GulfMark Offshore, Inc. (GLF)
Q1 2010 Earnings Call
April 28, 2010 9:00 am ET
David Butters - Chairman
Bruce Streeter - President and CEO
Quintin Kneen - CFO
James West - Barclays Capital
Judd Bailey - Jefferies
Bo Mckenzie - Global Hunter
Marius Gaard - Carnegie Investment Bank Ab
J.C. Harrington - BHP Billiton
Good morning. At this time, I would like to welcome everyone to the GulfMark Offshore Incorporated first quarter Earnings Call.
On the call today are David Butters, Chairman; Bruce Streeter, President and Chief Executive Officer; and Quintin Kneen, Chief Financial Officer.
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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. These risks are more fully disclosed in the company’s filings with the SEC. The forward-looking comments on this conference call should not therefore be regarded as representations and the project outcomes can or will be achieved.
Thank you. I would now like to turn the call over to Mr. Butters. Please proceed.
Good morning everyone and welcome to GulfMark Offshore’s first quarter 2010 earnings conference call.
When we last met, we hinted that perhaps we were bumping along the bottom of the business cycle and hope things might get better from there. Today I think I can say with a great deal of confidence that we indeed are on the upward moving slope and that I must tell you feels a lot better.
And I think what is interesting about this cycle recovery and perhaps different from previous recoveries is that unlike the past where improvement began in the Gulf of Mexico and spread to other areas. This recovery at least for GulfMark has begun in the North Sea and this is partly explained I believe because of the oily nature of that part of the world.
There maybe other reasons and perhaps Bruce can explain those as well. But he will take over and discuss the markets as we see them today and the outlook, but first Quintin Kneen will cover the first quarter financials and give us details on that. Our formal remarks will then be covered as usual by a question and answer period. So, Quintin, why don't you take over from here?
Thank you, David. As usual Bruce and I will speak for around 15 to 20 minutes and then we will open it up for questions. We will try to provide more clarity and color to the quarterly results and to the near-term outlook.
Although revenue and operating income were generally flat in comparison to the fourth quarter of 2009, the first quarter's results provided some interesting data points about the activity levels in each of our regions.
As we indicated on the last call, utilization in the Gulf of Mexico has been increasing steadily since August 2009. Utilization continues to demonstrate month-over-month improvement and for the month of March, utilization in the Gulf of Mexico was 91%.
Revenue in the Americas was up 12%. As indicated on our press release, the average day rate for the quarter in the Americas region decreased 7% from the prior quarter. That decrease was driven by utilization rates, putting the smaller lower day rate vessels back to work have the effect of lowering the average date rate.
Absent the effect of utilization rates, the average day rate in the region was actually up 3% in the Americas. So, approximately one quarter of the 12% quarterly increase in revenue came from improved day rates in the region.
The North Sea displayed a similar story. Revenue was up 6% before the negative impact of a strengthening US dollar. The 6% increase is the sum of a 4% increase from delivering two new large PSVs to the North Sea market, and a 2% increase in day rates.
This increase was offset by the strengthening of the US dollar over the North Sea currencies which brought down revenue and the average day rate by 4%. As a result headline North Sea revenue was up only 2% from the prior quarter and average day rate was actually down 2%.
Southeast Asia provides a softer story. Revenue was down 22% from the fourth quarter of 2009 due primarily to increased utilization and also due to real decrease in day rates.
We suggested on the Q4 call that utilization in contract rates would be lower in the first quarter and indeed that was the case. Revenue came in 22% lower driven by a 10 percentage point decrease in utilization and about a 4% reduction rates.
We expect rates to trend lower than last year's average, but we expect the utilization to increase from the current first quarter numbers.
All in, revenue for the first quarter of 2010 was $84.7 million consistent with what we reported for the fourth quarter of 2009.
Consolidated direct operating expenses were down during the period primarily because there were unusual items that drove the fourth quarter and 2009 expenses up. But direct operating expenses were also down due to the change in the exchange rates of the North Sea currencies.
The two new vessels delivered into the North Sea over the past two quarters increased direct operating expenses by approximately $1 million during the first quarter. The full quarter run rate for these vessels is approximately $700,000 per vessel.