GulfMark Offshore, Inc. (GLF)
Q1 2008 Earnings Call Transcript
April 30, 2008 1:30 pm ET
David Butters – Chairman
Ed Guthrie – EVP Finance and CFO
Bruce Streeter – President and CEO
Sonny Randhawa – Bank of America Securities
Peter Winkler [ph] –Formula Capital
Pierre Connor – Capital One Southcoast
Carter Dunlap – Dunlap Equity Management
Victor Marchon – RBC Capital Markets
Previous Statements by GLF
» GulfMark Offshore, Inc. F4Q08 (Qtr End 12/31/08) Earnings Call Transcript
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(Operator instructions) Thank you.
Mr. Butters, you may begin your conference.
Thank you, Jackie, and good afternoon everyone and welcome to GulfMark Offshore's first quarter 2008 earnings conference call. When we last met a few months ago, we mentioned that the company's strong earnings performance in the fourth quarter of 2007 lifted the company into a higher, more visible earnings platform and established a firm base for future growth. This view was based upon the delivery of several new vessels into our fleet at the end of 2007, the prospect of more deliveries in the months ahead, firm charter rates and a higher level of contract cover.
First quarter 2008 numbers, which Ed Guthrie will cover in detail in a few minutes, only reinforces that premise. In addition to generating solid operating performance over the past months, a number of fundamental developments have occurred during this period, which we believe will have a positive impact on shaping our future performance.
First, we recently established an operating presence in the U.S. Gulf of Mexico. We have assembled a small but high quality experienced team of professionals and have entered into an agreement to manage a number of third party U.S. flag vessels. While we do not own these vessels, the arrangement will give us the opportunity to build a high quality operation in the U.S. Gulf as we await delivery of our own deepwater U.S. flag vessels beginning next year.
Number two, we continued to take delivery of high spec vessels into our Southeast Asia operations and several more expected over the coming months. As a result, we are experiencing record revenue and earnings from this region not only in absolute terms but more importantly, to a growing relative contribution to GulfMark's overall earnings. This is giving a more balanced geographical source of revenue and earnings than we have had in the past.
And third and perhaps most exciting of all, the recent announcements by Petrobras of deepwater discoveries offshore Brazil has the potential of having a significant company altering impact on GulfMark.
Now, as some of you are aware, GulfMark has been operating successfully in Brazil for over 20 years. We have the infrastructure, the people and the equipment to serve this potentially explosive new business. Obviously, it will take time to develop these fields, but it is worth noting that the equipment needed to service these discoveries in the short-term will likely come out of the North Sea where they operate in the same deepwater, harsh weather environment.
It is not hard to speculate, but over time, if the Brazilian development goes as some analysts expect, Brazil could rise in terms of revenue and profit contribution to GulfMark.
And now, I'd like to turn the conference over to Ed Guthrie, who will cover our financial performance during the period, and then Bruce Streeter will cover our operations and business outlook. After that, we'll open up the conference to Q&A period. So, Ed, why don't you take over?
Thank you, David. I will give the cautionary statement as always 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 these risks are more fully disclosed in our filings with the SEC. The forward-looking comments on this call by Bruce, David or myself should not therefore be regarded as representations that the projected outcomes can or will be achieved.
As we reported this morning before the market opened, we reported the highest first quarter in the company's history in all categories of revenue, operating income and net income. Only the record fourth quarter of 2007 had higher results, when during the quarter, the North Sea spot market created the opportunity for a number of vessels to earn the highest day rates in their history. The consensus estimate was $1.10, and thus with EPS of $1.40, we were over 27% higher than the group had estimated.
We asked the question last quarter in our call as to what happened and why we were able to beat the estimate of the Street. The answer is still revenue. Although revenue in the North Sea declined during the quarter from the previous quarter, which by the way was not unexpected and most everyone forecasts a decline, it did not fall as much as either we or the analytical community had anticipated. The $8.4 million decrease in overall revenue sequentially from Q4 to Q1 was a result of seasonality in the North Sea, partially offset by higher revenue and stronger performance in Southeast Asia and our America's region.
As usual, we will compare this quarter's performance back to the prior quarter because we believe this gives our listeners a better sense of the trends in the business and where the company is going. And the fourth quarter and first quarter, as you know, are usually the weaker quarters of the year for our performance.