GulfMark Offshore Announces Third Quarter 2010 Operating Results

Oct 26, 2010, 19:30 ET from GulfMark Offshore, Inc.

HOUSTON, Oct. 26 /PRNewswire-FirstCall/ -- GulfMark Offshore, Inc. (NYSE: GLF) today announced the results of operations for the three- and nine-month periods ended September 30, 2010. For the three months ended September 30, 2010, revenue was $94.5 million. Net income for the same period was $19.2 million, or $0.75 per diluted share. The results for the quarter ended September 30, 2010, include a gain of $5.2 million, or $0.21 per diluted share, on the sale of the 1998-built North Traveller, a PSV operating in the North Sea.

Results of Operations

Revenue for the third quarter of 2010 was $94.5 million, an increase of 2%, or $1.7 million, over the second quarter of 2010. Average day rate in each of the three operating segments increased on a sequential quarterly basis; however, utilization was lower in all three regions for the same period. Utilization was impacted by increased drydock activity, particularly in the North Sea and the Americas. Also, during the quarter, the Company repositioned certain vessels out of the Gulf of Mexico, including relocating four vessels to Brazil to begin long-term contracts with Petrobras, which adversely impacted utilization in the Americas region.

In the North Sea, revenue increased $1.1 million to $38.3 million for the quarter. The average day rate increased 7% from the second quarter to $17,637. Of this percentage increase in average day rate, approximately 4% was due to the foreign currency effect of a weakening U.S. dollar.  Utilization in the North Sea decreased 4% from the prior quarter.

Revenue in the Americas was down $0.5 million to $38.3 million for the quarter. The average day rate was $15,830, up 17% from the second quarter average. However, utilization in the Americas decreased 16 percentage points to 76% for the third quarter. Utilization in the Americas was adversely impacted by the drydocking and subsequent relocation of four vessels to Brazil during the quarter.

Revenue for the third quarter in Southeast Asia was $17.9 million, up 6%, or $1.0 million, from the prior quarter. The average day rate in the region was $16,841, up slightly from the respective second quarter average. Utilization in Southeast Asia was 85.2%, down 8 percentage points sequentially. Utilization in Southeast Asia was impacted by the delivery of the last two vessels in the new-build program. After delivery in Poland in late June, these two vessels were transitioned to Southeast Asia.

Drydock expense was approximately $7.2 million in the third quarter, an increase of $1.1 million from the second quarter of 2010. Full-year 2010 drydock expense is still expected to be approximately $22.0 million, which results in a drydock expense expectation for the fourth quarter of $1.7 million.

Direct operating expenses for the third quarter were $41.7 million, down slightly from the second quarter of 2010, but in line with anticipated direct operating expenses prior to capitalized mobilization costs. During the quarter, costs of $1.4 million related to the mobilization of the four vessels to Brazil were capitalized and will be amortized over the four-year life of the contracts.

Operating income before special items was $20.8 million, up 12%, or $2.2 million, from the second quarter. The increase was driven by an increase in revenue of $1.7 million accompanied by approximately $0.5 million of lower operating costs. Reported net income for the quarter was $19.2 million, or $0.75 per diluted share.

Commentary

Bruce Streeter, President and CEO, commented, "The third quarter was better than we expected. The decrease in drilling activity in the Gulf of Mexico was offset by prolonged spill response work, but as the quarter progressed, particularly in September, we began to feel the impact of the drilling moratorium. In the Gulf of Mexico, we, along with everyone else, lack a clear understanding of the near-term activity levels. As such, the outlook for the remainder of 2010 remains uncertain.

"As previously disclosed, we have taken steps to relocate a portion of our U.S. fleet to Trinidad, Mexico and Brazil, and we will continue to look at selectively relocating vessels to other markets. We expect that our results for the fourth quarter will be adversely impacted by the drilling moratorium. The expiration of the drilling moratorium is positive, but until the de facto moratorium created by the unwillingness of the BOEM to issue drilling permits is changed, our near-term outlook for the Gulf of Mexico will be weak. In addition, our long-term outlook for the Gulf of Mexico will continue to deteriorate the longer the de facto moratorium remains in place.

