Orbital Minimizes Financial Impact of Antares Failure

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TURIN, Italy — Orbital Sciences Corp. officials on Oct. 29 sought to reassure investors that the Oct. 28 failure of the company’s Antares rocket just 15 seconds after ignition, which destroyed the Cygnus capsule carrying freight for the international space station under a NASA contract, will have minimal impact on Orbital’s financial performance and operations.

In a conference call with investors some 18 hours after the failure, Orbital Chief Executive David W. Thompson said that while it is too early to determine the failure’s cause and precise consequences, the company’s near-term plans will not change:

  • Orbital’s planned merger with the Aerospace and Defense division of ATK Corp., Thompson said, should not be affected, although he did not rule out a delay in a planned shareholder vote on the merger.
  • Orbital’s planned November bid to NASA for a follow-on space station logistics contract, called Commercial Resupply Services (CRS) 2, will proceed as scheduled. Thompson said this bid had always featured an upgraded Antares rocket with a new first-stage engine to replace the Russian AJ26 engine used now.
  • Orbital’s forecast for 2014 revenue and operating profit will not change even if a projected profit increase in the current NASA CRS contract does not materialize due to the failure.
  • Orbital will continue to book milestones on the current CRS contract, valued at $1.9 billion, under which revenue is recorded on a percent-of-completion basis. The company will continue to work on the next Antares rocket, and on the next Cygnus cargo module, and book revenue accordingly despite the failure.

In the conference call, Thompson said Orbital had collected a rich harvest of telemetry and visual data that should make it easier for a board of inquiry that includes the company, NASA, the U.S. National Transportation Safety Board and the Mid-Atlantic Regional Spaceport at NASA’s Wallops Flight Facility in Virginia, where the launch occurred.

The Oct. 28 launch was the fifth for Antares, and the fourth carrying the Cygnus space station supply capsule.

Given when the failure occurred, just 15 seconds after ignition, attention is focused on the Russian-made AJ26 first-stage engine, which Thompson noted has shown anomalies in the past during ground tests. The engine is imported and refurbished by Aerojet Rocketdyne of Sacramento, California.

But in a phrase he would repeat multiple times during the conference call, Thompson said “it’s too soon to say” whether the engine was the culprit in the explosion. Should that turn out to be the case, he said, Orbital might be able to reduce the planned two-year development period for the AJ26 replacement.

Isolating the approximate cause of the failure, given the voluminous telemetry and video data available, should take no more than several days, Thompson said. But determining the most probable root cause will take additional time.

The next scheduled Antares flight in April, also a Cygnus cargo run to the space station, likely will slip, Thompson said. It is not clear by how long, but it could be a few months, and perhaps as long as a year depending on what the inquiry board concludes, Thompson said.

He said it is also not yet clear how much sooner than 2017 the new main-stage engine — which Orbital says it has selected but declines to identify — could be incorporated into Antares. Orbital has been seeking an alternative to the AJ26 since mid-2013 and went as far as to sue Denver-based United Launch Alliance, which builds the U.S. Atlas rockets, for access to that vehicle’s Russian-built RD-180 engine.

Orbital subsequently dropped the lawsuit, which was based on antitrust grounds, against ULA and RD Amross LLC, the U.S.-Russian joint venture that imports the RD-180 for use as the Atlas first-stage engine, following a settlement whose terms have not been disclosed.

In an Oct 24 filing with the U.S. Securities and Exchange Commission (SEC), Orbital said it continues to “negotiate a business resolution with ULA for our access to the RD-180 rocket engine, subject to all necessary approvals from the U.S. and Russian governments. … If a mutually agreeable resolution is not reached, we will have the option to re-file our lawsuit against ULA.”

Orbital has declined to respond to requests for comment on how to reconcile the company’s selection of an AJ26 replacement, which the company confirmed in October, with the continued search for access to the RD-180.

Orbital is preparing a bid for a follow-on CRS contract to cover launches to the space station through 2024, which is NASA’s planned retirement date for the orbital complex. Thompson said Orbital’s bid, to be submitted in November, always included the new first-stage engine and thus will not be delayed or otherwise modified.

Orbital has said it is positioning an upgraded Antares to attract customers beyond NASA’s space station program. Thompson said that insofar as the Oct. 28 failure may accelerate the planned replacement of the AJ26, it may bolster Antares’ chances in winning U.S. Air Force and commercial business.

Dulles, Virginia-based Orbital had placed a $48 million insurance policy on the Oct. 28 mission. A separate insurance policy covers damage to the launch pad and associated facilities, which in any case appear to be minimal, Thompson said.