Eneti Inc. reported its results for the three months ended June 30, 2023.
The Company also announced that on August 8, 2023 its board of directors (the “Board of Directors”) declared a quarterly cash dividend of $0.01 per share on the Company’s common shares.
Results for the Three and Six Months Ended June 30, 2023 and 2022
• For the second quarter of 2023, the Company’s GAAP net loss was $49.8 million, or $1.36 per diluted share, including:
o a write-down of assets classified as held for sale of $49.3 million or $1.35 per diluted share,
o transaction costs of $3.3 million or $0.09 per diluted, consisting primarily of legal and consulting services, related to its pending business combination with Cadeler A/S.
• Total revenues for the second quarter of 2023 were $38.8 million, compared to $61.3 million for the same period in 2022. Second quarter 2023 revenues were driven by high vessel utilization. The Seajacks Scylla worked at an offshore wind farm project in the Netherlands throughout the quarter and the Seajacks Zaratan worked on the Yunlin project offshore Taiwan beginning in June 2023. In addition the Company’s three NG2500Xs continued to perform maintenance on offshore gas production platforms and wind turbine gear maintenance, and consulting revenue.
• Vessel operating costs primarily consist of crew costs, fuel costs and catering (fuel and catering are typically recharged to clients and presented on a gross basis in both revenue and vessel operating costs), despite the cost of fuel decreasing from previous periods due to less vessel transit during the quarter.
• For the second quarter of 2023, the Company’s adjusted net income was $2.8 million, or $0.08 adjusted per diluted share, which excludes the impact of the approximately $49.3 million write-down of the NG2500Xs, which were classified as held for sale and $3.3 million of transaction costs incurred related to the pending business combination with Cadeler A/S (see Non-GAAP Financial Measures below).
• For the second quarter of 2022, the Company’s GAAP net income was $52.7 million, or $1.36 per diluted share, including a gain of approximately $28.3 million and cash dividend income of $0.2 million, or $0.73 per diluted share, from the Company’s former equity investment in Scorpio Tankers Inc.
• Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the second quarter of 2023 was a loss of $37.3 million and EBITDA for the second quarter of 2022 was $60.2 million. Adjusted EBITDA for the second quarter of 2023 was $15.3 (see Non-GAAP Financial Measures below).
• For the first half of 2023, the Company’s GAAP net loss was $67.4 million, or $1.84 per diluted share including:
o a write-down of assets classified as held for sale of $49.3 million or $1.35 per diluted share,
o transaction costs of $3.3 million or $0.09 per diluted, consisting primarily of legal and consulting services, related to the pending business combination with Cadeler A/S.
• Total revenues for the first half of 2023 were $52.7 million compared to $83.7 million for the same period in 2022. First half 2023 revenues were generated primarily by the Seajacks Scylla, which worked at an offshore wind farm project in the Netherlands, as well as the Company’s three NG2500Xs which performed maintenance on offshore gas production platforms and wind turbine gear maintenance, and consulting revenue. The Seajacks Zaratan began work on the Yunlin project offshore Taiwan in June 2023.
• For the first half of 2023, the Company’s adjusted net loss was $14.8 million, or $0.40 adjusted per diluted share, which excludes the impact of the write-down of the NG2500Xs, which were classified as held for sale, of approximately $49.3 million and the $3.3 million of transaction costs incurred related to the pending business combination with Cadeler A/S (see Non-GAAP Financial Measures below).
• For the first half of 2022, the Company’s GAAP net income was $56.9 million, or $1.46 per diluted share, including a gain of approximately $46.8 million and cash dividend income of $0.4 million, or $1.22 per diluted share, from the Company’s equity investment in Scorpio Tankers Inc.
• EBITDA for the first half of 2023 was a loss of $47.6 million and EBITDA for the first half of 2022 was $74.4 million. Adjusted EBITDA for the first half of 2023 was $5.0 million (see Non-GAAP Financial Measures below).
Liquidity
As of August 4, 2023, the Company had approximately $85.9 million in cash.
