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Cal Dive International, Inc. (DVR)

Q4 2008 Earnings Call

February 18, 2009 12:00 pm ET


Quinn Hebert – President & CEO

Kregg Lunsford – CFO

Scott Naughton – COO

Lisa Buchanan – General Counsel

Brent Smith – Director of Finance


Roger Read – Natixis Bleichroeder

Jim Rollyson – Raymond James

Joe Agular – Johnson Rice & Company
Joe Gibney – Capital One Southcoast



Good day ladies and gentlemen, and welcome to the fourth quarter 2008 Cal Dive International earnings conference call. (Operator instructions) I would now like to turn the presentation over to your host for today’s call, Mr. Quinn Hebert, President, and Chief Executive Officer; please proceed sir.

Quinn Hebert

Welcome everyone, welcome to Cal Dive’s fourth quarter 2008 and full 2008 earnings call. With me this morning is Kregg Lunsford, our Chief Financial Officer; Scott Naughton, our Chief Operating Officer; Lisa Buchanan, our General Counsel; and Brent Smith, our Director of Finance.

To follow along on our presentation, you can find the presentation at our website at Going to the second slide with an important message from Lisa.

Lisa Buchanan

Thank you Quinn. This conference call includes forward-looking statements, particularly with respect to any statements that we make regarding our earnings expectations. The forward-looking statements made during this call are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

Our actual future results may differ materially due to a variety of factors. For information concerning factors that could cause our actual results to differ, we refer you to the Risk Factors described in our Form 10-K on file with the Securities and Exchange Commission. This call also includes certain non-GAAP financial measures. For reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures, we refer you to our earnings press release and the presentation slides for this call.

Quinn Hebert

Okay if we turn to slide three, we are going to go through our normal agenda where I’ll give some opening remarks, Kregg will walk us through the financial results in a little more detail, and then we’ll open up the phone lines to questions and answers.

Slide four just gives you a glimpse of what I’ll talk about, I’ll try to be brief, 2008 has turned out to be a record financial performance year for Cal Dive. Looking back at 2008 by quarter, the first quarter and a half of 2008 started out slower then we originally expected due to unusually harsh winter weather conditions and probably some customer spending fatigue from 2007.

Our activity levels really started to ramp up at the end of the second quarter and then we really hit our stride in the third quarter and then as you can see we closed out the fourth quarter, the final quarter in the year with really strong operating and financial performance.

With the acquisition of the Horizon Offshore assets in December, 2007, we felt that by adding those assets, the pipe laying and [derrick] barge assets, with our legacy diving assets, we’d offer the client base a superior construction solution on an integrated basis. We also believed that that combined fleet would drive utilization for each other and increase our overall profitability.

As you can see from our 2008 full year results we’re pretty gratified that our clients has responded positively to this strategy and our 2008 fleet utilization and the financial results reflect the success of this strategy. Before going any further, I’d just like to make a quick comment about the people at Cal Dive.

We’ve all spent a lot of time and energy to progress the integration of the combined companies forward and our results are really a credit to their hard work and determination to combine us as a unified entity. We really couldn’t review 2008 without commenting on the impact of the hurricanes. As we all know by now hurricane Gustav hit the gulf on September the first, Ike hit the gulf on September the 13 with Ike causing the most extensive damage with 60 destroyed platforms, 60 plus damaged platforms, 22 plus damaged pipelines, and we also estimate 400 to 600 wells associated with the damage still needs to be addressed.

At Cal Dive we really didn’t feel the full force of the hurricane related specs and repair activity until the fourth quarter of 2008, post Ike, our client base really acted much more deliberately and systematic taking the lessons that they learned from Katrina and Rita in 2005 and applying them to their Ike recovery efforts.

As a result they’ve deployed their capital more efficiently. And although the hurricane event from Ike did cause a lot of damage, we still didn’t see as many uncontrolled pollution events as we did after Katrina and Rita. And also as we had expected, we are not performing a lot of the hurricane salvage work through the winter months.

We do expect to perform a substantial portion of this hurricane repair and salvage work in 2009 during the better winter months. Internationally our assets were fully engaged and we had another great year of solid performance. We worked profitably in over 20 countries overseas in those areas that we’ve identified as international expansion, including the Med, the Middle East, Australia, Southeast Asia, and India.

Kregg will provide some more details on our revenue break down but 29% of our 2008 revenues were international based. In particular more specific we’ve increased the international revenues from $151 million in 2007 to $251 million in 2008 which is a 66% year over year increase. This increase was driven mostly by the increased international asset base we acquired with the Horizon Offshore acquisition and also the deployment of additional portable saturation diving systems in that theater.

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