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Cal Dive International, Inc. (DVR)
Q3 2012 Earnings Call
November 8, 2012 10:00 am ET
Quinn J. Hébert – Chairman, President and Chief Executive Officer
John R. Abadie, Jr. – Executive Vice President and Chief Operating Officer
Brent D. Smith – Executive Vice President Chief Financial Officer and Treasurer
Jim Rollyson – Raymond James
Martin Malloy – Johnson Rice
Joe Gibney – Capital One
Michael Marino – Stevens
Previous Statements by DVR
» Cal Dive's CEO Discusses Q2 2012 Results - Earnings Call Transcript
» Cal Dive International CEO Discusses Q3 2010 Results – Earnings Call Transcript
» Cal Dive International, Inc. Q2 2010 Earnings Call Transcript
» Cal Dive International, Inc. Q1 2010 Earnings Call Transcript
Quinn J. Hébert
Okay. Good morning, everyone. Welcome to Cal Dive’s third quarter 2012 earnings call. With me this morning is Brent Smith, our Chief Financial Officer; John Abadie, our Chief Operating Officer; and Lisa Buchanan, our General Counsel. To follow along this morning, you could find our presentation on our website at www.caldive.com, it’s under the Investor Relations hot button. If you turn to slide two, the forward-looking statements from our General Counsel.
Lisa Manget Buchanan
Thanks, Quinn. This conference call includes forward-looking statements, particularly with respect to any statements that we make regarding our earnings 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 most directly comparable GAAP financial measures, we refer you to our earnings press release and the presentation slides for this call.
Quinn J. Hébert
Okay. Slide three is our agenda, where I’ll make some opening remarks and then turn it over to Brent to review our financial results or detail and then went to Q&A.
On slide four for the third quarter we had three major impact items, first the Uncle John, her utilization for the quarter was interrupted as the marine riser system provided by unrelated third party did perform according to specification. So operations were halted to repair the marine riser equipment. As a result of this event, the Uncle John didn’t work for significant portion of the quarter and this caused us about $5 million in EBITDA for the quarter.
To be clear, the Uncle John did perform well in the job and the riser system was owned by third party and it was contracted directly by a customer. The good news on the Uncle John front is that she did return to work in early October and she is expected to be busy for the remainder of 2012 and into 2013. Second event was the Kestrel performance in the third quarter was about $4 million less EBITDA than last year.
The Kestrel was working on lower margin this year as compared to last year’s work when the Kestrel was working on a more profitable salvage project. The good news for the Kestrel is that, moving forward, she already started a two-year charter for work in Mexico that’s expected to contribute about $10 million improvement in EBITDA handling for the company.
And then third, we incurred about a $2.5 million loss in a lump-sum salvage project during the quarter. The loss was primarily driven by higher than normal weather delays associated with the cumulative impact at two main storms, Tropical Storm Debby and Hurricane Isaac as well as using the higher cost assets on the project due to scheduling conflicts within her own fleet.
It’s obviously disappointing how these three items affect our quarter as a result actually reflect the hard work of the men and women offshore and onshore who are working hard for Cal Dive. If these events did not occur, our EBITDA for the quarter probably would have been in the $17 million to $20 million EBITDA range. We believe all of the issues affecting the quarter been addressed and they are behind us.
On the bright spot, our international operation has been very busy and successful. In the third quarter, we continue to work on Pemex pipeline project in Mexico, the team is performing according to schedule. In Australia, operations are very active. We previously announced the award of $20 million worth of saturation diving projects in this area. Also, the Toisa Paladin which is a diving support of vessel that we have a 50-50 joint venture with Fugro continues to win work and we are pleased with these new assets of market penetration.
We are also conducting successful diving operations around the world, including such areas as China, Malaysia, Mexico, Russian Caspian Sea and West Africa. During the third quarter, to better align our cost structure and market conditions and they are to be more efficient, we implemented a U.S. domestic restructuring plan focusing three primary areas; first is, consolidating departments and facilities, head-count reductions and then selling non-core assets. We expect the restructuring to result in annualized savings of about $15 million, $10 million of which will be cash cost savings that will have a positive impact on EBITDA.