Trio of Satellite Orders Ends Nine-month Dry Spell for Orbital Sciences

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GLASGOW, Scotland — Satellite, rocket and missile-defense vehicle manufacturer Orbital Sciences on Sept. 18 said a nine-month dry spell in commercial satellite orders had ended with the signing of three firm telecommunications satellite contracts and an option for a fourth.

In a conference call with investors, Orbital Chief Executive David W. Thompson did not name the customers. But industry officials said two of the satellites were with DirecTV of Los Angeles and intended to meet surging demand for Innova/Sky Mexico, a DirecTV-Grupo Televisa joint venture providing satellite television in Mexico.

Televisa had told investors earlier to expect some $300 million in capital spending in 2013 for Innova, which leases capacity on a half-dozen satellites, with a 24-transponder agreement with Intelsat for the IS-21 satellite.

The third Orbital order, one industry official said, is with Thai satellite fleet operator Thaicom, for the Thaicom 8 satellite. Thaicom 6, built by Orbital, is awaiting launch aboard the new version of Space Exploration Technologies Corp.’s Falcon 9 rocket, a launch tentatively scheduled for this fall.

Orbital has been in negotiations with Indosat of Indonesia for the Palapa-E satellite as well.

Thompson said that by Orbital’s count, 13 commercial geostationary-orbiting telecommunications satellites have been ordered so far this year, of which Orbital has won all three that were in the company’s product range of lower-power spacecraft.

The new orders will help reverse a slide in Orbital’s Satellites and Space Systems division, which posted a 28 percent decline in revenue for the three months ending June 30 as satellites under construction neared completion and were not replaced by fresh orders. The division’s decline was the main reason Orbital reported a 10 percent drop in revenue, to $333.1 million, for the three months ending June 30 compared to the same period a year ago.

But the company’s operating profit rose to 7.9 percent of revenue compared to 7 percent a year ago.

The Satellites and Space Systems division also reported higher operating income margins — 11.3 percent of revenue compared to 8.2 percent a year ago, despite the revenue fall. The division’s higher profitability was attributed to Orbital’s ability to complete satellites under construction without using the cash reserves set aside to pay for manufacturing hiccups.

“For Orbital, up until just two months ago the commercial satellite business had been pretty weak in terms of new orders” since mid-2012, Thompson said during the conference call, noting that the company had booked no new orders since early 2012. “It looks like that’s turned around now.”

Antares Maiden Flight and RD-180 Lawsuit

A thorough review of the April inaugural flight of Orbital’s new Antares rocket has confirmed that it was “essentially flawless,” Thompson said. Orbital has scheduled the next flight for September, when the rocket will carry the first Cygnus cargo module to the international space station under contract to NASA.

The second Antares/Cygnus flight, which is part of a second NASA contract called Commercial Resupply Services, is scheduled for November or December from the rocket’s Wallops Island, Va., spaceport, Thompson said.

Thompson did not address Orbital’s antitrust lawsuit against United Launch Alliance (ULA) of Denver, which Orbital filed to force ULA not to use its exclusivity agreement with the providers of the Russian RD-180 rocket engine, which powers ULA’s Atlas 5 vehicle, to block Orbital’s attempts to purchase RD-180s for Antares.

Thompson reiterated that the supply of AJ-26 engines, purchased through Aerojet Rocketdyne, is limited. Aerojet Rocketdyne Chief Executive Warren M. Boley Jr. told reporters in June that the company could ensure a long-term supply of AJ-26 engines if Orbital would sign a contract guaranteeing the purchases.

Orbital’s Antares uses two AJ-26 engines per launch. Thompson said between 26 and 30 engines are available in the current AJ-26 inventory, which will meet the current Antares demand through 2016.

By mid-2014, he said, Orbital needs to settle on a long-term supply of Antares first-stage engines.

Orbital has been selected to provide a large air-launched rocket for startup StratoLaunch Inc. of Huntsville, Ala. The rocket would lift off aboard a purpose-built StratoLaunch carrier being designed by Scaled Composites of Mojave, Calif., a division of Northrop Grumman.

“It’s pretty ambitious from a technical standpoint,” Thompson said of the StratoLaunch concept. “You won’t see test flights or other major operational activities until the second half of the decade.”

Orbital booked a $4 million cash payment in the three months ending June 30 that the company said was for a settlement. Orbital Chief Financial Officer Garrett E. Pierce declined to elaborate on the nature of the settlement during the call.

Missile Defense

Orbital is a major contractor to the U.S. Missile Defense Agency (MDA) and it supplies solid-rocket boosters for the Ground-based Midcourse Defense (GMD) missile defense system, which suffered its latest failed intercept attempt July 5.

MDA’s director, Navy Vice Adm. James D. Syring, told congressional budget appropriators July 17 that the failure was caused by the inability of the exoatmospheric kill vehicle to separate from the booster’s third stage. “It wasn’t the booster,” Syring said.

Thompson declined to discuss the failed intercept in detail, but said it “probably underscores the need for more-frequent testing.” He said GMD testing of longer-range, higher-speed intercepts has occurred at a rate of no more than one per year, while the shorter-range missile-defense systems have had three to four tests per year.

The more tests, the better the business is for Orbital, Thompson said.

 

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