
the value of the fleet from 3 shipbrokers. These values give an adjusted
equity estimate of NOK 48.72 per share. The element of uncertainty
associated with these estimates is larger than in prior years.
ADMINISTRATION
The Company operates two independent administrative offices. The office
in Ålesund has 29 employees, the one in Aberdeen has 11 employees.
Together, these offices manage approximately 510 sailing crew. The P&O
Maritime Services, based in Australia, manage the operation of vessels in
the Asia/Pacific region.
In 1998, the compensation to the Board was NOK 730,000. Compensation
to the Managing Director was NOK 2,001,700, of which NOK 903,500 was
paid as bonus. Auditors fees are estimated at NOK 297,000, of which NOK
167,000 is for audits and NOK 130,000 is for consulting fees.
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SHAREHOLDER MATTERS
At the end of the year, the Company had 2,769 shareholders vs. 1,967 in
the previous year. There were 52 foreign shareholders owning 4.9% of
shares outstanding. Please see page 28 for listing of shareholders with
more than 20% ownership, in addition to an overview of Management and
Board members. No stock options have been given to the Board or to the
Management. The share price has declined from NOK 42.00 to NOK 21.00
during 1998. A NOK 1.00 dividend per share has been proposed for 1998.
The Company’s Board has the authority to raise capital by issuing shares of
up to 6 million shares before the shareholders’ pre-emptive rights come
into play. This authority is valid until the Annual Meeting 1999. At the
supplementary Annual Meeting on 17 December, a decision was made to
give the Board authority to buy back up to 10% of outstanding shares.
This authority is valid for 18 months from 01.01.99.
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The King and Queen of Norway visits Farstad Shipping ASA, for a
presentation of Maritime Nordvest.
The signing of the contracts with Norsk Hydro
The Naming Seremony of Far Senior
THE FLEET
On 4 June 1998, Far Senior (AHTS) was delivered by Langsten Slip &
Båtbyggeri AS. The reconstruction of Lochnagar (PSV) to a pipe-laying
vessel for flexible pipes was completed in the beginning of September. The
vessel began its employment contract with DSND on 5 August 1998. Far
Grip commenced its 5 year contract with Norsk Hydro in the middle of
August. In addition, Far Scandia accepted an extension of its contract with
Norsk Hydro by another 5 years. Far Sun extended its contract with
Amoco N. by another 5-year period. Far Sleipner, located in Brazil,
extended its contract by 8 years from October 1998.
On January 29, the anchor handling vessels Far Sea and Far Minara were
sold to P/R International Offshore Services ANS (IOS), a joint venture in
which Farstad Shipping and P&O, Australia, have a 50/50 interest. In the
beginning of October, IOS purchased two PSV vessels from Maersk. The
vessels, Lady Elizabeth and Lady Kari-Ann, continued their 2 and 5-year
current contracts with Exxon in Australia. Lady Sandra, a new AHTS
vessel, started on a bare-boat contract with IOS on 29 October.
In November 1997, an order was issued to Langsten Slip & Båtbyggeri AS,
for the construction of an AHTS vessel, model UT-741. The vessel is to be
delivered in May/June 1999. The vessel is going to be employed on a
contract with EMC. In 1998, Norsk Hydro awarded Farstad Shipping with
a 10-year contract for a large PSV vessel. To meet specifications in this
contract, an order was placed with Brattvaag Skipsverft AS for delivery in
July 1999. In addition, the Company has another AHTS vessel under
construction for delivery in February 2000. This vessel is tied to an 8-year
contract with Petrobas in Brazil. In January and March 1999, Kværner
Govan delivered two new PSV vessels. Both vessels were chartered under
5-year contracts immediately following delivery.
After the delivery of all current orders, the Farstad Fleet will be composed
of 25 vessels. In addition, there are 9 vessels owned through P/R
International Offshore Services ANS (IOS), and one vessel chartered under
a bare-boat contract with IOS.
HEALTH, SAFETY AND ENVIRONMENT
Farstad Shipping has maintained its strong involvement in the awareness of
health, safety and environmental issues aboard the vessels and on its land
based operations.
The Company’s vessels are managed according to our customers’ quality
expectations, and are maintained on a level that surpasses the minimum
national and international requirements with respect to safety and
environmental regulations. The vessels undergo a planned maintenance
program set up in accordance with recommendations by manufacturers as
well as classification companies, authorities as well as the Company’s own
experience.
In an effort to focus on improvements on Health, Safety and
Environmental issues, extensive training took place in 1998. Activities
include the reporting of unwanted events (including potential accidents), a
thorough investigation of the circumstances, and a discussion of
experiences that involves causes, costs and effective steps to take to prevent
such events from recurring. This is an effective tool, and one that gives the
Company an opportunity to limit losses and improve operational safety. In
addition, it encourages the crew to report hazards, which in turn can help
highlight the hazards. Because the reporting now is performed in a more
objective manner, the "individual at fault" risk is eliminated, and the sailing
crew has a better incentive to report possible hazards to people, equipment
and machinery.
The Company initiated a project in 1998 to inspect equipment and systems
to gain an insight on the Y2K problem. Today, approximately 85% of all
the equipment has been inspected, and a small number of problem areas
have been identified. All equipment is scheduled for inspection before the
arrival of critical dates.
Through DNV, the Company has certified the operations of vessels and
land-based operations to the quality standard 9002 and the safety standard
ISM, both on a voluntary basis. The Board believes that the significant
efforts on HSE as well as technical improvements will strengthen the
Company’s competitive edge.
Operations in 1998 have not caused any serious personal injury or material
damage, nor have they caused any substantial pollution of the environment. The Board believes that the workplace aboard the vessels as well as
onshore is healthy.
THE MARKET IN 1998
The North Sea
The Norwegian and British sector remains the most important markets for
Farstad Shipping. About 65% of the Company’s freight revenues came from
these markets.
The market balance in the North Sea improved in 1998 for the sixth
consecutive year. Despite many newly built vessels and vessels coming in
from other markets, the increase in the number of vessels has still remained
limited. The explanation for this is that vessels still depart from the North
Sea market to serve other markets. This is especially true for large AHTS
vessels, many of which have left the North Sea for markets in South
America, West Africa and the Far East. An increase in demand for the
North Sea fleet, combined with a limited inflow of vessels, contributed to
an average utilisation of 95% in 1998. The utilisation was 94% in 1997,
and 92% in 1996. The 95% in 1998 was a higher than expected utilisation
rate. Increased pipe-laying and construction activities contributed to the
high demand in the second half of the year.
Demand associated with operations and maintenance at existing
installations, as well as field construction and pipe-laying activities, make
up an increasing share of the market. These activities accounted for 90%
of total demand in 1998. Demand for supply vessels related to exploration
activities has steadily declined. In 1998, it made up only 10% of total
demand.
The booming market in recent years has led to a substantial increase of new
vessels. During 1998, about 30 new vessels entered the market. At the end
of the year, approximately 45 additional vessels were ordered or were
under construction. This will have an impact on the North Sea market.
Brazil
Brazil will remain one of the pioneers of oil exploration in deep waters. In
1998, Petrobras started producing oil at 1,853 metres depth, a world
record.
About 20% of the Company’s freight revenues in 1998 came from vessels
employed in Brazil. On contracts during the entire year, Petrobras
employed the AHTS vessels Far Centurion, Far Crusader, Far Sailor, Far
Sea and in addition, the PSV vessel Far Sleipner. Following a complete
conversion in Croatia, Lochnagar started its 8-year contract with DSND
(Søndenfjeldske) in August. The vessel is to be used by Petrobras for laying
flexible oil pipelines.
Australia and South East Asia
This region contributed with 15% of the Company’s freight revenues in
1998. Farstad Shipping and P&O, Australia, established a 50/50 joint
venture, "IOS", at the end of 1997. At the end of 1998, the IOS fleet
consisted of 2 PSV vessels and 8 AHTS vessels. One of the AHTS vessels,
built in 1998, is chartered on a 5-year bare-boat contract. Eight of the IOS
vessels are employed in the Far East/Australia, one is in Brazil, and one is
located in the North Sea.
P&O Maritime Services in Australia manages the vessels that are located in
the Asia-Pacific region. Farstad Shipping manages vessels in the Atlantic
region, including the North Sea.
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MARKET OUTLOOK
Historically, there is a high correlation between the oil
companies’ profits and the level of activity that they put
forth with respect to exploration and investments. Reduced
revenues and shrinking margins as a result of the current
low oil price has led to cuts in exploration budgets for 1999.
However, due to the low share of the total demand that
exploration activities represent in the North Sea, this
reduction in activities will have a relatively lesser impact on
demand for supply vessels in the North Sea market than in
other markets.
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The number of newly constructed vessels that will enter the
market is going to heavily influence the market balance in
1999. Additionally, there will be some impact by the
reduction in exploration activities by the oil companies, as a
result of the low oil price. The markets outside the North
Sea will see a lower activity level than previously anticipated
by this reduction. The demand for supply vessels in the
markets in Brazil, the Far East, Australia and West Africa
can not be expected to increase in the near future. The
degree of utilisation in the North Sea is expected to decline
in the times ahead, which in turn will have a negative effect
on the rates.
A substantial portion of the Farstad Fleet, estimated to be
80%, was at the beginning of 1999 employed under existing
charter contracts. Based on today’s contracts, the fleet is
approximately 65% covered for the year 2000.
TAX LAW REFORM
In 1996, the Norwegian Parliament, the "Storting", passed a
new tax law for Norwegian shipping companies. The new
reform, which is based on a draw principle, gives the
Norwegian shipping industry a tax law that is fair compared
to tax laws in many of the countries it competes with.
Farstad Shipping made a decision to make the necessary
changes to conform to the new law. These changes were
implemented in 1997. In our opinion, the system has
performed in accordance with the intentions for which it
was designed.
REIMBURSEMENT FOR SAILORS
The arrangement was implemented in 1993, with the
intention of strengthening the NOR-registered fleet’s
competitive edge as well as function as a vehicle to increase
recruitment of Norwegian sailors. The result has become
2,200 additional sailors. The recruitment work has borne
fruits in the form of increased enrolment into maritime
learning institutions, in fact the best in 25 years! All qualified
applicants have received apprenticeships. During the last
few years, Farstad Shipping has had a recruitment program
with an annual budget of NOK 5 million, which is about
50% of the annual reimbursement received.
Unfortunately, since the new laws came into effect, at the
annual budget debate in the Storting, doubt has been cast
over the stability of the laws and regulations governing the
shipping industry. Subsequently, in 1998, the reimbursement
program was cut from 20% to 12%.
To succeed in an industry that is as capital intensive as the
shipping industry, visibility of laws and regulations is
crucial. This is true for the reimbursement program as well
as tax regulations.
Ålesund, 3 March 1999
The Board of Farstad Shipping ASA
Sverre A. Farstad
Per Erik Dalen
Per Norvald Sperre
Chairman
Bjørn Havnes
Sigmund Borgundvåg
Bjarne Sælensminde
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PARENT COMPANY
1997
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1998
444,857
5,543
715,491
28,250
315,910
1,165,891
344,160
Total operating income
(109,181)
(76,564)
(32,417)
4
(34,974)
Operating expenses:
Crewing expenses vessels
Other operating expenses vessels
Administration
(218,162)
(34,970)
Total operating expenses
947,729
309,190
Operating profit before depreciation
854,802
(1,989)
307,201
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FARSTAD SHIPPING ASA (NOK 1000)
Operating income:
Freight income
Other income
(92,927)
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GROUP
NOTE
1998
1997
1996
1
703,052
3,648
62,005
597,376
907
75,117
456,615
2,218
203
768,705
673,400
459,036
(184,671)
(122,528)
(40,430)
(142,920)
(99,644)
(32,389)
(121,256)
(93,138)
(28,099)
(347,629)
(274,953)
(242,493)
421,076
398,447
216,543
12 17
12 16
Depreciation
7
(118,893)
(124,470)
(120,137)
Operating result
18
302,183
273,977
96,406
3
3
16,306
(76,181)
22,076
(55,634)
17,123
(54,976)
17,986
(50,193)
16,878
(405)
Financial items:
Financial income
Financial expenses
(32,207)
16,473
Net financial items
(59,875)
(33,558)
(37,853)
822,595
323,674
Pre-tax profit
242,308
240,419
58,553
101,693
-
102,361
(16,599)
924,288
323,674
240,464
342,780
41,954
5.30
5.30
1.30
Taxes
10
Profit of the year
2
(1,844)
Which is proposed to be allocated as follows:
120,750
758,209
45,329
278,345
45,329
924,288
323,674
18.15
7.14
Transferred to legal reserve
Transferred from retransfer reserve
Transferred to general reserve
Allocated to dividends
Profit per share (NOK)
13
B
14
A
L
A
N
C
E
PARENT COMPANY
1997
ASSETS
1998
Current assets:
Bank deposits
Other securities
Accounts receivables, freight income
Other short-term receivables
S
H
E
E
T
GROUP
NOTE
1998
1997
1996
112,175
21,257
119,189
28,817
156,414
11,171
58,149
33,561
187,196
10,318
52,740
23,395
281,438
259,295
273,649
650
675
6,303
206,430
42,591
1,830,998
425
275
7,879
114,610
36,589
1,549,407
200
359
9,455
39,432
1,270,321
116,911
11,171
27,991
44,261
62,516
21,257
39,003
9,326
200,334
132,102
1,042,136
878,652
892
7,879
14,434
242,563
1,473,586
207,156
1,425
6,303
1,710
Fixed assets:
Shares
Receivables Farstad Supply
Other long-term receivables
Rate equalisation reserve
Goodwill
Contracts newbuildings
Deferred maintenance cost
Vessels etc.
