GulfMark Offshore reports record results for Q2 2008
GulfMark Offshore, Inc. yesterday announced earnings per share of $2.00 for the second quarter and $3.40 for the first half of 2008. Highlights include: Highest Quarterly and First Half Earnings Per Share in Company History Acquired Rigdon Marine on July 1st Immediately Adding 19 Deepwater Gulf of Mexico Vessels Southeast Asia Sequential Quarterly Revenue Growth of 24% and 139% Over Prior Year Americas Revenue Growth of 25% in 2nd Quarter vs. 1st Quarter and 40% Year Over Year
Revenues for the quarter of $81.9 million increased $7.6 million over the same period in the prior year principally due to increased day rates in our Southeast Asia and Americas regions. Net income for the second quarter was $46.8 million, or $2.00 per diluted share, including a gain of $16.4 million from the sale of two vessels, representing a 52% increase over the prior year level.
Revenues for the first six months of 2008 increased 18.2% over the same period in the prior year to $165.2 million resulting from higher revenues from all regions. Net income was $79.0 million, or $3.40 per diluted share, including the gains on the vessel sales, which represents a 43.5% increase in net income compared to the same period in the previous year.
Compared to the first quarter this year revenues decreased $1.4 million, or 1.7%, as a result of the strategic positioning of several vessels to earn higher revenues in future quarters, increased drydock days and lower revenue in the North Sea, partially offset by improved revenue from Southeast Asia and the Americas. Net income increased $14.5 million compared to the first quarter of 2008 due primarily to the gain on vessel sales. Bruce Streeter, President and CEO, commented: "Although concluded on the first day of the third quarter, the major accomplishment of the second quarter was obviously our coming to an agreement and subsequently closing the Rigdon Marine acquisition. As we've previously noted, we believe this immediate entry into a leading position in the U.S. Gulf comes at a time when the current and forward looking fundamentals of that market are very favorable. Day rates in this region are moving up and a recent report suggested that supply vessel utilization hit 100% in the month of June. "With regards to the second quarter results, several areas deserve to be pointed out. First is the tremendous growth in the Southeast Asia region. Since the beginning of 2007 we have sold six older vessels operating in this region and have taken delivery of five new builds, the most recent being the Sea Choctaw in mid-July this year which has already started work on a one-year plus options charter in Vietnam. The combination of our vessel renewal initiative and the strengthening of day rates in the region have more than doubled this region's revenue and operating profits year over year. During the second quarter, we substituted the Sea Kiowa for the Sea Apache and have completed the modifications required for its initial two-year charter with Petrobras. The Sea Kiowa is currently underway to Brazil and is due to go on-hire late in the third quarter. "The second area relates to our positioning for future quarters and the impact on the current quarter. As I noted on the conference call on July 8th, we took steps during the second quarter that, while negatively impacting revenue this quarter, improves our position as it relates to revenue and earnings in future quarters. We incurred a total of 156 drydock days in the quarter versus the 110 estimated, resulting in lost revenue of approximately $3 million and a 3.5% reduction in overall fleet utilization. The advantage to the remainder of the year is we have now completed the majority of our planned drydocks for the year, 12 out of 18, and accomplished two dynamic positioning (DP) conversions. Also, as we've discussed, two of our large North Sea based anchor handlers are due to begin term contracts in West Africa by mid-August. One of these vessels mobilized to a North Sea shipyard to undergo a DP conversion while completing its drydock, thus ensuring 100% availability once it begins its contract, but adversely affecting 2nd quarter revenues.
"Lastly, we completed the sale of two older vessels during the quarter, the Sea Diligent, a 1981-built anchor handler, and the North Crusader, a 1984-built anchor handler. As has been the case in all of our vessel sales, we sold both of them at a profitable level, generating a gain of $16.4 million on sales proceeds of $21.4 million. Also, early in the third quarter we completed the sale of the Sem Valiant, another 1981-built anchor handler, for an estimated $0.9 million profit. These sales are part of our continued fleet evaluation and renewal initiative, and in the case of the North Crusader, resulted in an addition to our managed fleet.
