RigNet Revenues Climb after Settling Contract Dispute
[Via Satellite 05-10-2016] RigNet revenue increased by $10.2 million for the first quarter of 2016 over the previous quarter to $62.3 million, thanks primarily to the settlement of a contract dispute between a customer and its Telecoms Systems Integration (TSI) division. TSI revenue increased $12.8 million, offset partially by a $2.6 million decrease from RigNet’s Managed Services division.
RigNet reported the contract dispute with a customer in Australia this March. Having resolved this dispute, the company has reduced the accrued estimated loss from $14.3 million to $12 million for the life of this project, hence recognizing incremental adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) in the quarter of $2.1 million consisting of revenue of $2.3 million and $200,000 in legal fees. The company believes it will complete the project in the second quarter of 2016.
Year over year, RigNet revenues decreased $15.3 million compared to the prior year quarter. The decrease compared to the prior year resulted primarily from managed services revenue, which decreased $12.7 million. The company attributed these decreases mainly to reduced spending by oil and gas operators on upstream drilling projects as a result of lower commodity prices.
Quarterly adjusted EBITDA were $10.7 million compared to negative $3.2 million in the prior quarter and $17.1 million in the prior year quarter. The increase since the prior quarter was due to the settlement of the TSI dispute coupled with cost containment actions partially offset by lower managed services results. The decrease compared to the prior year quarter resulted primarily from lower revenue partially offset by benefits from cost containment actions.