2,186,556
1,690,180
Total fixed assets
2,087,647
1,709,185
1,319,767
2,386,890
1,822,282
Total assets
2,369,085
1,968,480
1,593,416
5
6
4
4
Total current assets
6
6
7
7 11
2 7
B
A
L
A
N
C
E
PARENT COMPANY
1997
LIABILITIES AND EQUITY
1998
14,463
60,989
45,329
8,154
63,423
45,329
Short-term liabilities:
Debt to suppliers
Other short-term liabilities
Allocated to dividends
120,781
116,906
Total short-term liabilities
S
H
E
E
T
GROUP
NOTE
8
1998
1997
1996
37,374
50,355
45,329
25,347
43,582
45,329
23,146
42,813
-
133,058
114,258
65,959
2,068
1,061,843
-
1,411
875,937
-
649
710,788
102,502
1,063,911
877,348
813,939
45,329
216,705
910,082
45,329
217,544
714,001
79,326
90,988
543,204
1,411
708,606
-
2,068
-
Long-term liabilities:
Other long-term liabilities
Interest-bearing mortgage debt
Deferred tax
710,017
2,068
Total long-term liabilities
45,329
211,509
1,299,254
45,329
198,396
1,459,583
Equity capital:
Share capital (45.329.370 of NOK 1.00)
Legal reserve
General reserve
1,556,092
1,703,308
Total equity capital
1,172,116
976,874
713,518
2,386,890
1,822,282
Total liabilities and equity
2,369,085
1,968,480
1,593,416
719,063
125
0
865,887
1,078,809
246,629
886,793
171,244
727,620
96,557
Mortgages
Guarantee liabilities
12
13
10
9
9
15
15
15
C
A
S
PARENT COMPANY
1997
H
F
L
O W
S
T A T
FARSTAD SHIPPING ASA (NOK 1000 )
822,595
(715,491)
92,927
11,528
24,677
(10,360)
323,674
(315,910)
1,989
(11,012)
(6,310)
404
1,726
(46,432)
657
37,369
CASH FLOW FROM
OPERATING ACTIVITY:
Pre-tax profit
Paid taxes this period
Ordinary depreciations
Periodical maintenance costs
Changes in debtors
Changes in creditors
Discrepancies pension costs/payments
from pension funds
Unrealised foreign exchange loss/(gain)
Changes in prepayments and accruals
181,574
30,457
Net cash flow from operation activity
1.582,975
(276,220)
571,740
(956)
207,030
(1.040,145)
(870,198)
-
(431,725)
671,638
(400)
(396,558)
M
E
N
T
GROUP
1998
16
E
1998
1997
1996
242,308
(348)
(62,005)
118,893
24,069
(61,040)
12,027
240,419
(109)
(75,117)
124,470
16,796
(5,409)
2,201
58,553
(306)
(203)
120,137
2,025
7,238
657
10,145
9,330
404
3,394
(14,226)
465
1,299
(1,800)
A 294,036
CASH FLOW FROM
INVESTMENT ACTIVITY:
Sale of fixed assets (sales price)
Investments in fixed assets/
contracts newbuildings
Payment from sales of shares
Purchase of shares
Changes in long-term receivables
Other investments
292,823
187,408
120,139
(578,136)
127,415
(578,886)
1,451
(450,135)
(225)
(400)
(500)
(100)
810,297
Net cash flow from investment activity
B (458,622)
(451,971)
(448,784)
343,753
(160,291)
(33,997)
(708,606)
(131,128)
(45,329)
-
CASH FLOW FROM
FINANCE ACTIVITY:
New long-term debt
Repayment of debt
Result 1997, transferred to subsidiaries
Dividends
Repayment of equity capital
331,506
(155,744)
(45,329)
-
326,446
(163,230)
(33,997)
387,543
(132,792)
(33,997)
149,465
(885,063)
Net cash flow from finance activity
129,219
220,754
(65,519)
(44,309)
Changes in liquidity over the year
(34,153)
(29,929)
(40,622)
193,601
128,082
Liquid assets at 01.01
167,585
197,514
238,136
128,082
83,773
Liquid assets at 31.12
133,432
167,585
197,514
C 130,433
A + B + C
A
C
C
O
U
N
T
I
N
G
P
R
I
N
C
I
P
L
E
S
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the parent company Farstad Shipping ASA and the
subsidiaries specified in note 6. In the consolidated statements, all inter-company balances and transactions
are eliminated. The cost of acquiring share in subsidiaries is eliminated against equity in the subsidiary at
the time of acquisition or at the time of establishment. The cost method is used for this elimination.
The profit and loss statement (P&L) for a foreign subsidiary are translated to NOK at average exchange
rates for the year. The balance sheet is translated to NOK according to the exchange rate at the end of the
year.
OWNERSHIP OF THE GENERAL PARTNERSHIP (ANS)
Shares in the this general company, see note 2, are entered using the principle of proportional consolidation
(gross method). Accordingly, Farstad Shipping’s share of the parent company’s assets, debts and margins
are included in Farstad Shipping’s financial statements, under their respective accounts. Balance sheet items
and P&L items between the general company and Farstad Shipping are eliminated proportionally to the
extent of Farstad Shipping share of ownership in this company.
SALE OF VESSELS
Profit from sale of vessels are included in operating income, due to the perception that these transactions
are part of the regular business operations.
17
DEPRECIATION OF VESSELS
Vessels and portion of vessels in ANS are valued in the consolidated balance sheet at cost, less accumulated
depreciation. The cost of the vessels or the portion of the vessels in ANS follows a straight-line
depreciation schedule over 25 years. This principle was changed in 1998. Prior years’ depreciation expense
of the fleet was based on a useful life of 20 years from the time of possession/acquisition. The effect that
this change has for the year 1998 makes for a reduction in depreciation expense of NOK 30 million
compared to the previous depreciation schedule. Smaller investments, alterations and investments
necessitated by new charter contracts are normally depreciated in a straight line over 5 years, unless there
are conditions that dictate a longer useful life of that particular investment.
GOODWILL
With the acquisition of the management companies Sverre Farstad & Co AS and Farstad UK Ltd. in 1993,
the goodwill value of NOK 15.8 million has been added to the balance sheet. This will be depreciated by
10% annually, in that the aquisition is anticipated to have value for the Company for at least ten years.
CONSTRUCTION CONTRACTS
Paid instalments for newbuildings are entered as fixed assets as each payment take place. Investments that
are not included in the contract, such as inspection costs, and other related costs and rebates during
construction, will be recorded as fixed assets. For details, see note 11.
PENSION COSTS AND OBLIGATIONS
The Company is financing its pension obligations to 234 employees through two group pension plans. The
Company has separate arrangements with five individuals, for whom the Company pays the annual
premiums. These premiums are recorded as pension costs as they incur.
The net present value of the future obligations of the group pension plans is calculated based on insurance
accounting principles. The estimated obligation for the employees on shore is recorded as a debt on the
A
C
C
O
U
N
T
I
N
G
P
R
I
N
C
I
P
L
E
balance sheet. The current year’s change in net pension obligation then becomes a pension cost in the
financial statements. Estimates of the pension obligation to the sailing crew currently indicate overfinancing. This is not included on the balance sheet. For details, please see note 12.
MORTGAGE DEBT
Mortgage debt for the fleet, including the first year’s payment of principal, is recorded as long-term debt.
For a detailed payment plan, please see note 13.
MAINTENANCE COSTS
Periodic maintenance is capitalized, and then gets charged to operating costs during the period until the
next periodic maintenance is due; normally it is a 30-month cycle. Upon delivery of newbuildings, a portion
of the cost of the vessel is valued as periodic maintenance. If a vessel is sold, the periodic maintenance cost
on the balance sheet is deducted from the gains on the sale.
FOREIGN EXCHANGE
Entries are recorded according to the rates at the time of transaction or at the rate of a forward exchange
contract when currency value have been secured. Current assets and short-term debts are valued at rates on
31.12.98. Long term debt is valued at the current rate at the time that the loan was established, or the
current rate at the end of the year, whichever is higher. Any increase in long term debt due to a change in
exchange rates is charged as an expense.
18
TAX COST IN CONNECTION WITH THE NEW TAX REGIME FOR SHIPPING COMPANIES.
In 1996, a new tax regime for shipping companies came into effect in Norway. The main principle is that
no operating income tax has to be paid as long as a company conforms to the tax regime. Tax must be paid
on payments made by a company that is within the regime, or when a company withdraws from the regime.
The Company made steps to include its entire fleet in the regime as of 1997. Within the regime, the
Company has to pay a tax based on the tonnage, which is classified as an operating expense. For Farstad
Shipping, this expense is insignificant.
Companies within the system can only own vessels and/or companies that own vessels. The operation of
vessels must be hired from companies that are outside the regime, and at market prices. For the receiving
company, this is taxable income.
The net present value of deferred tax associated with the positive and temporary differences in tax payments
which is transferred to companies that conform with the new tax regime, is considered insignificant; the
reason is that the taxable income that these differences represent is not expected to be taxable in the
foreseeable future. This judgement is based on the Company’s dividend policy, cash reserves and the freely
taxable equity of the part of the Company that remains outside the tax regime. The judgement is also based
on the Company’s intention that by conforming to the tax law, the change is a long-term commitment, and
that the Company intends to maintain its activities.
Estimated tax cost includes payable taxes to foreign tax authorities. For details, please see note 10.
CASH FLOW STATEMENT
The Company uses the so-called indirect model when presenting its cash flow statement. Bank deposits and
other deposits are included in current assets. As mentioned in note 15, there is liability associated with a
portion of this amount.
S
N
N OT E
1
O T E S
( N O K
1 0 0 0 )
P RO F I T O N S A L E O F F I X E D A S S E T S
Vessels etc.
Salesprice
Book value
Deferred
maintenance
Profit
571,334
270
241,026
233
14,435
-
315,873
37
Sale of 5 vessels to Farstad Supply
Other fixed assets
Total profit parent company
315,910
Far Minara (50% share)
46,036
Far Sea
(50% share)
73,714
Other fixed assets
119
Profit-elimination from sale of vessels within the Group
13,754
42,464
58
385
1,240
-
31,897
30,010
61
(315,873)
Total profit group
62,005
In order to adapt to the new tax regime for Norwegian shipping companies, vessels have been sold to subsidiaries to
market values. The last 5 vessels were transferred at 01.01.98.
N OT E
2
N OT E
3
N OT E
4
I N T E R E S T S I N G E N E R A L PA RT N E R S H I P
Farstad Shipping’s 50% participation in P/R International Offshore Services ANS is included in the Group figures as follows:
Pre-tax
profit
Tax
Profit
Current
assets
Vessels and
def. maint.
Short-term
debt
Long-term
debt
22,722
(1,696)
21,026
42,806
332,169
12,260
211,774
FINANCIAL ITEMS
Parent Company
1997
Farstad Shipping ASA
1998
7,083
502
296
9,426
679
17,986
3,670
516
11,717
476
499
16,878
38,466
1,781
8,220
1,726
50,193
21
384
405
19
Group
1998
1997
Financial income
Interest income from bank deposits
Dividends received
Interest income from subsidiaries
Agio, realised
Other financial income
Total financial income
7,905
516
7,382
503
16,306
9,070
502
11,923
581
22,076
Financial expenses
Interest on mortgage loans
Other financial expenses
Disagio, realised
Disagio, unrealised
Total financial expenses
57,972
970
7,094
10,145
76,181
41,369
2,199
8,672
3,394
55,634
OT H E R S H O RT- T E R M R E C E I VA B L E S
Parent Company
1997
1998
786
1,280
1,389
30,139
10,667
44,261
537
1,167
1,212
177
6,234
9,327
Bunker and stock of lubrication oil
Loans to employees
Prepaid costs
Receivables from Group Companies
Other receivables and interest earned
Group
1998
1997
3,022
1,167
5,065
19,563
28,817
4,164
1,290
3,682
24,425
33,561
All receivables are valued at par and are considered to be collectable.
It has not been found necessary to make provisions for possible losses on claims.
N
N OT E
5
N OT E
6
O T E S
( N O K
1 0 0 0 )
BANK DEPOSITS
Taxes owed on behalf of employees, NOK 4,555, are comitted resourced deposited into seperate account, but are
included in bank deposits. See note 15 concerning bank deposits and collateral.
SHARES IN SUBSIDIARIES AND OTHER SHARES
Companies
Shares:
Sparebanken Møre
Kreditbanken ASA
Ulstein Holding ASA
Solstad Offshore ASA
Total shares included in other securities
Shares in subsidiaries:
Farstad Shipping Ltd.
