Cal Dive International, Inc. (DVR)
Q1 2008 Earnings Call
May 1, 2008 12:00 pm ET
Quinn J. Hébert - President and Chief Executive Officer
Lisa Manget Buchanan - Executive Vice President, General Counsel and Secretary
Previous Statements by DVR
» Cal Dive International, Inc. Q4 2008 Earnings Call Transcript
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» Cal Dive International Inc. Q4 2007 Earnings Call Transcript
Scott T. Naughton - Executive Vice President and Chief Operating Officer
Jim Rollyson - Raymond James
Michael Marino - Johnson Rice & Company
Stephen Gengaro - Jefferies & Company
Joe Gibney - Capital One Southcoast, Inc.
Roger Read - Natexis Bleichroeder
Sonny Randhawa - Bank of America
David Smith - JP Morgan
Karen David-Green – Oppenheimer
Joe Hill – Copia Capital
Welcome to the first quarter 2008 Cal Dive International earnings conference call. (Operator Instructions) I would now like to turn the call over to Mr. Quinn Hébert, President and CEO.
Welcome to Cal Dive’s first quarter 2008 conference call. For those of you who want to follow along, presentation is available at our website at www.caldive.com on the Investor Relations hot link.
With me today is Scott Naughton, our Chief Operating Officer; Kregg Lunsford, our Chief Financial Officer; Lisa Buchanan, our General Counsel; and Brent Smith, our Director of Finance and Investor Relations.
We’ll follow our typical format where Lisa will give us an important message. I’ll make some introductory remarks, then Kregg will walk us through the presentation briefly, and then we’ll open the phone lines for Q&A Session.
This conference call includes forward-looking statements, particularly with respect to any statements that we make regarding our earnings and 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 mostly direct comparable GAAP financial measures, we refer you to our earnings press release and the presentation slides for this call.
At first, I’d like to start the call with just giving a little bit of historical perspective on the first quarter of 2008. In the US, we spent the last three years or so cleaning up after the hurricanes, of Ivan, Katrina, and Rita in the Gulf. During that phase, we saw an initial frantic pace of activity that included offshore emergency inspections and repairs, production restoration, and salvage work at the real heightened levels of activity. We saw that start to level off towards the end of 2007. It got a little bit more methodical, planned pace of primarily salvage activity and more typical seasonality we expected.
We’ve also known for quite some time that many of our customers are investing more and more of their capital dollars overseas. Given these factors over the past two years, we’ve invested in significantly expanding our international capabilities and consolidating our leadership positions in the Gulf.
If you look at the first quarter 2008, as we expected, returning to more typical winter seasonality where our clients are going to plan projects in better weather months, which are primarily late second quarter, third quarter and fourth quarter.
We indeed had bad weather in the first quarter which significantly reduced the level of activity offshore than Gulf of Mexico. If you compare the winter weather between 2007 first quarter and 2008, 2007 was more typical winter weather. Along 2008, the rate of high sea states, by that I mean sea states in excess of five feet, was about double the rate in the first quarter of ’07. This obviously negatively impacted our best utilization, as you’ll see from our slides later on.
Another factor playing a prominent role in the first quarter of ’08 is that it looks like many of our clients in the US, after the last two or three years of fast-paced activity, spending significant capital dollars to let the production back on stream, have taken a slight break to catch their breath the first three months of this year. It looks like they pulled their capital spending in and make more efficient use of the capital of playing the projects in good weather periods so that they don’t have to assume the risks of paying for weather stand-by days in the first quarter. The stand-by weather day costs are basically sub-costs and don’t advance to progress of an offshore project.
A factor, however, in our favor for the first quarter was the success of our international expansion with our international group contributing approximately 50% of the first quarter revenues which had doubled over last year’s contributions. Give you an idea, our international progress is about 20% for ’07 revenues which came from the international area. We expect to be on track for the full year where we see about 35% of our total revenues to be generated outside the US.
During the first quarter, we did take advantage of this slow period to schedule close to half of our annual service days for our ships and barges related to regulatory drive-ops and capital improvements.
We haven’t been resting in the first quarter. We spent the last 90 days building up our backlog from $175 million at year-end to about $450 million, which is about a 150% increase in one quarter. Geographically, the backlog breaks down to about one-third of it occurred in the Gulf of Mexico; one-third will be international; and one-third will be in the US East Coast.