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GulfMark Offshore, Inc. (GLF)
Q3 2010 Earnings Conference Call
October 27, 2010 9 AM ET
David Butters – Chairman
Quintin Kneen – CFO, EVP, Treasurer and Secretary
Bruce Streeter – CEO, President and COO
James West – Barclays Capital
Luke Lemoine – Capital One Southcoast
Jeff Patel – Madison Williams
Marius Gaard – Carnegie Investment Bank
Matt Beeby – Global Hunter Securities
Gary Stromberg – Barclays Capital
Previous Statements by GLF
» GulfMark Offshore, Inc. Q2 2010 Earnings Call Transcript
» GulfMark Offshore, Inc. Q1 2010 Earnings Call Transcript
» 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, Lanea, and good morning everyone. And thank you for participating this morning on our Q3 earnings conference call. Except for some questions that might arise from the Macondo incident and its post-effects, our conference call today should be pretty straightforward. And so I think we can begin right away with some comments from Quintin Kneen who will cover the financial performance of the last three months, and then as usual Bruce will cover the current operating status and outlook, and finally we’ll have the Q&A period following that. So Quintin, why don’t you review the financials for the Q3?
Thank you, David. As always Bruce and I will speak for about 15 to 20 minutes and then we will open it up for questions. As David mentioned a relatively straightforward quarter in terms of profitability and balance sheet movements. On a sequential quarter basis, revenue was up 2% and operating income was up 12%. This is the second sequential quarter that we have seen combined consolidated revenue and operating income growth since September, 2008, and although this income growth is consistent with a gradual recovery in the (inaudible) sector, I expect that we will see a pause in this recovery in Q4 and early 2011 as the Gulf of Mexico comes back online; followed, I believe, by another leg up in the cycle.
On a sequential quarter basis, average data rates were up in all three operating regions, although utilization was lower across the board. Revenue in the North Sea was up just over $1 million. Strong day rates drove the increase and were fostered by a strong North Sea spot market in the first months of Q3. The North Sea had 62 dry dock days in the quarter, up from 34 dry dock days in the Q2 and more than we had indicated on the last call. I will give an update on dry dock activity for the remainder of 2010 shortly, but we have just shifted some dry docks originally scheduled for Q4 this year up into Q3.
Revenue in the Americas was down nominally but essentially flat. Average day rate for the quarter was up over the previous quarter and equalization was down, reflecting the continued demand for spill response during most of the quarter offset by a sharp decline in late September as spill response activities began to wind down. Utilization was also impacted by the dry docking of four US-based vessels before they left for Brazil.
Revenue from our Southeast Asia operations increased by approximately $1 million over the prior quarter. Average day rate was up slightly. Utilization in Southeast Asia was 85%, which is down from the prior quarter but which relates to the addition of the two new vessels that were delivered in early Q3 that have yet to find surface.
Consolidated direct operating expenses were lower during the Q3, but principally due to deferring 1.4 million of mobilization costs associated with the four vessels going on contract in Brazil. Absent to capitalization of those costs, direct operating expenses in Q3 were in line with our anticipated annual run rate for the current fleet of approximately $43 million to $44 million quarterly run rate.
On the last call, we guided dry dock expense to be $5.5 million for the Q3, with some cautionary commentary that they might be higher depending on the actual timing of dry docks scheduled for the last half of 2010. Dry dock expenses for Q3 were $7.2 million, which was in fact higher due to moving forward in the year certain dry docks in the North Sea. We expect that dry dock expense for Q4 will be approximately $2.5 million, which results in a dry dock expenditure expectation for all of 2010 of $23 million, consistent but slightly higher than our original guidance for the year of $22 million.
General and administrative expenses for the quarter were down again, this quarter by approximately $1.2 million to be $10.2 million for the quarter. The average run rate for recurring G&A costs should be approximately $11 million per quarter, and accordingly I expect that G&A will be slightly higher in Q4 and that full year 2010 will reflect that quarterly average of approximately $11 million. Consolidated depreciation increased approximately $500,000, in line with the increase expected from the recent delivery of the last two vessels.