Farstad Supply AS
Total shares in subsidiaries:
Sundry shares
Total shares under fixed assets
Shares owned by Farstad Supply AS:
Farstad International AS
Sharecapital
Total no.
of shares
Share
in %
Par
value
Book
value
552,615
163,520
216,620
71,588
84,600
84,200
6,300
10,000
1.53
1.03
0.03
0.03
8,460
1,684
63
20
11,389
2,315
504
281
14,489
GBP 5.000
1,471,245
5.000
1,471,245
100
100
63
1,471,245
1,471,308
650
1,471,958
1,691
1,471,245
1,472,936
650
1,473,586
50
50
100
50
50
The parent company’s receivables on Farstad Supply, amounting to NOK 207,156, arose through the sale of vessels to the
new shipowning company within the tax regime for Norwegian shipping companies.
The receivables bear interest at market interest rates.
20
N OT E
7
V E S S E L S A N D OT H E R O P E R AT I N G A S S E T S ( G RO U P )
Goodwill(10%)
Contracts on vessels(0%)
Cars (20-25%)
Other fixed assets (2-25%)
Directly owned vessels
General partnership (ANS)
Total vessels etc.
Total operating assets
Acquisition
cost at 1.1.
Additions
in the year
Disposal
in the year
Accumulated
depreciation
Book value
at 31.12
Ordinary
depreciation
15,809
114,610
1,958
7,943
1,968,511
214,602
2,193,014
2,323,433
0
321,566
1,298
991
373,740
175,624
551,653
873,219
0
229,746
673
67
192,061
0
192,801
422,547
9.506
0
1,220
2,877
651,094
65,679
720,869
730,375
6.303
206,430
1,363
5,992
1,499,095
324,548
1,830,998
2,043,731
1,576
0
722
609
90,444
25,542
117,317
118,893
Contracts of a vessel in a yard implies that advance payment is included in that year’s addition under contracts. When
completed, the value of that vessel is included in that year’s disposal under contracts and the cost price of the vessel
is included. Sale of vessels to the general partnership will give a disposal at the line for directly owned vessels and our share
will be included as additions to the line for ANS.
Below, the investments are only included as contracts in order not to make double entries.
INVESTMENTS IN AND SALE OF FIXED ASSETS (SALES PRICE) DURING THE PAST 5 YEARS: (NOK mill.)
1998
1997
1996
1995
Purchase Sale Purchase Sale Purchase Sale Purchase
Cars
1.3 0.4
0.9 0.5
1.4
1.4
0.3
Goodwill
Other operating assets
1.0
1.8
1.3
0.1
0.3
Directly owned vessels
144.0 118.5
54.1 127.7
33.5
8.9
Interest in vessels in partnership
79.6
214.6
138.7
Newbuildings
321.6
281.2
132.4
142.5
Total for the Group
547.5 118.9
552.6 128.2
168.6
1.5
290.7
1994
Sale Purchase Sale
0.2
1.1
0.5
0.1
0.1
4.3
0.4
64.4
0.7 47.9
268.8
0.3
20.0
64.7
295.0 49.1
N
N OT E
9
Parent Company
1997
1998
14,815
5,071
5,191
10,457
25,321
134
60,989
18,004
4,455
40,786
178
63,423
Group
Tax deductions, holiday pay, VAT, etc.
Deferred income recognition of option premiums
Estimated taxes payable
Accrued expenses
Accrued interest on mortgage debt
Liabilities to group companies
Other short-term liabilities
Date
01.01.98
Number of shares
1998
1997
18,015
1,644
6,914
16,966
6,816
50,355
14,815
5,071
171
7,550
10,856
5,119
43,582
Share capital Legal reserve
45,329,370
45,329
Result 1997, transferred to Farstad Supply
From this years profit
Total Parent Company
10
1 0 0 0 )
D E V E L O P M E N T I N T H E C O M PA N Y ’ S S H A R E C A P I TA L ,
L E G A L R E S E RV E A N D G E N E R A L R E S E RV E ( P A R E N T C O M P A N Y )
01.01.98
31.12.98
N OT E
( N O K
OT H E R S H O RT- T E R M L I A B I L I T I E S
8
N OT E
O T E S
45,329,370
General reserve
211,509
1,299,254
(13,113)
45,329
(118,016)
278,345
198,396
1,459,583
21
TA X S I T UAT I O N
Parent Company
1997
822,595
1,750
(686,612)
(131,128)
404
347,445
124,985
(470,961)
(8,478)
0
1998
323,674
1,458
(315,873)
-
657
1,571
(11,487)
0
Group
1998
1997
Calculation of taxable profit:
Operating income before taxes
Permanent discrepancies
Profit sale of vessels within the Group
Operating result transferred to company
within the new tax regime
Changes in temporary discrepancies related to:
Current assets / short-term liabilities
Fixed assets / long-term liabilities
Income from profit and loss account
Reversed temporary discrepancies due to
adapting the new tax regime
Reversed from correction income
Taxable profit
(1,410)
8,028
(1,072)
(13,659)
(19,423)
(2,068)
6,457
(1,587)
(13,659)
(7,935)
Calculation of deferred tax. Specification of discrepancies:
Current assets / short-term liabilities
Fixed assets
Unused dividend tax credit
Loss carried forward
Correction income
(2,068)
6,457
(1,587)
(13,659)
(7,935)
(1,410)
8,028
(1,072)
(13,659)
(19,423)
(27,536)
(18,792)
Calculation base for deferred taxes
(18,792)
(27,536)
0
0
0
0
Deferred tax
(101,693)
-
Specification of taxes in profit and loss account:
Taxes payable abroad
This year’s change in deferred taxes
1,844
-
141
(102,502)
(101,693)
0
Total tax costs
1,844
(102,361)
N
O T E S
( N O K
1 0 0 0 )
N OT E
C O N T R AC T S N E W BU I L D I N G S / C O N V E R S I O N S
11
The Company has ordered 5 newbuildings to be delivered January 1999, March 1999, May 1999, July 1999 and
February 2000. Total investment is approximatly NOK 1,200,000, whereof NOK 206,430 is capitalized as fixed
assets per 31.12.98 for paid instalments to yards, inspection costs and owners supplies. Long-term financing is
expected to be 70-80% of the investments.
N OT E
PENSIONS
12
For the accounting purposes, the Company’s pension plan is treated in accordance with standard for pension
expenses. See further detals under accounting principles on page 17.
The Company’s net pension liabilities, can be specified as follows, and are classified in the balance sheet under
long-term debt:
31.12.97
31.12.98
Insured pension rights earned
8,915
6,811
Non-insured pension rights earned
104
447
Pension funds (actual value)
(6,309)
(5,421)
Estimated contribution to social security
241
125
Actuarial corrections
(883)
(551)
Net pension liabilities 1 )
2,068
1,411
7.0%
8.0%
3.3%
2.5%
7.0%
8.0%
3.3%
2.5%
55
1,239
1,453
658
3,405
107
1,541
1,285
614
3,547
Calculations are based on the following financial and actuarial assumptions:
Discount rate
Expected return on pension funds
Annual expected wage growth and G adjustment
Adjusment in pension paid
This year’s net pension cost is calculated as follows:
22
Pension payment from operations
Pension cost from supplemental schemes
Pension cost, sailing crew, from operations 1 )
Changes in net pension liabilities
Total
1)
Actuarial calculations for the sailing crew show that the fund is overfinanced by NOK 2,967.
The Company has decided not to include this element in the balance sheet.
N OT E
I N T E R E S T- B E A R I N G D E B T
13
Net interest-bearing debt per 31.12:
Interest-bearing debt
Interest-bearing current assets
Net interest-bearing debt
Instalment schedule*)
1998
1,061,843
(141,241)
920,602
1999
174,900
2000
187,300
2001
175,100
1997
875,937
(176,458)
699,479
2002
175,100
2003
162,600
*) including calculated instalment for new debt for the financing of the newbuildings..
The interest-bearing mortgage debt is in its entirety tied to financing the fleet. Of the total debt on 31.12.98, 66% of
this is denominated in USD, and the rest is in NOK. Two newbuildings, delivered in January and March 1999 are
financed in GBP. All debt denominated in NOK has a floating interest rate. On 31.12.98, arrangements were made to
fix the interest rate for 5 years on USD 41.7 million. The interest rate is calculated with the basis in the market rate
(NIBOR/LIBOR), plus a fixed margin charged by the banks. The margins varies between loans. The interest rate has
recently been renewed for shorter periods, from one to three months.
The mortgage debt associated with the individual vessels is shown on the fleet overview on page 47. In 1999 and
2000, when the Company takes delivery of additional 5 vessels that are currently on order, mortgage debt will
increase by NOK 960 million.
N
N OT E
14
O T E S
( N O K
1 0 0 0 )
O F F - B A L A N C E F I N A N C I A L I N S T RU M E N T S
In order to secure the currency exchange rate of short-term receivables and freight income in foreign currency, at 31.12.98
the Company has entered into the follwing agreements:
a)
Forward agreements for an amount of GBP 33.3 million due from January 1999 to May 2003.
Forward rates varies between NOK 11.50 and 13.10.
b)
Forward agreements for an amount of USD 2.0 million due June 2000 and December 2000.
Forward rate NOK 8.17.
To secure the planned financing of a newbuilding in USD the Company has per 31.12.98 entered into forward agreements
to buy USD 18.0 million, due date 20.02.00, at an average forward rate of NOK 7.75. In 1999, this contract amount has
been increase with USD 11.0 million at same average forward rate.
N OT E
15
M O RT G AG E S , G UA R A N T E E L I A B I L I T I E S
Parent Company
Group
0
1,078,809
0
7,460
113,656
1,823,643
1,944,759
Mortgages:
Debt and accrued interest secured by mortgages
Security includes:
Bank deposits
Account receivables
Vessels, at book value
In addition the Company has assigned future freight income, and any insurance payment as security for debt.
Guarantee:
Guarantee liabilities not included in the balance sheet
865,887
246,629
Mortgage debt has been transferred from Farstad Shipping to Farstad Supply as a part of the adaptation to the new tax
regime for Shipping Companies. Farstad Shipping remains as guarantor for this debt, amounting to NOK 865,887 per
31.12.98.
N OT E
16
N OT E
17
C O N N E C T E D C O M PA N I E S
Tyrholm & Farstad AS, Ålesund, the Company’s largest shareholder, is defined as a connected company.
On 01.01.93 the Company signed a five-year agreement with Tyrholm & Farstad AS with regard to office
accommodation and the use of computer and other services at the head office in Ålesund at an annual cost of
NOK 3,680. The rent agreement was at 01.01.98 extended with another five years, and the agreement for other
services was renegotiated 01.03.99 for 3 years. The Company has no receivables or liabilities to Tyrholm & Farstad
at 31.12.98.
G OV E R N M E N T G R A N T S
Parent Company
1997
1998
12,371
10,589
51
12,422
534
11,123
201
-
12,623
11,123
Government refund scheme to secure
employment of Norwegian seamen
Refund scheme for temporary posistions
for seamen during training
Government grants for reduction of crew costs
Contracting grant for rebuilding of ships
(reduction of capitalized value)
Total government grants
Group
1998
1997
10,589
12,525
534
11,123
51
12,576
-
201
11,123
12,777
23
N
N OT E
18
O T E S
( N O K
1 0 0 0 )
R E S U LT S O RT E D B Y BU S I N E S S S E G M E N T S
AHTS
PSV
Total vessels
Norwegian sector
British sector
Brazil
Far East/Australia
Total sectors
Freight
income
Operating
costs
Operating
profit I(EBDIT)
Depreciation
Operating
profit II(EBIT)
Book value
vessels
421,587
281,465
703,052
159,163
293,478
154,037
96,374
703,052
186,942
160,687
347,629
75,149
133,627
87,123
51,730
347,629
234,645
120,778
355,423
84,014
159,851
66,914
44,644
355,423
65,627
50,359
115,986
30,430
37,301
26,469
21,787
115,986
169,018
70,419
239,437
53,584
122,550
40,445
22,857
239,437
1,099,431
766,804
1,866,235
458,105
658,041
476,429
273,660
1,866,235
Operating result (EBIT) for Farstad Shipping is NOK 302,183. The difference of NOK 62,746 is divided between other revenues: NOK
3,648, sale of fixed assets, NOK 62,005, and other depreciation, NOK 2,907.
In 1998, some of the vessels have had activity in more than one area. When allocating costs/revenues for each geographical area,
consideration has been made to actual revenues. However, the vessels’ operating costs are prorated. The depreciation is allocated using
the same principle as other costs. The administration overhead costs related to the entity as a whole are allocated equally between the
vessels.
The book value breakdown per vessel by geographical location was determined using the end of 1998 as basis. Book value as of 31.12.98
was used, and includes the individual vessel’s accrued periodic maintenance costs as of that date.
24
AU D I TO R S R E P O RT F O R 1 9 9 8
TO THE ANNUAL SHAREHOLDERS MEETING OF FARSTAD SHIPPING ASA
We have audited the annual report and accounts of Farstad Shipping ASA for 1998, which show a profit for the year of NOK
323,674,036.- for the parent company and a consolidated profit for the year of NOK 240,464,000.-. The annual report and
accounts which comprise the annual report proper, profit and loss account, balance sheet, funds flow statement, notes to the
accounts and consolidated accounts, are presented by the company’s Board of Directors and it´s Managing Director.
Our responsibility is to examine the company’s annual report and accounts, its accounting records and other related matters.
We have conducted our audit in accordance with relevant laws, regulations and Norwegian generally accepted auditing standards.
