GulfMark Offshore, Inc. (GLF)
Q2 2010 Earnings Call Transcript
July 29, 2010 5:00 pm ET
David Butters – Chairman of the Board of Directors
Quintin Kneen – EVP and CFO
Bruce Streeter – President and CEO
Bo McKenzie – Global Hunter Securities, LLC
Jud Bailey – Jefferies & Company
Marius Gaard – Carnegie Investment Bank
» GulfMark Offshore, Inc. F4Q08 (Qtr End 12/31/08) Earnings Call Transcript
» GulfMark Offshore, Inc. Q3 2008 Earnings Call Transcript
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 that the projected outcomes can or will be achieved. Thank you.
I would now like to turn the call over to Mr. Butters. Please proceed.
Thank you Megan, and welcome, everyone, to GulfMark Offshore’s second quarter earnings conference call. Today we won’t deviate from our standard practice. Quintin Kneen will give us an overview of the financial performance for the last three months and, following that, Bruce Streeter will give us an operations overview and hopefully lift the fog that’s been settled over the Gulf of Mexico as a result of the unfortunate incident a few months back.
So, Quintin, why don’t you run through the financials experience in the last three months please?
Thank you, David. As always, Bruce and I will speak for about 15 minutes and then we will open it up for questions. A good quarter; on a sequential quarter basis, revenue was up 10% and operating income was up 108%. Nice sequential movements and, admittedly, those percentages are probably results of the prior quarter, but it’s the first sequential quarter that we have seen combined consolidated revenue and operating income growth since September 2008.
Revenue and utilization were up in all three operating regions. The situation in the Americas is unique due to the spill response activities and the deepwater drilling moratorium. Nonetheless, on a sequential quarter basis, total revenue and utilization increased meaningful. Revenue was up 15%, or $5.2 million, average day rate was up slightly, and utilization was up 12 percentage points to 92%.
Although the same sequential quarterly trends were evident in the Gulf of Mexico, monthly data in the Gulf of Mexico shows utilization slipping slightly in the month of June. It’s difficult to predict how the Gulf of Mexico will fare over the remainder of 2010. Absent the events in the Gulf of Mexico, we were anticipating some softness during the hurricane season, but it’s difficult to tell if the slippage in June is indicative of that influence or other factors related to the drilling moratorium.
Revenue in the North Sea was also up. On a sequential quarter basis, revenue was up 6%, or $1.9 million, and utilization was up, although, slightly.
Southeast Asia increased revenue by approximately $1 million over the prior quarter. The increase in Southeast Asia was driven primarily by utilization increases. Day rate continues to slip in Southeast Asia, and they were down 7% sequentially, but as we have indicated in the past, the cyclical activity in Southeast Asia is not as strong as it is in the Gulf of Mexico or the North Sea, and our outlook for Southeast Asia is for quarterly revenue to continue to increase throughout the remainder of 2010, driven consequently by increases in utilization. And although we expect the average day rate in Southeast Asia to be sequentially lower, Southeast Asia still has the highest average day rate of any of our operating regions.
Consolidated direct operating expenses were down slightly during the second quarter. Foreign currency is the overriding factor that drove the dollar value of those expenses lower. On a stable currency basis, expenses were up slightly, due to having the North Purpose in for a full quarter in Q2. The North Purpose delivered in mid-first quarter.
On a stable currency basis, expenses are expected to increase slightly in the second half of 2010 due to the delivery of the last two vessels. Each vessel will add approximately $700,000 per quarter of direct operating cost.
On the last call, we guided dry dock expense to be $5.5 million for the second quarter. We ended up performing approximately $6.2 million of dry docks during the quarter. For the full year of 2010, we are still anticipating spending approximately $22 million for dry docks. That works out to an expectation of about $9 million to be spent on dry docks for the second half of 2010.
Bruce will provide an update on vessel movements shortly, but for those vessels that we intend to relocate out of the Gulf of Mexico, our intention is to dry dock those vessels before they leave. So depending on those opportunities, dry dock expense may be higher than I just indicated.
But not withstanding the impromptu dry docks, for Q3, we are currently expecting to spend $5 million on 7 dry docks; 1 in the North Sea for approximately $1 million, 4 in the Americas for $2 million, and 2 dry docks in Southeast Asia for $2 million.