"Our international operations have performed well. The North Sea had a solid third quarter. Revenue and average day rates were up nicely in both the Norwegian and U.K. sectors of the North Sea. Excluding the impact of the delivery of the Sea Valiant and the Sea Victor into Southeast Asia, quarterly utilization was 98% in that region. Southeast Asia has seen a sharp increase in the supply of vessels during 2010, and that increase in supply is likely to continue to impact utilization in that region over the next few quarters. The newly delivered vessels have arrived in Southeast Asia and are ready for work, but have not yet obtained employment. Despite the lack of benefit from the new vessels, day rates, and more importantly revenue, for Southeast Asia have both increased on a sequential quarterly basis."

Mr. Streeter continued, "We remain optimistic about the future, although we expect that the fourth quarter will be a soft quarter, impacted by the de facto drilling moratorium and seasonality in the North Sea. Our focus is on longer-term positive developments. The current price of oil should continue to increase drilling and exploration expenditures, and activity in the international marketplace. GulfMark's existing international presence allows us to capture the short-term, and more importantly, the longer-term benefit of continued international expansion. We feel that deepwater drilling in the Gulf of Mexico will rebound once the industry receives regulatory clarity, and this clarity combined with a general economic recovery should provide a strong global marketplace for our vessels. Maintaining a young, technologically advanced fleet results in enhanced utilization throughout the cycle, and we continue to look for those new projects and investments that meet our customers' expectations and improve our fleet value, mix and earning capacity."

Liquidity, Capital Commitments and Contract Cover

Cash flow from operations totaled $18.0 million in the third quarter. Cash on hand at September 30, 2010, was $87.9 million, and as of that date, $10.0 million was drawn on the $175.0 million revolving credit facility. Total debt at September 30, 2010, was $344.7 million, and debt net of cash on hand was $256.8 million. Quarterly principal amortization on the remaining term-loan facility is $8.3 million. There are no remaining capital commitments under the recently completed new-build program. Total contracted future revenue was $673 million as of September 30, 2010, a slight increase over the prior quarter.

Conference Call Information

GulfMark will conduct a conference call to discuss the Company's earnings with analysts, investors and other interested parties at 9:00 a.m. Eastern time on Wednesday, October 27, 2010. Those interested in participating should call 877-317-6789 (international callers use 412-317-6789) 10 minutes in advance of the start time and refer to the GulfMark Third Quarter Earnings conference call. A telephonic replay of the conference call will be available for six days, starting approximately two hours after the completion of the call; the replay can be accessed by dialing 877-344-7529 (international callers should use 412-317-0088) and entering conference # 445372. The conference call will also be available via audio webcast and podcast download, accessible from the Investor Relations section of our website at www.GulfMark.com. A transcript of the call will be furnished to the SEC on Form 8-K as soon as practicable.

GulfMark Offshore, Inc., provides marine transportation services to the energy industry through a fleet of offshore support vessels serving every major offshore energy market throughout the world.

Contact:

Quintin V. Kneen

Executive Vice President &

Chief Financial Officer

E-mail:  

Quintin.Kneen@GulfMark.com

(713) 963-9522

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:  the price of oil and gas and its effect on industry conditions; industry volatility; fluctuations in the size of the offshore marine vessel fleet in areas where the Company 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 Company's filings with the SEC, including the registration statement and the Company's Form 10-K for the year ended December 31, 2009. Consequently, the forward-looking statements contained herein should not be regarded as representations that the projected outcomes can or will be achieved.

Operating Data (unaudited)

Three Months Ended

Nine Months Ended

(dollars in thousands, except per share data)

September 30,

June 30,

September 30,

September 30,

September 30,

2010

2010

2009

2010

2009

Revenue

$         94,479

$  92,782

$         90,764

$       271,912

$       304,215

Direct operating expenses

41,729

42,658

39,508

127,456

119,122

Drydock expense

7,242

6,159

6,398

20,365

11,278

General and administrative expenses

10,236

11,456

11,556

33,423

33,661

Depreciation and amortization expense

14,492

13,977

13,533

42,444

39,049

(Gain) loss on sale of assets

(5,201)

106

4

(5,095)

(5,497)

Impairment charge

-

97,665

-

97,665

46,247

Operating Income (Loss)

25,981

(79,239)

19,765

(44,346)

60,355

Interest expense

(5,807)

(5,062)

(5,146)

(15,858)

(15,229)

Interest income

597

37

128

739

264

Foreign currency gain (loss) and other

(603)

(1,020)

532

158

(884)