We have performed those audit procedures which we considered necessary to confirm that the annual report and accounts are
free from material misstatements. We have examined selected parts of the evidence supporting the accounts and assessed the
accounting principles applied, the estimates made by management and the content and presentation of the annual report and
accounts.
To the extent required by Norwegian generally accepted auditing standards we have reviewed the company’s internal control and
the management of its financial affairs.
The Board of Directors’ proposal for appropriation of the profit is in accordance with the requirements of the Joint-Stock
Companies Act.
In our opinion the annual report and accounts have been prepared in accordance with the requirements of the Norwegian JointStock Companies Act and present fairly the financial position of the company as of 31.12.98 and the result of its operations for
the financial year, in accordance with Norwegian generally accepted accounting principles.
Ålesund, 4 March 1999
ERNST & YOUNG AS
Odd Jarle Døving
State Authorised Public Accountant (Norway)
The translation into English has been prepared for infomation purposes only.
A N A L Y T I C A L
I N F O R M A T I O N
DEVELOPMENT IN FREIGHT INCOME
100
%
100
80
80
60
60
40
40
20
20
0
%
0
1995
1996
1997
1998
E-99
1995
Norwegian sector
BritisH seCtor
BraZil
Far East/Australia
West-Africa
60
50
40
30
20
10
0
AHTS
PSV
70
60
50
40
30
20
10
0
%
1997
(as % of freight income 1998)
AHTS
1998
E-99
PSV
DEVELOPMENT EBDIT
EBDIT1998
FREIGHT INCOME 1998
%
1996
AHTS
PSV
TOTALT
Norwegian sector
British sector
Norwegian sektor
British sector
Brazil
Far East/Australia
Brazil
Far East/Australia
70
60
50
40
30
20
10
0
%
(as % of freight income)
25
AHTS
1995
PSV
1996
TOTALT
1997
1998
BUSINESS SEGMENTS
The Norwegian GAAP (Oct. 1995) sets guidelines for the division of
the various business segments and for what information should be
submitted detailing the individual segment. Note 18 in the financial
statements details the business segments in Farstad Shipping.
Uncertainties associated with the allocation of costs and revenues, as
well as with balance sheet items, inhibit analysis of profitability by
business segment.
Sea. The corresponding number for PSV was 84%. The AHTS’s
relative share of revenues and profits in the North Sea has increased
during the last few years, partially due to the increased number of
vessels, and partially due to the currently positive market. The
Company’s AHTS vessels have been in a better position to take
advantage of the market changes because the PSV vessels have
generally been tied to long-term contracts. In addition, AHTS vessels
have commanded higher rates than PSV vessels.
Factors that may be crucial when evaluating profitability:
• The different needs and requirements with respect to tonnage
that exist in each individual market
• The useful financial life of each vessel differs between markets
• The age of the fleet
• Length of contract
• Operational risk
• Tax regulations
• The need for a local partner
• Differences in administrative and marketing services rendered
Brazil
This market contributed with 22% of the Company’s total revenues in
1998, the equivalent of NOK 154 million. AHTS vessels made up
75% of this number. EBDIT in percent of freight revenues is lower
than in the North Sea market, due to the latter’s positive market in
1998.
The North Sea
Of the Company’s total freight revenues for 1998, 65% came from the
North Sea market, where British sector made up 36.5%. The
Norwegian sector’s share of revenues has declined in later years. In
1998, 51.5% of revenues from AHTS activities came from the North
Far East/Australia
Represented by IOS, this market contributed with 13% of the
Company's total revenues in 1998, or NOK 96.4 million. PSV
revenues made up only 8% of the total, but that share is expected to
increase in 1999 after 2 PSV vessels were purchased by IOS in
October 1998. Australia is the most important market in this region,
accounting for as much as 82% of total revenues for the region.
EBDIT in percent of freight revenues is at a comparable level with the
Brazilian market.
A N A L Y T I C A L
VALUE ADJUSTED
EQUITY
TOTAL
2500
VALUE OF VESSELS
PSV
VALUE OF VESSELS VS. MORTGAGE
PER SHARE
mill. NOK
NOK
2000
40
1500
30
150
mill. NOK
3000
1500
500
10
30
0
0
95
96
97
98
17%
37%
90
20
94
46%
2000
60
93
mill. NOK
2500
120
1000
92
MORTGAGE
SORTED BY CURRENCY
AHTS
50
0
I N F O R M A T I O N
40%
Est. 31.12.99
1000
15%
500
Far Scandia - UT 705
31.12.92
Value adjusted equity
total and per share
26
VALUE ADJUSTED EQUITY AT 31.12.98
Total
(NOK mill.)
Per share
(NOK)
Market value vessels
Book value vessels
2,902.7
1,866.2
64.04
41.16
Excess value vessels
1,036.5
22.88
Book equity
1,172.1
25.86
Value adjusted equity (VAE)
2,208.6
48.72
Estimated VAE has increased by approximately 6% compared to the
value on Dec. 31 1997. At the end of 1998, it was estimated at NOK 2.2
Bn. The market value of the Company (share value multiplied by
number of shares outstanding) declined in the same period by 50%. At
the end of 1998, it was approximately NOK 950 million.
THE MARKET VALUE OF VESSELS
The market value of the fleet is calculated by averaging estimates from 3
independent Norwegian ship brokers at the end of 1998. For a detailed
table of the value estimates for each vessel, please turn to page 47. The
brokers’ assessments assume that the vessels are without contracts and
available for immediate sale. Value estimates in USD are calculated
using exchange rates at the end of 1998.
The historical value of the vessels during the last few years are shown
above, represented by two vessels built in 1983 (Far Scotsman and Far
Crusader) and two vessels built in 1991. The market value for the
Farstad fleet fell in 1998 by 7% on average.
Far Scotsman - ME 202
Far Sea - ME 303 II
31.12.93
31.12.94
31.12.95
31.12.97
30.06.98
31.12.98
Far Crusader - ME 303
45%
0
31.12.92
31.12.93
31.12.94
31.12.95
31.12.96
31.12.97
31.12.98
Est. 31.12.00
31.12.96
Due to the current market outlook, uncertainties associated with the
valuation estimates are greater than in prior years.
VARIATION IN BROKERS’ ESTIMATES
The brokers have submitted their value estimates using a high-low range.
The average of the high end of the estimates gives a fleet market value of
NOK 2,971 million, equivalent to NOK 50.22 per share. The average of
the low end of the range gives values of NOK 2,834 million for the fleet
and NOK 47.21 per share.
A 10% change in fleet value corresponds to a change in VAE of NOK
6.40 per share.
EXCESS VALUES
Estimates of the value adjusted equity does not take into consideration
other additional values in the Company than the excess values of the
vessels. The value estimates assume that vessels can be sold individually.
There are no adjustments for excess values that are derived from charter
contracts already in service. There are no adjustments for excess values
tied to vessels under construction. There are no adjustments made for
changes in value which could derive from a sale of the fleet, or a sale of
the whole Company as a going concern.
Goodwill is valued at NOK 6.3 million. This balance comes from the
1993 acquisition of Sverre Farstad & Co. A/S and Farstad Shipping Ltd.
No adjustments of these assets are included in the valuation of Farstad
Shipping.
The last years’ acquisition trend has clearly demonstrated that buyers are
willing to pay a considerable premium above fair market value of the
fleet when gaining control of an entire company.
Market value
Book value
Mortgage
TAXES
Value adjusted equity after tax is not calculated. The Company has, from
the tax year 1997 and onward, repositioned itself to adapt to the new tax
regime for shipping companies. Anyhow, the Company would not have
reached a normal tax position for many years due to a substantial
investment program. However, the transitional regulations made it
advantageous to start adjusting to the new tax law as of 1997. The
Company views this adaptation as a long-term effort.
The Company’s tax position in the future depends upon the results
achieved in those subsidiaries that are not included in the new
regulations, and the extent of activities on the Australian continental
shelf.
For details on the Company’s tax position at the end of 1998, please see
note 10 in the financial statements.
DEPRECIATION ON VESSELS BOOK VALUE
In 1998, the Company extended the depreciation schedule for the fleet
from 20 to 25 years. This change improved the 1998 consolidated
financial statements by approximately NOK 30 million compared to the
previous depreciation schedule.
NOK
GBP
USD
INTEREST AND EXCHANGE RATE
At the end of the year, 66% of the Company’s total mortgage debt was
denominated in USD. This debt is being serviced from revenues in USD.
The remaining mortgage debt is denominated in NOK. Additional
borrowing of NOK 960 million to finance vessels to be delivered in 1999
and 2000 will be made partially in GBP, partially in NOK and partially in
USD. For details on anticipated allocation, please see figures.
The interest risk exposure for 1999 is estimated to be NOK 0.01 per
share for every 1.0% p.a. change in US interest rates. The equivalent
effect for 1.0% p.a. change in Norwegian rates is NOK 0.08 per share, or
NOK 3.8 million. For a similar change in British rates, the effect would
be NOK 0.06 per share, or NOK 2.5 million. Interest rate exposure is
reduced on a continuous basis through hedging activities.
The Company expects the following breakdown in freight revenues, by
currency: NOK approximately 20%, GBP approximately 45%, USD
approximately 25%, and AUD approximately 10%. The currency risk
associated with the portion of revenues that does not have an offsetting
cost, is reduced through the use of hedging. Estimates at the beginning
of 1999 show the following effect on cash flow for 1999 given currency
fluctuations: A change in the relationship NOK/GBP of NOK 0.50
would change cash flow by NOK 4.6 million, or NOK 0.01 per share.
An equivalent change in the relationship NOK/USD would impact cash
flow by NOK 7.7 million, or NOK 0.17 per share. For NOK/AUD would
the corresponding effect be NOK 3.3 million, or NOK 0.07 per share.
27
S H A R E H O L D E R
PAYMENT TO SHAREHOLDERS
M A T T E R S
SHARE PRICE DEVELOPMENT 1993 - 1999
SHARE PRICE DEVELOPMENT JANUARY 1998 - MARCH 1999
(NOK per share)
1994
1995
1996
1997
1998
Jan. Feb. Mar. Apr. May June July
Aug. Sep.
Oct. Nov. Dec.. Jan. Feb.
50
45
40
35
- 48
- 44
0,60
-
0,40
- 30
- 36
0,20
- 25
- 32
- 20
- 28
- 15
- 24
1,00
0,80
0,00
1993
1994
1995
1996
1997
1998
FINANCIAL CALENDAR
Result for first quarter
Annual General Meeting
Payment to shareholders
Result for first halfyear
Result for third quarter
27
27
12
19
28
- 40
- 13
April
April
May
Aug.
Oct.
- 20
- 11
(subject to change)
- 1600
- 240
- 800
- 120
- 400
- 60
- 200
- 30
© Delphi Investor Service
© Delphi Investor Service
28
THE COMPANY’S 20 LARGEST SHAREHOLDERS
Number
%
21,236,199
2,465,900
1,097,500
1,000,000
1,000,000
846,600
650,000
474,300
423,400
410,000
365,000
300,000
285,000
250,000
236,000
235,000
217,600
217,000
213,800
200,000
46.8
5.4
2.4
2.2
2.2
1.9
1.4
1.0
0.9
0.9
0.8
0.7
0.6
0.6
0.6
0.5
0.5
0.5
0.6
0.4
Total 20 largest
Total 10 largest
Total foreign shareholders
32,123,299
29,603,899
2,221,139
70.9
65.3
4.9
Total shares
45,329,370
100.0
AT 31.12.98:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Tyrholm & Farstad A/S
Gjensidige Livsforsikring
NOR Forsikring AS
Sverre A. Farstad
Jan H. Farstad
Gjensidige Skadeforsikring
Bankers Trust Company
Storebrand Skadeforsikring
Det Stavangerske Dampskibs.
Morgan Guaranty Trust
Bank of New York
Aksjefondet Handelsbanken
Meieribrukets Pensjonskasse
K-Holding AS
Artur Kleven
Verdipapirfondet K-Kapital
Aksjespar Postbanken
Trondheim Kommunale P.
Skandinaviska Enskilda
John Kleven AS
THE COMPANY’S 10 LARGEST SHAREHOLDERS
AT 31.12.97:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Tyrholm & Farstad A/S
Gjensidige Livsforsikring
NOR Forsikring AS
Norgesinvestor Verdi
Sverre A. Farstad
Jan H. Farstad
Gjensidige Skadeforsikring
Morgan Guaranty Trust
Brown Brothers Harris-Energy
Orkla ASA
Total 10 largest
ALLOCATION OF SHARES
Total shares
11,00050,000100,000More than
Shareholders
Total
999
1,077
49,999
1,612
99,999
33
499,999
40
500,000
7
Sum
2,769
Number
%
18,550,699
2,725,000
1,097,500
1,000,000
1,000,000
1,000,000
850,000
827,300
742,500
700,000
40.9
6.0
2.4
2.2
2.2
2.2
1.9
1.8
1.6
1.5
28,492,999
62.7
AT 31.12.98:
%
38.9
58.2
1.2
1.5
0.2
100.0
Share
holding
366,362
7,003,614
2,204,928
7,615,694
28,138,772
45,329,370
%
0.8
15.4
4.9
16.8
62.1
100.0
It is the Board's objective to give the owners of the Company, the
shareholders, a competitive return on invested capital over time. The
shareholders return must be achieved through a combination of
appreciation in share price and the cash dividend paid by the Company.