Newbuildings
The Company is currently under contract with Daewoo Shipbuilding and Marine Engineering (“DSME”) for the construction of two next-generation offshore wind turbine installation vessels (“WTIV”). The aggregate contract price is approximately $654.8 million, of which $131.0 million has been paid. The WTIVs are expected to be delivered in the fourth quarter of 2024 and second quarter of 2025, respectively. The estimated future payment dates and amounts are as follows (1) (dollars in thousands):
Business Combination
During the second quarter of 2023, the Company and Cadeler A/S, another offshore wind turbine and foundation installation company, entered into a business combination agreement to combine through a stock-for-stock exchange offer to be made to all stockholders of Eneti based on an exchange ratio of 3.409 Cadeler shares for each Eneti share (the “Exchange Offer”).
Following the completion of the Exchange Offer, Cadeler and Eneti shareholders will own approximately 60% and 40% of the combined company, respectively, on the basis of the share counts for each of Cadeler and Eneti as of June 16, 2023 and assuming all outstanding Eneti shares are exchanged for Cadeler shares in the Exchange Offer.
The combined entity will be named Cadeler A/S and the combination is expected to close in the fourth quarter of 2023; subject to regulatory approvals and applicable conditions being met. Additional information about the business combination can be found in the Company’s previously furnished report on Form 6-K, dated June 16, 2023.
Sale of NG 2500X Vessels
During July 2023, the Company entered into an agreement with an unaffiliated third party to sell the Seajacks Hydra, Seajacks Leviathan and the Seajacks Kraken for approximately $70.0 million in aggregate. Delivery of the vessels are expected to take place before the end of 2023. The sale is expected to provide net cash proceeds of approximately $56.8 million after the repayment of amounts due on the term loan tranche under the $175.0 Million Credit Facility.These vessels were classified as held for sale as of June 30, 2023.
Award of New Contracts
During July 2023, Seajacks UK Limited, a wholly-owned subsidiary of the Company, has signed two new contracts in the offshore wind sector in NW Europe for between 62 and 82 days of employment for two of its NG2500X-class vessels that will generate between approximately $5.2 million and $6.7 million of revenue in 2023.
Intention to Enter into Joint Venture for Offshore Wind Foundation Installation
In April 2023, Eneti entered into a non-binding memorandum of understanding indicating its intention to form a joint venture company with Transocean Ltd. (“Transocean”) that will engage in offshore wind foundation installation activities.
Debt Overview
The Company’s outstanding debt balances, gross of unamortized deferred financing costs as of June 30, 2023 and August 4, 2023, are as follows (dollars in thousands):
The Company has undrawn availability under a $75.0 Million Revolving Loans of the above-mentioned $175.0 Million Credit Facility.
Performance Bonds
As of June 30, 2023, performance bonds were issued on behalf of the Company for $1.9 million, which was cash collateralized. In July 2023, the performance bond was cancelled and the cash collateral was released back to the Company.
Quarterly Cash Dividend
In the second quarter of 2023, the Board of Directors declared, and the Company paid, a quarterly cash dividend of $0.01 per share totaling approximately $0.4 million.
On August 8, 2023, the Board of Directors declared a quarterly cash dividend of $0.01 per share, payable on or about September 15, 2023, to all shareholders of record as of August 28, 2023. As of August 8, 2023, there were 38,647,119 common shares outstanding.
Conflict in Ukraine
As a result of the conflict between Russia and Ukraine which commenced in February 2022, the United States, the European Union, and others have announced unprecedented levels of sanctions and other measures against Russia and certain Russian entities and nationals. The ongoing conflict has disrupted supply chains and caused instability and significant volatility in the global economy. Much uncertainty remains regarding the global impact of the conflict in Ukraine and it is possible that such instability, uncertainty and resulting volatility could significantly increase our costs and adversely affect our business. These uncertainties could also adversely affect our ability to obtain additional financing or, if we are able to obtain additional financing, to do so on terms favorable to us. We will continue to monitor the situation to assess whether the conflict could have any material impact on our operations or financial performance.
