GulfMark Offshore, Inc. (GLF)

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GulfMark Offshore, Inc. (GLF)

Q3 2008 Earnings Call Transcript

October 29, 2008, 9:00 am ET


David Butters – Chairman

Bruce Streeter – President and CEO

Ed Guthrie – EVP, Finance and CFO


James West – Barclays Capital

Victor Marchon – RBC Capital Markets

Pierre Conner [ph]

Jud Bailey – Jefferies

Michael Ainge – TIAA-CREF



Good morning. My name is Thomas and I will be your conference operator today. At this time, I would like to welcome everyone to the third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you.

Mr. Butters, you may begin your conference.

David Butters

Thank you, Thomas, and good morning everyone and welcome to our earnings call. Format today would be as usual. Ed Guthrie will give us a rundown of our financial performance during the last quarter and past periods as well. And then, if he is willing and able, Bruce Streeter who’s got a little bit of a cold today, he’s a sick puppy, will talk about the operations and the outlook for the business as well.

So Ed, why don’t you run down the earnings for us?

Ed Guthrie

Thank you, David. As usual, let me give you the forward-looking statement that this conference call will include comments which are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors and are more fully disclosed in the company’s filings with the SEC. The forward-looking comments on this conference call by myself and Bruce should not therefore be regarded as representations that the projected outcomes can or will be achieved.

As we announced last night after the market closed, we enjoyed the best quarter in the company’s history. During the third quarter, strong performance from all operating regions was the major reason for that in addition to the former Rigdon vessels that were acquired on July 1 of the first day of the quarter.

Utilization was stronger in all regions except in North Sea where we had the down time on two of the anchor handlers prior to going on longer term contracts. We believe that the Rigdon transaction will continue to bring strong performance to the Americas region in the future.

We will compare back to the previous quarter as we always do to give the listeners a perspective on the sequential changes which we believe is the most meaningful in trying to understand where the business is going and what the current trends are. And Bruce will talk to those in a little bit.

Revenue for the quarter was up $42.7 million to $124.6 million in total. As noted in the press release, all the regions were up over the previous quarter. The Southeast Asia region was up $0.9 million. This was despite the loss of $1.2 million in revenue from the transfer of one of the vessels down to the Americas during the quarter. Increase came from higher utilization due to lower drydock time and a little more than two months of operation from the delivery of the newest of the vessels, the Choctaw in late July at a very attractive day rate.

The Americas region was up $36.1 million due to the newly-acquired vessels as we indicated in the press release on $34.8 million attributable to that group of vessels and in addition to that, out of the group, we lost approximately $1.1 million due to – this was the region where we had a highest number of drydock days during the quarter, some 55 drydock days.

The North Sea was primarily due to higher day rates offset partially by currency impacts as the dollar strengthened against both Pound, Kroner and Euro, and I’ll give you a number on that shortly in terms of what the net effect was on the income statement.

The utilization on the two anchor handlers that went down to West Africa on the term contracts, we lost approximately 59 days in the quarter before they actually headed in that direction and if you apply the day rate, essentially for the quarter, we lost approximately $6 million during the quarter because of those down days.

The currency impact on the revenue was about $3 million and during the quarter, you had about a 4% strengthening of the dollar against the Sterling and about 5% against the Kroner.

Bruce will, I'm sure, have a few comments with respect to the sector day rates a little later on. Our operating cost of $46.5 million were up $16.6 million from the second quarter. Of that $16.6 million, $12.7 million was due to the addition of the new boats plus the new deliveries added another $0.5 million. Our bareboat fees associated with vessels that we had sold and essentially had bareboated back to complete contracts that we had at the time the vessels were sold, increased about $1 million during the quarter.

Our drydock expense was up slightly $3.5 million. The drydock days decreased 87 from 156 in the second quarter, all expenses increased due primarily to the fact that in the second quarter we took a credit of approximately $1 million associated with the sale of the Crusader that had been recorded in an earlier quarter.

We’ve completed 16 of the 18 drydocks that we expected that we would do in a year; one of those was one that was accelerated from 2009 into the current year. So we expect three more to be done in the third quarter, approximately 50 days and a cost between $2.25 million and $2.5 million.

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