In light of the results achieved in 1998 and the Company’s equity
situation, the Board will propose a cash dividend to the shareholders of
NOK 1.00 per share at the annual meeting on 27 April. The dividend
payout will take place in the middle of May. The dividend that has been
paid in recent years is shown in the figure above. Shareholders at the
time of the annual meeting only are eligible for dividend. The dividend
policy in the upcoming years will be determined based on profitability
and investment plans.
The Company’s share price at the beginning of the year 1998 was NOK
42.00. At the end of the year, the share price has declined to NOK 21.00.
The year’s top price was NOK 43.00: the lowest NOK 19.80. The fall
correlates strongly with the general decline of all oil- and offshorerelated stocks.
The Company had 2,769 shareholders on 31.12.98, versus 1,967
shareholders on 31.12.97. There were 52 foreign shareholders, with a
total ownership of 4.9% of the shares outstanding. Foreign shareholders
are permitted to hold 33 1/3% of the shares outstanding.
At the annual meeting on 23.04.98, the Board was given authority to
issue additional 6.5 million shares.
This authority, which is valid until the annual meeting in 1998, has not
been used. It will be proposed extended for one additional year. At a
general meeting on 17 December 1998, the Board was given authority to
buy back up to 10% of the Company’s shares. This authority is valid for
18 months from 01.01.99.
Currently, there are 45,329,370 shares outstanding. In 1998, 25.6 million
of the Company’s shares were traded, vs. 47.4 million in 1997. The
Company’s shares were traded on 251 trading days out of 251 total
trading days in the year.
No member of the Board or the Management of the Company has stock
options in Farstad Shipping.
THE BOARD AND MANAGEMENT’S SHARES
Shares
In accordance with § 11,12 of the Company’s Act
THE BOARD:
Per Norvald Sperre
0
Sverre A. Farstad
22,252,199
Sigmund Borgundvåg
0
Bjørn Havnes
0
Per Erik Dalen
0
Bjarne Sælensminde
85,000
THE MANAGEMENT:
Sverre A. Farstad
see above
Terje J.K. Andersen
25,000
Torstein L. Stavseng
28,000
AT 31.12.98:
The Company’s auditor holds no shares to Farstad Shipping ASA.
S T R A T E G Y
FLEET BREAKDOWN
(as of January/February 1999):
12
6
Today’s
Fleet
World Fleet:
AHTS >10.000 BHP
PSV > 2.000 DWT.
Total
1
2
1
4
30
4
2
Farstad Shipping/IOS:
AHTS >10.000 HK
PSV >2.000 DWT
Total
Sea is their main market. As the oil companies have gradually focused
more on cost control in later years, companies providing transportation
to the various installations in the North Sea have been impacted. The oil
companies now co-operate to a larger degree, either directly or through a
logistics service supplier such as ASCo. The trend has therefore been
towards fewer, but larger PSV vessels with large decks and larger tank
capacity to minimise the transportation costs per ton.
Melbourne manages the vessels operating in the East and Australia. This
structure allows for a greater flexibility in moving vessels between the
various markets.
The technological innovation that has taken place during the last few
years has allowed exploration activities to move to areas of greater
depths. The oil companies have prioritised these areas due to the
increase in size and profits that they yield. In order to operate safely and
efficiently under harsher weather conditions and to meet the challenges
associated with exploration at greater depths, AHTS vessels need to have
increased winch- and engine capacity. Farstad Shipping has under
construction, and has recently taken possession of a total of four new
AHTS with sufficiently large winch- and engine capacity in order to serve
this market. This investment is clearly a strong statement by the
Company that illustrates its ambition to be a substantial player among
operators capable of servicing deep sea exploration activities.
Since the trend has favoured larger sized vessels, there have been many
new orders of these to meet demand. When deliveries of all current
orders are completed, this segment will make up approximately 20% of
the world’s fleet of supply vessels. Farstad Shipping’s share of this fleet
is about 10%.
The proximity to the maritime environment on the North West Coast of
Norway offers an excellent opportunity to work with shipyards and
equipment manufacturers to promote innovation and improve safety and
efficiency in the industry. In addition, this position puts the Company in
the forefront of the competition when faced with changes in demand.
The sailing crew has been an active participant in this process, facilitated
by the management’s ability to utilise the crew’s expertise and
competence.
Whereas more than half of the world fleet of AHTS vessels are outside
the North Sea, the situation is quite different for PSV vessels. The North
Farstad Shipping has chosen an international strategy for the
management of the vessels as well. The Company’s vessels in the North
Sea and Brazil are managed from Ålesund and Aberdeen. P&O in
131
114
245
29
47
76
160
161
321
16
12
28
2
2
4
18
14
32
31
Farstad Shipping’s strategy remains focused on being a substantial, longterm and global operator of large, modern offshore service vessels. The
Company has concentrated its activities around the market segment with
demand for the largest and most technologically advanced service
vessels. This means anchor handling vessels (AHTS – with power in
excess of 10,000 HP) and platform vessels (PSV - size in excess of 2,000
DWT).
In addition, Farstad Shipping has two PSV vessels with less than 2,000
DWT and Lochnagar, a pipe-laying vessel for flexible pipes. Lochnagar is
an example of a successful strategy to modify an older PSV vessel to
secure a profitable, long-term employment. For details, please see page
49.
New- Total
buildings Fleet
The Company’s charter strategy remains one in which the priority is to
minimise the exposure to short-term fluctuations in the demand for
supply vessels.
Of the Company’s fleet, 14 vessels are built for Farstad in Norway.
Shipyards in the Northwest have built 10 of these. In addition, the
Company currently has 3 vessels under construction at shipyards in
Møre og Romsdal. Experience indicates that vessels that originated with
the Company have performed better with respect to maintenance costs
than tonnage that was acquired secondhand.
AHTS
is mainly used for towing missions and for anchoring mobile platforms
and production modules/vessels. In addition to tow- and anchor
handling capabilities, this vessel is equipped for fire fighting, rescue
operations and oil recovery. The AHTS vessel is therefore often used as
standby rescue vessels for oil fields in production. The AHTS is also
commonly utilised in anchor handling activities for cranes- and pipelaying vessels, and in supply service for all types of platforms,
transporting both dry and wet cargo in addition to deck cargo.
PSV
is mainly used to supply fields in production. This involves the transport
of individual items, generally in containers as deck cargo. In addition, a
modern supply vessel transports a variety of different products in segregated systems, such as methanol, pre-blended drill fluids, brine, water
and oil. The various fluids are contained in epoxy painted tanks, with
individual pumps and hoses for discharging. Dry bulk cargo such as
cement, barite and bentonite are also transported by the PSV vessel, and
are discharged at the installations using compressed air.
Many of the larger PSV vessels have been employed in later years in
pipe-laying activities.
T H E
M A R K E T
F O R
O F F S H O R E
10
20
World-wide per February 99
40
50
30
Mærsk
44
Farstad/IOS
Gulf
3
Trico Marine
Edison Chouest
17
13
Stirling
11 2
Tidewater
12
Solstad
10 2
3
9
6
4
DOF
Swire
2
81
AHTS > 10.000 BHP SORTED BY COMPANY
0
5
10
15
Gulf
Farstad/IOS
Stirling
Edison Chouest
Trico Marine
Tidewater
Mærsk
Havila
Hvide Marine
Seacor
20
0
25
No. of PSV
No. of newbuildings
PSV > 2.000 DWT SORTED BY REGION
10
20
Mærsk
Farstad/IOS
Solstad
Seacor
Swire
Trico Marine
Havila
Gulf
Edison Chouest
DOF
0
20
40
60
Number of vessels
Number of newbuildings
Brazil
Canada
Australia
West Africa
7
Far East
Number of PSV
40
50
No. of newbuildings
AHTS > 10.000 BHP SORTED BY REGION
0
80 100 120
Gulf of Mexico
30
No of AHTS
North Sea
Havila
32
7
16
2
Seacor
Hvide Marine
22
7
4
28
V E S S E L S
PSV > 2.000 DWT SORTED BY COMPANY
AHTS>10.000 BHP AND PSV>2.000 DWT SORTED BY COMPANY
0
S U P P L Y
North Sea
Brazil
West Africa
Far East
Autralia
Gulf of Mexico
Canada
China
10
20
30 40
50
60
33
Number of AHTS
Source: Petrodata
FLEET STRUCTURE
The demand for supply vessels remained high in most markets
throughout 1998. These North Sea based companies in particular have
reported excellent results. Even though the rates did not match the
record year 1997, they set record levels during large parts of the year.
Taking into consideration the 30 or so new supply vessels that entered
the market during 1998, the results were above expectations.
High and increasing demand for large AHTS vessels in Brazil, West
Africa and the Far East/Australia was crucial for maintaining the positive
market in the North Sea in 1998. The orders for additional vessels are a
consequence of this. There were strong indications towards the end of
1998 that the markets were unable to absorb additional tonnage. At the
end of 1998, there were 80 large supply vessels on order or under
construction. Most of these will be delivered during 1999.
Approximately 30 of the new vessels are headed for the North American
market and are not expected to influence the markets outside the
U.S./Mexican Gulf area.
The large number of additional vessels entering the market, combined
with expectations of reduced activity world wide as a result of the
current low oil price, gives the offshore supply industry a difficult market
outlook in 1999. Substantial reductions in rates must be expected as
well as a number of vessels laid up. It will obviously take some time for
the market to absorb the excess tonnage. The length of time will depend
on how quickly the oil price recovers and stabilises at a higher level.
The restructuring of the industry continued into 1998, albeit at a slower
pace than in 1997. On March 1st, Brøvig Supply was acquired by
GulfMark, an American company that also owns North Sea based Gulf
Offshore. Havila Supply ASA was incorporated and stock listed in the
spring. The company is composed of vessels from Remøy, Taubåtkompaniet, and three new vessels.
There have also been a string of mergers and pools among the oil
companies. Aberdeen Service Company (ASCo), a logistics company,
has acquired its competitor Wood Group Offshore, making it the largest
charterer in the North Sea after Statoil. The low oil price has damaged
margins and put the oil companies under a lot of pressure to reduce costs
to make up for some of the shortfall in profits. The end result is reduced
activity.
The North Sea remains the most important market for the larger supply
vessels. This is especially true for the large platform vessels, where 101
of the total world fleet of 114 large PSV vessels are located in the North
Sea. In the beginning of 1999, there were approximately 20 large PSV
vessels under construction. Although these vessels are to be employed in
the North Sea market, only about half of them have long-term contracts.
Outside the North Sea market, only Brazil and the U.S./Gulf of Mexico
have displayed interest in using large PSV vessels as the start of an effort
to rationalise the transportation activities to and from installations. It
will take some time before operators of large PSV vessels can expect any
growth in demand for this type of vessel outside the North Sea.
The market on the American side of the Gulf of Mexico is reserved for
vessels built in the U.S. The American offshore supply industry currently
has 30 large PSV vessels under construction. Most of these are
reportedly tied to long-term contracts, and are therefore expected to
remain within the U.S. market.
American companies have contracted 5 large AHTS vessels for the
U.S./Gulf of Mexico. Even when considering the collapse of the Gulf
market in 1998, a question remains whether any of the operators would
find it profitable to move tonnage from this market to another market.
In any case, it is not likely that any of these would go to the North Sea.
Oil exploration has increased considerably in areas of deeper and more
challenging waters in recent years. This has increased demand for large
AHTS outside the North Sea. Brazil is among the most active at great
depths; Petrobras is currently producing oil at depths in excess of 1,800
meters. Petrobras’ current plans continue this trend and, if realised, they
will increase the demand for large AHTS vessels in Brazil.
The markets in the Far East/Australia performed well in 1998. However,
the low oil price has led to a reduction in activities for 1999 in these
markets. On the coast of West Africa, the oil companies increased their
oil and gas exploration activities during 1998, resulting in significant
discoveries. A reduction in efforts is expected until the oil price recovers
to a level that makes production of oil and gas more attractive.
At the start of the year, 25 large AHTS vessels were under construction
world-wide (excl. the U.S./Gulf of Mexico), half of which are secured on
contract. Under more normal circumstances, with a higher oil price and
a rising market, a large number of the older North Sea tonnage as well as
some new vessels would be employed in the markets outside the North
Sea. The current situation makes this an unlikely outcome.
Far Sailor installing «suction anchor» on Campos Basin.
