Dolphin Offshore to acquire 2 vessels for $70 mn in 2 years

Dolphin Offshore has signed a pact with Paxocean Engineering for construction of two vessels for USD 70 million.Navpreet Singh, Chief Financial Officer (CFO) of Dolphin Offshore told CNBC-TV18 that the vessels will be delivered over the next two years. The company will take loan to pay 85 percent of the total amount for the ships while the remaining 15 percent will be from internal capital, he adds. The ships are multipurpose and technologically advanced. The total vessel capacity of the company will be 12 ships in two years once the new vessels come in. Singh expects the company to remain debt free for next two years till the payment has to be made. Decreased offshore activities due to monsoon will impact the second quarter, he says adding that the growing marine business will instead boost growth. Below is the transcript of Navpreet Singh’s interview with Reema Tendulkar & Anuj Singhal on CNBC-TV18.Anuj: If you could tell us about this contract that you have entered with Paxocean if you could take us through the contour of the two deal and how is this going to help you?A: We have signed the contract with the Paxocean Group for building of two ships last week and these ships would be delivered to us in about 22 months and 24 respectively. The ships are basically larger version and more technically advanced versions of vessels that we already have in our fleet. One is 400 Men DP3 Accomodation Barge which makes it about one of our new 4 or 5 of such barges in the world today. The second is the multipurpose offshore construction vessel with accommodation for 150 passengers.Reema: What has been the total payout for these two vessels and what would your capacity now stand at?A: As a company we currently own ten vessels so with these two vessels coming into the fleet two years from now will go up to 12 vessels. In terms of the capex payout is approximately about USD 70 million.Anuj: Last quarter was not good for you. What is the outlook for the rest of the financial year?A: Second quarter is generally a poor quarter because of the monsoon season in terms of the offshore engineering, procurement and construction (EPC) work but our marine activities has been continuously doing well and that will remain much in situation going forward from here.Reema: With this payout of USD 70 million what will the balance sheet look like now in terms of debt as well cash if any?A: The major payouts will only take place on the delivery of the vessels. So for the next two years we are still pretty much long-term debt free company. We have some working capital in parent company. The subsidiary company where these vessels are being bought is currently a totally debt free company. The loan draw down will take place two years from now when the vessels are delivered so there will no t be much change in the balance sheet in that context.Reema: Do you generate any operating cashflows which will be used for the USD 70 million or the entire funding will be done via a loan? A: While 85 percent is funded by the banks, 15 percent is funded from internal resources, but generally what we need to invest will be about USD 11 million which is less than one year’s cash accruals.