Income before income taxes

20,168

(85,284)

15,279

(59,307)

44,506

Income tax benefit (provision)

(961)

(5,447)

(2,577)

9,326

17,340

Net Income (Loss)

$         19,207

$(90,731)

$         12,702

$       (49,981)

$         61,846

Diluted earnings (loss) per share

$             0.75

$    (3.55)

$             0.50

$           (1.96)

$             2.44

Weighted average diluted common shares

25,737

25,546

25,485

25,512

25,343

Other Data

Revenue by Region

North Sea

$         38,340

$  37,217

$         40,722

$       110,832

$       130,957

Southeast Asia

17,867

16,841

19,114

50,535

56,300

Americas

38,272

38,724

30,928

110,545

116,958

Rates Per Day Worked

North Sea

$         17,637

$  16,478

$         20,171

$         16,965

$         20,820

Southeast Asia

16,841

16,817

21,180

17,190

21,033

Americas

15,830

13,486

16,894

14,165

16,605

Overall Utilization

North Sea

91.6%

95.1%

90.5%

93.5%

89.3%

Southeast Asia

85.2%

92.8%

85.8%

87.0%

88.9%

Americas

76.0%

91.7%

57.3%

82.5%

76.2%

Average Owned Vessels

North Sea

25.7

25.2

24.0

25.1

25.0

Southeast Asia

13.9

12.1

11.7

12.7

11.3

Americas

35.0

35.3

35.8

35.4

34.6

Total

74.6

72.6

71.5

73.2

70.9

Drydock Days

North Sea

62

34

65

145

140

Southeast Asia

17

61

25

139

80

Americas

109

38

110

241

157

Total

189

132

200

525

377

Drydock Expenditures (000's)

$           7,242

$    6,159

$           6,398

$         20,365

$         11,278

Summary Financial Data (unaudited)

Three Months Ended

Nine Months Ended

(dollars in thousands, except per share data)

September 30,

June 30,

September 30,

September 30,

September 30,

2010

2010

2009

2010

2009

Balance Sheet Data

Cash and cash equivalents

$             87,941

$           49,794

$       198,103

$         87,941

$       198,103

Working capital

98,296

58,459

188,572

98,296

188,572

Vessel and equipment, net

1,202,595

1,165,956

1,132,951

1,202,595

1,132,951

Construction in progress

3,422

30,215

44,904

3,422

44,904

Total assets

1,474,588

1,413,231

1,661,668

1,474,588

1,661,668

Long-term debt (1)

311,412

309,728

414,677

311,412

414,677

Shareholders’ equity

927,583

871,924

991,185

927,583

991,185

(1) Current portion of long-term debt included in working capital.

Cash Flow Data

Cash flow from operating activities

$             17,977

$           17,448

$         47,449

$         57,360

$       138,672

Cash flow from (used in) investing activities

16,419

(7,116)

(11,150)

(45,870)

(31,518)

Cash flow from (used in) financing activities

1,835

(7,787)

(4,603)

(15,394)

(17,195)

Forward Contract Cover - Remainder of Current Calendar Year

North Sea

90%

77%

Southeast Asia

60%

82%

Americas

66%

48%

Total

73%

64%

Forward Contract Cover - Next Full Calendar Year

North Sea

57%

55%

Southeast Asia

42%

54%

Americas

48%

26%

Total

50%

41%

Reconciliation of Non-GAAP Measures: Three Months Ended September 30, 2010

(dollars in millions, except per share data)

Operating Income

Tax Provision Benefit (Provision)

Net Income

Diluted EPS

Before Special Items

$                 20.8

$               (1.0)

$             14.0

$             0.54

Impairment Charge

-

-

-

-

Gain on Sale of Vessel

5.2

-

5.2

0.21

Tax Adjustments

-

-

-

-

U.S. GAAP

$                 26.0

$               (1.0)

$             19.2

$             0.75

Vessel Count by Reporting Segment

North Sea

Southeast Asia

Americas

Total

Owned Vessels as of July 28, 2010

26

14

35

75

Newbuild Deliveries

-

-

-

-

Sales & Dispositions

1

-

1

Owned Vessels as of October 26, 2010

25

14

35

74

Managed Vessels

13

1

1

15

Total Fleet as of October 26, 2010

38

15

36

89

SOURCE GulfMark Offshore, Inc.



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http://www.GulfMark.com