T H E
M A R K E T
AHTS/PSV IN THE NORTH SEA
SORTED BY COMPANY per February 99
0
5
10
15
20
25
300
250
Boat-years
83%
265
86%
89%
91%
92%
200
219
%
95%
94%
204
202
150
80
172
205
203
191
188
176
195
191
188
0
Solstad
No. of PSV
> 2.000 DWT
No. of newbuildings
in Europe
%
TERM DEMAND
SORTED BY SECTOR
200
Boat-years
200
155
90
150
TERM DEMAND
SORTED BY ACTIVITY
137
129
158
61
134
1993
Supply
1994
1995
Demand
1996
1997
1998
E-99
46
100
100
0
Utilisation
70
0
J F M A M J
J A S O N D
1993
1997
1998
E-99
19
21
89
91
16
88
28
12
89
26
25
15
106
14
21
16
26
116
123
93
50
50
60
24
33
60
20
1992
Boat-years
150
40
50
Havila
100
80
100
Stirling
100
V E S S E L S
79%
238
179
Trico Marine
S U P P L Y
UTILISATION PER MONTH
238
Farstad/IOS
No. of AHTS
> 10.000 BHP
O F F S H O R E
DEVELOPMENT IN DEMAND FOR
OFFSHORE SUPPLY VESSELS
Gulf Offshore
Mærsk
F O R
1994
1995
British
sector
1996
1997
Norwegian
sector
1998
North Sea
others
0
1992 1993 1994 1995 1996 1997 1998 E-99
Production
Construction
Drilling
Source: Petrodata
34
THE NORTH SEA MARKET
The demand for offshore service vessels was higher in 1998 than in 1997.
The main causes for this were higher demand for production-related
activities along with a longer and more comprehensive construction
season, due to delays in pipe-laying projects. The industry was 96-98%
utilised for large periods during the year. Companies that had many
vessels on the spot market profited greatly from these market conditions.
The positive market in the North Sea attracted tonnage from other
markets in 1998. However, high activity levels elsewhere also caused
vessels to move away from the North Sea market. At the end of 1998,
the North Sea market counted 215 vessels. Despite the new vessels
entering the market, the increase was only a marginal 15 vessels from the
previous year. The total number at the end of 1999 is expected to be 255
vessels.
The total demand for offshore service vessels, expressed in boat-years,
increased by 4 to a total of 195 boat-years in 1998. The short-term
market (defined as contracts longer than 30 days) made up 158 boatyears, an increase of 3 compared to 1997. British and Norwegian sectors
represented 60% and 32% of total demand, respectively. Only British
sector expanded in 1998, from 84 to 90 boat-years. The average rate of
utilisation in 1998 was 95% for the North Sea; it was above 90% during
all months of the year. A reduction is expected for 1999.
Approximately 77% of the short-term contract market is serviced by PSV
>2,000 DWT and AHTS >10,000 HP. The corresponding share in 1993
was 62%. The largest PSV vessels (in excess of 3,000 DWT) represent
the bulk of the increase. Today, they have a market share of 30% for the
short-term contracts.
With the number of large supply vessels now under construction, a
reduction of the small and medium sized supply vessels is anticipated.
The alternative effect under these market conditions is that the newer
vessels are preferred over the older tonnage.
Short-term contracts
Supplying fields in production and performing emergency service
Demand from oil fields in production totalled 116 boat-years in 1998, an
increase of 10 since 1997. Demand that was related to production
activity represented 73% of short-term contracts in 1998, up from 50%
in 1991/1992. The main cause of this trend is the sheer increase in
production installations, and that the activity has moved to more remote
areas, often at greater depths.
Production related activity is expected to remain at high levels for years.
Today, there are 279 fields producing oil in the North Sea, of which 60%
are located in the British sector. There are plans to start production of
additional 266 fields in the next five years, although some of these are
submerged satellite fields. With the current low oil price, several of these
will be postponed. Whether the increase in the number of production
installations will influence the demand for offshore service vessels
depends upon the oil companies’ ability to co-ordinate efficiently or pool
vessels in the new and more remote areas with other companies.
Construction activity
Demand for supply vessels for construction purposes made up 26 boatyears in 1998, compared to 25 in 1997. This includes the construction of
new production installations as well as infrastructure projects such as
pipelines, booster stations and loading buoys. 1998 was characterised by
especially high pipe-laying activities in the Norwegian sector. Due to
delays, pipe-laying activities remained high during the autumn and
winter up to the Christmas season of 1998, contributing to a very active
4th quarter. In December, approximately 25 vessels were employed in
this activity, compared to expectations of 3-4 vessels. Recent years have
seen an increase in demand for the laying of telephone cables offshore.
During 1998, this was an important contributor in maintaining a high
level of utilisation for large PSV vessels.
In 1999, there are projects that are expected to create a demand similar
to 1998. These include cable laying, pipe laying and installation of
mobile production systems and other subsea-installations. The bulk of
activities are expected to take place in the 2nd and 3rd quarter.
Exploration activities
As a result of gains in productivity and logistics, the number of offshore
service vessels involved with exploration activities has fallen
considerably in recent years. This trend was exacerbated in 1998 by
reduced rig activity. Whereas demand for supply vessels for this type of
activity totalled 61 boat-years in 1992, it had declined to 16 boat-years in
1998. This is a decrease of 8 boat-years compared with 1997. Demand in
1999 is expected to be somewhat lower than in 1998.
The spot market
The activity in the spot market has traditionally been around 20-25% of
total demand. The tight market conditions in 1997 and 1998 has caused
this share to drop to just under 20%. Because there have been periods in
which the spot market was drained for tonnage, many oil companies set
up short-term contracts at the time in order to secure their operations. A
substantial portion of the spot market activity is managed from Aberdeen
and in the British sector.
Emergency Towing Vessels (ETV) Services
for the UK Coastguard
The UK Coastguard has chartered three large AHTS vessels for ETV
patrol during the autumn and winter months (October – April) in recent
years. The vessels patrol the busiest and most exposed parts of the British
coastline. Farstad owns two of the three vessels that were chartered this
past winter. The partner for Farstad Shipping this winter was Howard
Smith Towage and Salvage Ltd. The vessel Far Turbot is stationed at
Dover to provide ETV cover for the English Chanel area, and Far Minara
is stationed at Falmouth to patrol the ofte very stormy South West
Approaches.
The trend into the future will depend upon the number of rigs involved
with exploration activities, and the degree of involvement that the supply
vessels will have. In particular, the operators’ use of AHTS vessels has
changed recently. Previously, the oil companies engaged one, and often
two AHTS vessels to assist an active exploration rig. Today, the AHTS
vessel is most commonly used only when the rig is being relocated.
Chartered vessels supply the rig during the drilling phase as well as fixed
production installations and mobile exploration rigs. The consequence
is that the demand for vessels in terms of rig-years is down to 0.3 boatyears. It is possible, however, that increased exploration in deeper and
more remote waters will reverse this trend.
Far Minara in service for the UK Coastguard
35
T H E
OILFIELDS OUTSIDE MACAÉ
CAMPOS BASIN - BRAZIL
M A R K E T
F O R
O F F S H O R E
SUPPLY VESSEL OWNERS / MANAGERS
per February 99
WITHIN THE REGION
0
2
4
6
8
S U P P L Y
V E S S E L S
SUPPLY VESSELS WITHIN THE REGION
per February 99
0
10
2
4
6
8
SUPPLY VESSEL-OWNERS / MANAGERS
WITHIN THE REGION
per February 99
0
10
Mærsk
Australia
Farstad/IOS
China
Finarge
Philippines
Solstad
India
Gulf
Singapore
Tidewater
Vietnam
Swire
Others
Other
Other
AHTS > 10.000 BHP
PSV > 2.000 DWT
AHTS > 10.000 BHP
2
4
6
8
Farstad/IOS
Chinese
Mærsk
Seacor
PSV > 2.000 DWT
AHTS > 10.000 BHP
PSV > 2.000 DWT
Source: Petrodata
36
BRAZIL
This year, the Company will have these vessels employed in Brazil: The
anchor handling vessels Far Sailor, Far Sea, Far Centurion, Far
Crusader, the platform vessel Far Sleipner, and in addition, the pipelaying vessel Lochnagar. Farstad Shipping also has an AHTS vessel
under construction, to be employed under an 8-year contract for
Petrobas after delivery takes place in the beginning of year 2000.
Approximately 22% of freight revenues for the Company are expected to
come from activities in Brazil.
Stationed in the Petrobas base in Macaè, approximately 200 kilometers
northeast of Rio de Janeiro, the vessels service the fields in the "Campos
Basin". They perform supply duties, anchor handling jobs, construction
assistance, submerged pipe-laying activities and maintenance.
Source: Brasil energy
The total production in Brazil at the end of 1998 totaled 1.2 million
barrels per day. Petrobas’ ambition is to increase production to 1.5
million barrels before year 2000. Offshore production represents about
80% of this total.
FAR EAST/AUSTRALIA
As a result of the establishment of IOS at the end of 1997, the
Company’s presence in the Asia-Pacific region has increased
substantially. By using the organisation that P&O have established in the
region, IOS has especially focused its activities on the markets in
Australia and the Far East. Australia is deemed the most important
market in the region. In 1998, 13% of freight revenues in the Company
came from this region. A similar share is expected in 1999. In the
beginning of 1999, both the PSV vessels and four of the AHTS vessels
were employed in areas outside Australia. Two of the AHTS vessels were
employed in the Philippines.
exploration activities in shallow waters and as a consequence for the
jack-up market. For the deep-water rigs, on the other hand, the relatively
few rigs available in the market are much more sensitive to increases in
demand. Just a smaller increase in demand would likely create a positive
effect on activities which in turn could be very positive for the large
AHTS vessels in second half of 1999.
This region employs about 25% of the world’s fleet of supply vessels, and
about 17% of the world’s fleet of rigs. However, it is a fairly small
market of the large supply vessels. At the end of the year there were
three large PSV vessels and 24 large AHTS vessels (5 of these were in
China) in this region. With the acquisition of two PSV vessels in October
1998, IOS has consolidated its position as a leader in the market for
large AHTS and PSV vessels.
Lady Kari-Ann at the base in the Bass-strait
Far Centurion and Far Crusader transferring bunkers offshore in the Campos Basin
A series of events took place in 1998 that will have a positive influence
on the market for production of oil and gas in Brazil in the coming
years:
• Petrobas started its Joint Venture Partnership Program for continued
development of oil fields in Brazil, in cooperation with other large oil
companies. The deep Campos Basin area is one of the most
promising areas in this respect.
• Petrobas started developing two large new fields at depths of 1,000 –
2,000 meters, "Marlin Sul" and "Roncador". A pilot system is already
installed in the Roncador field, capable of production at a depth of
1,853 meters. Petrobas has also started developing four other fields in
the Campos Basin that have depths of 500 – 1,200 meters.
• The Brazilian government’s oil ministry – ANP – has launched its first
international bidding invitation for an offshore field of 90,000 km2.
The region maintained a high rate and utilisation level far into 1998.
This was an extension of the positive market conditions in 1996 and
1997, when the rate level increased by 20% annually. The financial crisis
in Asia, combined with a low oil price contributed to a strong decline in
rig activities in Q4 1998, and the trend continued into 1999. The rig
utilisation level in Q1 1999 is down to 60%. This trend has also been
negative for the utilisation and rate level for the supply vessels.
There are signals from Asia that indicate that the financial crisis has
bottomed out. Several countries have predicted economic growth in
1999. If the oil price can be stabilised at a higher level (USD 15.00 per
barrel), the development yields some hope that the fall in the market for
rigs and supply vessels could bottom out. It is expected that it will take
some time before an improvement in the market is reflected for
Lady Sandra on trail trip
37
A D M I N I S T R A T I O N
Employees at the office in Aalesund
A N D
O R G A N I S A T I O N
Ålesund harbour
Aberdeen harbour
The Management: From left: Terje J. K. Andersen and Sverre A. Farstad.
In front; Torstein L. Stavseng
38
In the beginning of May, Sverre A. Farstad will step in as the Chairman of the Board.
Terje J. K. Andersen will take over as Managing Director. Karl Johan Bakken is promoted as
Director of Market and Operations.
39
Employees at the office in Aberdeen
FA
S
R S TA D
Macaé harbour
Melbourne harbour
ASA
H I P P I N G
FA
R S TA D
S
H I P P I N G
ASA
Sverre A. Farstad
Managing Director
100%
100%
FA
R S TA D
S
H I P P I N G
LT
D
.
Torstein L. Stavseng
Finance Director
Terje J. K. Andersen
Deputy Managing Director
100%
OPERATION
Jan H. Farstad
Rolf Synnes
Technical Manager
Crewing Manager
Magnar Gjerde
Sylvi L. Eliassen
Quality/Safety Manager
Chartering Manager
FA
R S TA D
S
Idar Gjerde
Finance Manager
Hallkjell Dahle
Finance Manager IOS
H I P P I N G
LT
John R. Maxwell
General & Chartering Manager
Mike Gibbon
Trevor Reid
Safety & Personnel Manager
Ship Manager
Richard Stables
Jim Watt
Accountant
Ship Manager
D
.
F A R S TA D S U P P LY AS
Farstad Shipping Ltd. is the company with office in Aberdeen, with a
total of 11 employees. The office is responsible for operating 8 supply
vessels with a crew of 183, most of whom is British. In addition, Farstad
Shipping Ltd. and the Brazilian DSND Consub S.A. operate Lochnagar
as a co-op. In 1998, Lochnagar was reconstructed to serve as a pipelaying vessel for flexible pipes.
The Company’s headquarters are in Aalesund, with 29 employees. This
office operates 15 of the Company’s vessels with a crew of 285. In
addition, the office is responsible for supervising the construction
projects, and will later take on the operation of additional 3 vessels
currently under construction. The 5 supply vessels that are located in
Brazil are operated from Aalesund in co-operation with DSND Consub
S.A., which has offices in Rio and Macae.