"Overall we are very satisfied with the achievements of the quarter and year to date. In comparing average vessel day rates mid-year compared to the previous year, we are pleased to note increases in each region. Reports indicate that our regions should continue to benefit from strong demand both in the near future and the longer-term as potential continues to develop in areas such as Brazil, the deepwater Gulf of Mexico, West Africa and Southeast Asia. The addition of Rigdon Marine, with its 22 vessels currently operating and 6 under construction, comes at optimal time coupled with the 11 remaining GulfMark new builds set to deliver over the next two years. We've significantly strengthened and diversified our operating base for the remainder of 2008 and are well positioned to continue to increasing shareholder value over the long-term."
Cash flow from operations totaled $76.6 million for the six months ended June 30, 2008, compared to $56.4 million for the same period in 2007. Cash from operations plus cash on hand were used to fund approximately $62.9 million in capital expenditures primarily related to the new build program. Estimated remaining cash commitments for 2008 under the new build program, including the new build program of Rigdon Marine, are approximately $51.7 million and are expected to be funded from a combination of cash flow from operations, available cash, and borrowings under the credit facilities assumed in the Rigdon Marine acquisition.
Liquidity at quarter-end was $295.5 million, consisting of $261.4 million of working capital and $34.1 million available under the $175.0 revolving credit facility. The working capital balance included $214.7 million of cash that included a $140 million draw on our revolver that was done in anticipation of our July 1 closing of the Rigdon Marine acquisition. Total debt at June 30, 2008 was $300.5 million, comprised of $159.6 million for the 7.75% senior notes due 2014 and $140.9 million on the revolver. On July 1, 2008, we closed the Rigdon acquisition, utilizing $150 million of our cash on hand at the end of the quarter and assumed approximately $269 million of existing Rigdon debt and $26 million of working capital. Concurrent with the closing of the acquisition, we repaid $33 million of acquired construction loans. Upon completing the transaction our total outstanding indebtedness increased to approximately $536 million.
GulfMark Offshore, Inc. provides marine transportation services to the energy industry through a fleet of ninety (90) offshore support vessels that serve every major offshore energy industry market in the world.
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involve known and unknown risk, uncertainties and other factors. Among the factors that could cause actual results to differ materially are: price of oil and gas and their effect on industry conditions; industry volatility; fluctuations in the size of the offshore marine vessel fleet in areas where GulfMark operates; changes in competitive factors; delay or cost overruns on construction projects and other material factors that are described from time to time in the GulfMark's filings with the SEC, including its Form 10-K for the year ended December 31, 2007. Consequently, the forward-looking statements contained herein should not be regarded as representations that the projected outcomes can or will be achieved.
Revenues for the quarter of $81.9 million increased $7.6 million over the same period in the prior year principally due to increased day rates in our Southeast Asia and Americas regions. Net income for the second quarter was $46.8 million, or $2.00 per diluted share, including a gain of $16.4 million from the sale of two vessels, representing a 52% increase over the prior year level.
Revenues for the first six months of 2008 increased 18.2% over the same period in the prior year to $165.2 million resulting from higher revenues from all regions. Net income was $79.0 million, or $3.40 per diluted share, including the gains on the vessel sales, which represents a 43.5% increase in net income compared to the same period in the previous year.
Compared to the first quarter this year revenues decreased $1.4 million, or 1.7%, as a result of the strategic positioning of several vessels to earn higher revenues in future quarters, increased drydock days and lower revenue in the North Sea, partially offset by improved revenue from Southeast Asia and the Americas. Net income increased $14.5 million compared to the first quarter of 2008 due primarily to the gain on vessel sales. Bruce Streeter, President and CEO, commented: "Although concluded on the first day of the third quarter, the major accomplishment of the second quarter was obviously our coming to an agreement and subsequently closing the Rigdon Marine acquisition. As we've previously noted, we believe this immediate entry into a leading position in the U.S. Gulf comes at a time when the current and forward looking fundamentals of that market are very favorable. Day rates in this region are moving up and a recent report suggested that supply vessel utilization hit 100% in the month of June. "With regards to the second quarter results, several areas deserve to be pointed out. First is the tremendous growth in the Southeast Asia region. Since the beginning of 2007 we have sold six older vessels operating in this region and have taken delivery of five new builds, the most recent being the Sea Choctaw in mid-July this year which has already started work on a one-year plus options charter in Vietnam. The combination of our vessel renewal initiative and the strengthening of day rates in the region have more than doubled this region's revenue and operating profits year over year. During the second quarter, we substituted the Sea Kiowa for the Sea Apache and have completed the modifications required for its initial two-year charter with Petrobras. The Sea Kiowa is currently underway to Brazil and is due to go on-hire late in the third quarter. "The second area relates to our positioning for future quarters and the impact on the current quarter. As I noted on the conference call on July 8th, we took steps during the second quarter that, while negatively impacting revenue this quarter, improves our position as it relates to revenue and earnings in future quarters. We incurred a total of 156 drydock days in the quarter versus the 110 estimated, resulting in lost revenue of approximately $3 million and a 3.5% reduction in overall fleet utilization. The advantage to the remainder of the year is we have now completed the majority of our planned drydocks for the year, 12 out of 18, and accomplished two dynamic positioning (DP) conversions. Also, as we've discussed, two of our large North Sea based anchor handlers are due to begin term contracts in West Africa by mid-August. One of these vessels mobilized to a North Sea shipyard to undergo a DP conversion while completing its drydock, thus ensuring 100% availability once it begins its contract, but adversely affecting 2nd quarter revenues.