P&O Maritime Services in Melbourne are responsible for the operation
of the 8 vessels that P/R International Offshore Services (IOS) currently
have in the Far East/Australia.
F A R S TA D I N T E R N AT I O N A L AS
50%
P&O
AUSTRALIA
50%
P/R I N T E R N AT I O N A L O F F S H O R E S E RV I C E S
ANS
OWNERSHIP OF FLEET
Farstad Supply is the company in the Farstad Group that owns the
vessels. The company was founded in 1997, as a result of the Company’s
efforts to conform to the new tax regime for shipping companies. In the
beginning of 1999, the Company owned 19 vessels, and in addition,
there were 5 vessels on order. IOS owns 9 vessels, and in addition, it has
one vessel on a bare-boat contract. These companies have no employees.
H E A L T H ,
HEALTH, SAFETY AND
ENVIRONMENTAL PROTECTION
(HSE) POLICY
Farstad Shipping acknowledges that the health and safety of personnel serving
on Farstad Vessels or Offices, combined with concern for the environment is
very important, and have, therefore, established the following policy:
Farstad Shipping have undertaken to offer and maintain a safe working
environment. The Company anticipates that all individuals will contribute to
enhance safety, irrelevant to their position or rank, onshore or offshore. Every
individual should have an understanding of responsibility towards himself, his
family, his colleagues and the company in all matters concerning health and
safety.
Each individualÕs attitude and actions, as others see and observe them, will be
setting standards, and this can serve the purpose of encourage others to perform
their job in a way that can contribute to the achievement of an accident free and
non health damaging working environment.
We have a common responsibility for preserving and improving the
environment, onshore or offshore, and accordingly, we should by all means
work to reduce any risk of damaging the environment by waste, pollutants or
unnecessary use of non-environmentally friendly substances.
Farstad Shipping will appreciate each individualÕs co-operation and suggestions
in health, safety ane environmental issues, and the Company will in its turn
offer necessary resources to reach the goals set forth in this policy.
•lesund, 3 June 1993
Sverre A. Farstad
Managing Director
40
S A F E T Y
A N D
E N V I R O N M E N T
( H S E )
INTERNATIONAL REGULATION
IMO (International Maritime Organisation)
The UN’s shipping organisation (IMO) has developed a com-prehensive
set of regulations for international shipping. Transportation activities
create risks of damages to the environment through pollution, primarily
as discharge to air and water. Many countries have specific
requirements, but all requirements essentially conform to the rules and
regulations adopted by the IMO. Norway is an active participant in
IMO’s activities in order to regulate shipping activities. This is
performed by Sjøfartsdirektoratet, Det Norske Veritas and the shipping
companies, represented by Norges Rederiforbund.
SOLAS/MARPOL (Convention Safety of Life at Sea)/Convention for
the Prevention of Pollution from Ships)
Within HSE, these are the conventions that form the basis for the
shipping companies’ own systems.
STCW (Standard for Training, Certificates and Watchkeeping for
seafarers)
ISM (International Safety Management Code)
This code requires that there is a documented leadership infrastructure
for environmental issues, similar to that of safety and other leadership
functions. The ISM code represents a substantial step forward to handle
environmental activities within the Company
Captain- and Chief-meeting for british officers in Aberdeen. In addition to keeping a busy
training schedule, there are conferences held regularly to update the crew about new developments
in the Company and to discuss operational and organisational issues.
Separation of waste onboard
LTI-RATIO (LOST TIME INCIDENTS)
(number of lost time incidents for every million hours worked)
20
15
10
41
5
The translation into english has been prepared for information purposes only.
0
HSE AT FARSTAD SHIPPING
With a strong focus on the prevention and reduction of injury to people,
damage to equipment and the environment, Farstad Shipping has
implemented its own requirements, procedures and systems for HSE.
Only through the continuous and systematic reporting and follow-up of
potential accidents, events and actual accidents can the Company
achieve the goals set on HSE. The Company’s environmental policy is
defined to include the following main factors.
•
•
•
Comply with requests from authorities and customers
Reduce the risk for damages and uncontrolled discharges.
Be proactive with health, safety and environmental improvements
Even though there is no mandatory ISM certification for shipping
companies managing supply vessels before July 2002, Farstad Shipping
has already implemented this system. In 1996, the Company’s offices
were ISM certified. All vessels owned by the Company are on schedule
to be certified by the end of year 2000.
HSE REPORT FOR 1998
The goals set for HSE at the beginning of the year were essentially
met. These are some examples:
• Introduction of "Cargo securing manuals" to all vessels.
• Emergency exercises for officers, crew and other personnel.
• Introduction of mandatory record keeping for rest time, in
accordance with the STCW convention.
• Implementation of a garbage management plan, for treatment of
waste.
• Quality systems translated to English and Portuguese.
• Acquisition of oilspill kit (oil collection equipment for small
oil spills).
To improve the atmosphere for the crew, a decision was made to
install satellite TV systems aboard all the Company’s vessels. The
feedback from the crew has been very positive. In an effort to limit
noise and vibrations, one of our new vessels is equipped with motors
that are mounted on rubber blocks. In addition, there is an extra
layer of insulation in the engine room to reduce noise pollution.
Reports of incidents and Non Conformance Report
In 1998, the vessels in the fleet managed by Farstad Shipping have
reported 215 incidents, compared to 125 incidents in 1997. This increase
is mainly a result of an awareness effort in 1998.
88
89
90
91
92
93
9 incidents were reported in 1998 (7 in 1997) concerning personal
injuries. These resulted in 137 days of absence (109 in 1997). The
personal injuries for 1998 are equal to a LTI-ratio of 4,4 versus 5,7 in
1997.
Non Conformance Report (NCR) shows result of operational interuptions and/or internal audits/inspections according to the
Company’s quality system. The number of NCR in 1998 was 78
versus 106 in 1997.
19 incidents were reported in 1998 (6 in 1997) concerning a
discharge of totally 22.06 m3 (2.63 m3 in 1997). The numbers for 1998
include a discharge of 22.06 m3 of brine. Brine is not considered to be
harmful to the environment. Other types of discharge include marine gas
oil, lubricants and hydraulic oil. Discharge has in some instances
occurred when loading and unloading at rigs or other offshore
installations.
Air pollution occurs generally when there is a discharge of exhaust gases
(NOX or SO2). Most of the vessels use a grade of marine gas oil for fuel
and production of electricity. A few vessels use a lighter type of heavy oil.
The charterer of the vessel is the decision maker in terms of time
schedule and fuel consumption. Farstad Shipping is dedicated to limiting
the discharge of hazardous gases, and is always ready to evaluate optimal
solutions and new technology. To meet future requirements, the
94
95
96
97
98
Company is going to focus more on pollution control in the coming year.
There is already a strong focus on how to reduce the use of chemicals for
cleaning as well as adding cooling fluids. The increased use of
environmentally friendly products has led to the use of an electrical
system that reduces corrosion. This has contributed to a reduction in the
use of chemicals and poisonous agents in engine / machinery and water
intakes.
There is an existing program to replace all fire extinguishers that contain
halon that are located in engine rooms. This program will be prioritised
in 1999.
In recent years, the Company has increasingly used TBT free antifouling
paint at a considerable cost premium. It has become a standard
requirement for all vessels that are under construction and scheduled for
delivery in 1998-99.
The Company operates in many areas, and the infrastructure for waste
management, including waste oil and hazardous materials is sometimes
less than ideal. The Company separates waste and manages waste oil in
a manner that is optimal with respect to the regulations and
infrastructure that exist.
H E A L T H ,
S A F E T Y
A N D
E N V I R O N M E N T
( H S E )
Choice of Career
Students from VKI visiting on
board M/V Far Grip when the
vessel called at Aalesund. The
basis for choice of occupation on
board is often laid at the
completion of VKI (first year
studies), and a visit on board a
vessel is therefore important.
Bridgechair on starboard side:
• Right armrest, joystick for manoeuvring, controls for winch, selector for the desired
type of winch.
• Left armrest, winch controls with buttons, winch tension control and buttons to
select the desired type of winch.
Bridgechair on the port side:
• Equipped with a flexible microphone attached to the back of the chair
• Right armrest, joystick, controls for main propellers
• Left armrest, controls for thrusters, selector for communication systems VHF/UHF
Bridge simulator,
Especially developed for supply vessels. Captain Geir Jarnes on the bridge simulator at SMS. The
simulator, which has been used since 1996, is developed in a joint effort by Farstad Shipping, the
Ulstein Group and Ship Manoeuvring Simulator Centre AS (SMS) in Trondheim. The simulator is
used for training officers in manoeuvring and handling crisis situations.
Trainee Year 1
Motorman Trainee Elisabeth
Nykrem engaged in maintenance
of equipment on board
M/V Far Superior.
Trainee Year 2
AB Trainees Kim Andre Henden
and Motorman Trainee Morten
Hermansen being instructed in
MOB vessel operation by AB
Kjell Godø on M/V Far Fosna.
42
Farstad Shipping has, in a joint effort with Aktro AS in Molde, developed a deck
manipulator for anchor handling vessels. The powerful manipulator is equipped with a
special hydraulic grip tool to handle anchor chains, wire and heavy objects. The
prototype was built and tested at Aktro’s facility outside Molde. The first unit produced
is now installed aboard Far Senior, and built into the deck astern, and is hydraulically
powered.
FOCUS ON IMPROVED HSE
The maritime environment that characterises the North West coast has
enabled Farstad Shipping to take the initiative to, or participate in
several projects aimed at improving safety at sea.
The development of our own specifications for supply vessels has made it
possible to utilise the experience gained by our crews. The co-operation
with the maritime environment coupled with R&D efforts in developing
new equipment has formed the basis for better vessels with improved
safety. A joint project is now under way to develop our own type of
vessel called "Far PSV 2000".
In addition, there is substantial improvement with respect to equipment,
noise, use of materials, maintenance requirements, documentation, and
comfort for the crew.
Farstad Shipping, the Ulstein Group, the electronics firm Øverland and
chair manufacturer NorSap/Maritime Partner have all joined forces to
develop a chair aimed at improving work posture when manoeuvring
and handling the anchor of offshore vessels. A prototype was tested in a
simulator in Trondheim. The chair is installed in Far Senior and ordered
for our three newbuildings.
New developed deck manipulator -see above
The manipulator can be operated with the use of a remote control. This dramatically improves the
safety of the crew when handling heavy shackles, chaines and wires. In addition to its capabilities
as a crane, the manipulator is also designed to pull chains or wire across the deck, with a
horizontal power of 10 tons (regular cranes are only able to lift vertically). Nils Ove Giskegjerde,
senior mechanical engineer aboard Far Senior, introduced the idea and created the first blueprint
of the deck manipulator.
TRAINING
Training and skill enhancement are vital to the Company’s future
opportunities. The more advanced types of vessels that the Company
has acquired in the last couple of years create new and greater demands
for training. This is especially true for Far Sovereign, delivered in 1999.
The STCW convention has adopted new international regulations that
require the upgrade of older certificates.
For the crew whose education was taken before 1997, training in some
areas must be completed to ensure that their certificates are valid from
February, 2002. A considerable effort by the office as well as the officers
must be made in order to receive the new certificates in time.
Requirements from the oil industry and the maritime authorities have led
to increased demand for training and continuing education, especially
for what safety is concerned. Because Farstad Shipping has traditionally
prioritised training and safety, the new requirements have not had any
significant impact on the Company. The use of IT as well as simulators
for evaluating and testing the officers has become an increasingly
important part of the training. The Company has set up its own
computer facilities to train employees.
Simulator for dynamic positioning (DP)
Deck Officers Hans Engeseth and Ståle Synnes in front of the simulator at "Høgskolen" in
Ålesund, which Farstad Shipping helped to finance in 1998. The simulator consists of an operator
console, a controller console, an instructor’s control, and a manual manoeuvring console. The
modules that are installed include those for supply vessels, production vessels and drilling rigs.
The Company wants to utilise the simulator for training deck officers who are designated to
employment on vessels with DP-equipment.
In 1998, more than 1,000 days have been spent on safety as well as
professional training. In 1998, the Company also trained personnel who
had been designated the role as professional counsellors for new
employees and apprentices on board.
RECRUITMENT
Results from the efforts in recruitment that the industry, including
Farstad Shipping, has made in recent years, is starting to show. Even
though recruitment will remain an important task for the HR
department, there is going to be an increased focus on training and
improving the competence level. The contribution that the public
reimbursement program has given the industry, has laid the foundation
for a continued growth of Norwegian sailors.
YEAR 2000
The Company initiated a project in 1998 to inspect equipment and systems
to gain an insight on the Y2K problem. Today, approximately 85% of all
the equipment has been inspected, and a small number of problem areas
have been identified. All equipment is scheduled for inspection before the
arrival of critical dates.
Craftman’s Certificate
AB Trond Myrhaug and Motorman Trainee Tore Fjelle received
their Craftman’s Certificate in
January 1999.
Officer’s Education
Two of the company’s future
officers who will complete their
maritime education this year,
Hans Engeseth and Ståle Synnes.
Education Completed
Arve Molnes joined the company
as Trainee in 1993, and has since
completed his maritime education. He is now serving as 1st
Deck Officer on board M/V Far
Senior. Here on DP-watch on
board M/V Far Senior.
Making Use of Qualifications
Electrician Åge Nakken and 1st
Engineer Frode Klokk are engaged in the Maritime Personnel
Department where Åge is preparing for Year 2000, and Frode
is preparing new forms for use on
the PC’s on board the vessels.
Both Åge and Frode started as
trainees in Farstad Shipping.
43
U T- 7 4 1 F A R S O V E R E I G N
44
SUPER POWERFUL MULTIPURPOSE VESSEL FOR THE
OFFSHORE INDUSTRY
This new vessel under construction at Langsten
Slip & Batbyggeri, will be de-livered during late
May / early June 1999. The Far Sovereign will be
one of the largest and most powerful anchor
handling vessels in the market. With a total of
27,400 BHP being developed from her four main
engines she is estimated to have a continuous
bollard pull of 280 tons and will be capable of
undertaking all AHTS duties world-wide in
offshore deep water locations for today’s market
and into the future. Her capabilities will also
include subsea operations such as pipeline
plough trenching, cable lay, construction and
abandonment.
As a multipurpose vessel she will be equipped
with a DP system ( DYNPOS AUTR NMD Class
II) and has achieved ERN 99/99/99. Also fitted is
a 19 metre helicopter deck, accommodation for
63 persons, a 7 x 5 metre moon pool, standby and
rescue equipment for 300 persons and will be
certified to NOFO oil recovery class. The Far
Sovereign is 85.2 meters long, 20.5 meters wide,
4400 DWT and her main deck is 680 m2. The
maximum speed will be 17 knots.
For anchor handling and towing contracts she is
equipped with a double drum, 500 ton pull
winch, a a 130 ton pull secondary winch, two 20
ton tugger winches and a further two spooling/
storage winches located under the main deck.
offshore use and is located midships, port side
and can be used to work either over the vessels
side or through the moon pool. Two further
cranes are located forward, port and starboard,
and can lift 7 tons at 12 meters. There is a further
small crane located aft on the starboard side
which can reach 19 meters with a 2.5 ton
capacity. There is also a sectional, removable
mezzanine deck of 320 m2 which provides
additional deck space and a base for ROV
operations.
The DP system is a Kongsberg Simrad DP system,
type SDP21. This system meets the requirements
of DP Class II. The reference systems are,
tautwire, laser, HIPAP (hydroacoustic) and
DGPS. In addition to the two main propellers
which are 4.5 meters in diameter, three tunnel
thrusters and one azimuth thruster enables the
vessel to maintain an exact position. The two
stern thrusters each develop 1,200 BHP and in
the bow the tunnel thruster develops 1,600 BHP
and the azimuth 2,200 BHP. This unit is a KRM-8
and is separately powered by a diesel engine and
greatly enhances her station keeping abilities.
The four main engines are Ulstein Bergen diesels
and are configured in a "father-son" arrangement.
The two larger engines are BVM-12 units and
develop 7,200 BHP each and the smaller engines
are BRM-9 units and each develop 5,400 BHP.
The axle generators are set for floating frequency
in the 50-60 Hz range and this makes it possible
to operate a fuel saving combination operation.
At the stern, she is equipped with a 160 ton SWL
"A" Frame, four tow-pins rated at 270 tons SWL,
two karm forks at 270 tons SWL and a further
two rated at 750 tons SWL. The stern roller is a
split/double type design and is 6 meters wide, 4.5
meters in diameter and has a SWL of 620 tons.
The propeller system is operated by gear boxes
from Scana Volda. The port side is capable of
running the axle generator without the propeller
system rotating.
The Far Sovereign is also equipped with 4 cranes.
The largest has a 100 ton capability at 10 meters
and 10 tons at 26 metres. This crane is rated for
The Far Sovereign has secured a term contract
with European Marine Contractors Ltd. (EMC)
for plough trenching work worldwide and other
offshore construction and subsea activities.
45
F
L
E
E
T
G
A
L
L
E
R
Y
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
5
19
46
T
Register i )
Owner
A H T S
-
Year
built
Design
BHP
DWT
Deck
area m 2
Liquid
mud
A N C H O R H A N D L I N G
Farstad Supply AS
1999 UT 741
27400
4400
680
Farstad Supply AS
2000 UT 730
19200
2200
570
Firefighting
/
Standby
Rescue
class
T U G
x
N
Farstad Supply AS
NOR
1998 UT 722 L
18000
2200
525
Farstad Supply AS
NIS
1997 UT 722
16800
2750
540
Farstad Supply AS
NOR
1993 UT 722
14400
2400
570
x
FIFI II
N
Farstad Supply AS
NOR
1993 UT 722
14400
2400
570
x
FIFI II
Farstad Supply AS
IOM
1991 ME 303 II
14400
1850
567
x
Farstad Supply AS
NIS
1983 ME 303
13040
2056
476
x
Farstad Supply AS
IOM
1983 ME 303
13040
2056
476
x
NOR
1980 UT 708
10560
2013
459
NIS
1987 Hudong
9800
2060
402
x
Farstad Supply AS
ii )
x
IOS
(50%)
IOS
(50%)
NIS
1983 ME 303
12240
2280
467
x
IOS
(50%)
NIS
1983 Amels
10560
2047
395
x
IOS
(50%)
NIS
1983 ME 303
12240
2350
481
x
IOS
(50%)
NIS
1983 Bolsønes
12800
2112
484
x
IOS
(50%)
NIS
1991 ME 303 II
13200
1750
567
x
IOS
(50%)
NOR
1983 UT 708
12240
1969
407
x
NIS
1998 KMAR 404
16100
2900
538
x
iii )
P S V
-
P L A T F O R M
Farstad Supply AS
S U P P L Y
Estimated Mortgage
Oil
marketdebt iv )
revalue v ) at 31.12.98
covery (NOK mill.) (NOK mill.)
N
/
vi )
Charterer
E
3-5 years
EMC
1
8 years
Petrobras
2
155,0
Spot
112,0
Sept. 02
Petrobras
4
x
180,8
78,3
Nov. 05
Norske Shell
5
N
x
180,8
79,7
Aug. 03 + opt.
Norsk Hydro
6
N
x
146,0
28,2
April 99.
ASCo
7
FIFI II
UK
x
100,8
16,9
Dec. 99
Petrobras
8
FIFI II
UK
100,8
16,1
Nov. 00
Petrobras
9
FIFI II
N
81,7
12,8
March 00 + +
ETPM/HM Coastguard
81,5
34,3
Spot
103,7
42,7
June 99
MSPMS/Woodside
12
83,5
38,5
June 99
MSPMS/Woodside
13
103,7
42,7
April 99
BHPP
14
103,9
42,7
April 99
BHPP
15
145,7
67,5
Dec. 00
Petrobras
16
84,2
42,7
April 00 + opt.
EMC/HM Coastguard
17
0
0
x
FIFI I
FIFI II
N
FIFI I
x
x
9600
4300
900
x
3
10
11
Spot
18
FIFI II
N
x
10 years
Norsk Hydro
19
IOM
1999 VS 483
6700
4070
902
x
-
-
March 04
ASCo
20
Farstad Supply AS
IOM
1999 VS 483
6700
4070
902
x
-
-
Jan. 04 + opt.
Amerada Hess UK
21
Farstad Supply AS
IOM
1996 UT 750
7200
4494
965
x
153,3
31,8
Feb. 01
ASCo
22
Farstad Supply AS
IOM
1995 UT 745
7200
4680
965
x
150,8
75,4
Jan. 00 + opt.
ASCo
23
Farstad Supply AS
IOM
1991 UT 705
6600
3000
868
x
107,5
23,8
Jan. 02 + opt.
ASCo
24
Farstad Supply AS
NOR
1991 UT 705
6600
3000
868
x
107,5
17,3
April 05 + opt.
Norsk Hydro
25
Farstad Supply AS
NOR
1990 UT 705 L
6600
3796
1016
x
117,5
17,0
Dec. 01 + opt.
Saga Petroleum
26
Farstad Supply AS
NOR
1983 UT 706 L
6120
3330
780
x
74,2
11,5
Sept. 00 + opt.
ASCo
27
Farstad Supply AS
IOM
1982 UT 705 omb.
6570
4300
-
x
190,8
121,6
Aug. 06 + opt.
DSND
28
Farstad Supply AS
IOM
1982 ME 202
6760
2902
540
x
69,7
12,1
April 02 + opsj.
Amerada Hess UK
29
Farstad Supply AS
NIS
1984 ME 202
5250
2980
615
x
71,0
12,6
Nov. 06
Petrobras
30
Farstad Supply AS
NOR
1983 UT 706
6120
2512
630
x
FIFI I
N
76,2
15,2
Feb. 00 + opt.
ASCo Norge
31
Farstad Supply AS
NOR
1982 H/R omb.
3400
1540
250
x
FIFI I
N
44,5
7,7
Dec. 03
Amoco N
32
Farstad Supply AS
IOM
1982 H/R
3400
1540
395
x
33,7
5,2
July 99 + opt.
BHP Petroleum
33
IOS
(50%)
NIS
1983 ME 202
5160
3003
620
x
71,9
55,5
Oct. 03
Esso
34
IOS
(50%)
NIS
1982 ME 202
6960
2972
612
x
72,2
55,5
Sept. 00 + opt.
Esso
35
iv )
The vessels debt is shown on a 100% basis.
ii )
P/R International Offshore Services ANS
v)
iii )
The vessel is chartered by IOS on a 5 years
bareboat charterparty.
The estimate of market value are based on
an average of three independent broker’s
estimate of the vessels’ value (free of
charter) at the year end 1998/99.
N
vi )
x
T A
D
F
L
E
E
T
1999 2000 2001 2002 2003 2004 2005
FAR SOVEREIGN TBN
FAR SANTANA TBN
FAR SENIOR
FAR SAILOR
FAR FOSNA
FAR GRIP
FAR SKY
FAR CRUSADER
FAR CENTURION
FAR TURBOT
LADY CYNTHIA
LADY AUDREY
LADY ELAINE
LADY VALISIA
LADY DAWN
FAR SEA
FAR MINARA
LADY SANDRA
C O N T R AC T OV E RV I E W AT 2 6 . 0 3 . 9 9
Farstad Supply AS
IOM = Isle of Man
S
V E S S E L
1999 UT 745
i)
R
C O N T R AC T OV E RV I E W AT 2 6 . 0 3 . 9 9
240,8
FIFI I
A
Fleet
gallery
No:
249,2
x
F
S U P P L Y
x
x
Employment
at 26.03.99
H
Certain freight contracts contain clauses
which give the charterer the right to
cancel the contracts.
TBN
FAR STAR
FAR SUPPLIER
FAR STRIDER
FAR SUPPORTER
FAR SERVICE
FAR SERVER
FAR SCANDIA
FAR SUPERIOR
FAR GRIMSHADER
LOCHNAGAR
FAR SCOTSMAN
FAR SLEIPNER
FAR SPIRIT
FAR SUN
FAR VISCOUNT
LADY ELIZABETH
LADY KARI-ANN
Contracts
Charterer’s option
48
L
O
C
H
N
A
G
A
R
T h e P S V L o c h n ag a r
Lochnagar prior to the conversion to a flexible pipe-laying
vessel. This is a co-op project between Farstad Shipping and
DSND.
New steel
Orginally vessel
T h e ex t e n t o f t h e c o nve r s i o n
Drawing showing the extensive conversion of the vessel. The
project included 1,250 tons new steel, a new main engine, an
extra azimuth thruster astern, a new tunnel thruster in the
baugh, helicopter pad, accommodations for 60 people and a
DP system in accordance with Dn V class Aut R. I addition
to this, there is a new bridge astern. After the conversion,
Lochnagar is 23 m. longer and 5 m. wider. Additionally,
there was installation of equipment for pipe-laying, which
was DSND’s portion of the conversion.
49
L o c h n ag a r d u r i n g c o nve r s i o n
Lochnagar during conversion, here at the shipyard Victor
Lenac in Rijeka, Croatia. The conversion project started
immediately following the vessel’s arrival at the yard in
February 1998.
T h e p i p e - l ay i n g ve s s e l L o c h n ag a r
Lochnagar after completion of conversion. The vessel is
chartered on an 8-year contract with DSND, which will use
the vessel in Brazil in the first part of the contract period.
FA R S TA D
S H I P P I N G A S A
PO Box 1301, 6001 •lesund
Notenesgt.14
Norway
Te l : + 4 7 7 0 1 2 4 4 6 0
Fax: +47 70 12 85 30
T l x : 4 2 7 5 5 T Y FA R N
e-mail: [email protected]
FA R S TA D S H I P P I N G LT D .
F a r s t a d H o u s e , B a d e n t o y Av e n u e .
Badentoy Park, Portlethen,
Aberdeen AB12 4YB Scotland
Te l : + 4 4 1 2 2 4 7 8 4 0 0 0
Fax: +44 1 224 783 340
Tlx: 73310
e-mail: [email protected]
Farstad Shipping
• Table of Contents
• Overview
• Summary 1998
FARSTAD SHIPPING ASA
A
N
N
U
A
L
R
E
P
O
R
T
• Key figures
• Report of the Board of Directors
• Income Statement
• Balance Sheet
• Cash Flow Analysis
• Notes
• Shareholders Policy
Main menu
HUGIN 1999. All rights reserved

PDF - Farstad Shipping

Transcription

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