"Lastly, we completed the sale of two older vessels during the quarter, the Sea Diligent, a 1981-built anchor handler, and the North Crusader, a 1984-built anchor handler. As has been the case in all of our vessel sales, we sold both of them at a profitable level, generating a gain of $16.4 million on sales proceeds of $21.4 million. Also, early in the third quarter we completed the sale of the Sem Valiant, another 1981-built anchor handler, for an estimated $0.9 million profit. These sales are part of our continued fleet evaluation and renewal initiative, and in the case of the North Crusader, resulted in an addition to our managed fleet.
"Overall we are very satisfied with the achievements of the quarter and year to date. In comparing average vessel day rates mid-year compared to the previous year, we are pleased to note increases in each region. Reports indicate that our regions should continue to benefit from strong demand both in the near future and the longer-term as potential continues to develop in areas such as Brazil, the deepwater Gulf of Mexico, West Africa and Southeast Asia. The addition of Rigdon Marine, with its 22 vessels currently operating and 6 under construction, comes at optimal time coupled with the 11 remaining GulfMark new builds set to deliver over the next two years. We've significantly strengthened and diversified our operating base for the remainder of 2008 and are well positioned to continue to increasing shareholder value over the long-term."
Cash flow from operations totaled $76.6 million for the six months ended June 30, 2008, compared to $56.4 million for the same period in 2007. Cash from operations plus cash on hand were used to fund approximately $62.9 million in capital expenditures primarily related to the new build program. Estimated remaining cash commitments for 2008 under the new build program, including the new build program of Rigdon Marine, are approximately $51.7 million and are expected to be funded from a combination of cash flow from operations, available cash, and borrowings under the credit facilities assumed in the Rigdon Marine acquisition.
Liquidity at quarter-end was $295.5 million, consisting of $261.4 million of working capital and $34.1 million available under the $175.0 revolving credit facility. The working capital balance included $214.7 million of cash that included a $140 million draw on our revolver that was done in anticipation of our July 1 closing of the Rigdon Marine acquisition. Total debt at June 30, 2008 was $300.5 million, comprised of $159.6 million for the 7.75% senior notes due 2014 and $140.9 million on the revolver. On July 1, 2008, we closed the Rigdon acquisition, utilizing $150 million of our cash on hand at the end of the quarter and assumed approximately $269 million of existing Rigdon debt and $26 million of working capital. Concurrent with the closing of the acquisition, we repaid $33 million of acquired construction loans. Upon completing the transaction our total outstanding indebtedness increased to approximately $536 million.
GulfMark Offshore, Inc. provides marine transportation services to the energy industry through a fleet of ninety (90) offshore support vessels that serve every major offshore energy industry market in the world.
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involve known and unknown risk, uncertainties and other factors. Among the factors that could cause actual results to differ materially are: price of oil and gas and their effect on industry conditions; industry volatility; fluctuations in the size of the offshore marine vessel fleet in areas where GulfMark operates; changes in competitive factors; delay or cost overruns on construction projects and other material factors that are described from time to time in the GulfMark's filings with the SEC, including its Form 10-K for the year ended December 31, 2007. Consequently, the forward-looking statements contained herein should not be regarded as representations that the projected outcomes can or will be achieved.