Hornbeck Offshore Services, Inc. (NYSE:HOS) announced today results for the first quarter ended March 31, 2011. Following are highlights for this period and the Company’s future outlook:
Lack of drilling permits in Company’s core geographic market, the GoM, results in net loss for 1Q2011 Recently awarded long-term time charters for two additional DP-1 200 class new gen OSVs in Mexico Recently awarded four-year time charters for four additional DP-2 240 class new gen OSVs in Brazil More than half of the new gen OSV fleet now committed to long-term foreign and/or specialty time charters Recently reactivated five cold-stacked new gen OSVs, bringing stacked fleet back to pre-Macondo peak of ten Contract backlog for new gen OSV vessel-days currently at 58%, 43% and 32% for 2Q-4Q2011, 2012 and 2013 Quarter-end cash balance of $137m as of Mar 31, 2011 up $10m sequentially from $127m as of Dec 31, 2010
First quarter 2011 revenues decreased 16.1% to $72.3 million compared to $86.2 million for the first quarter of 2010 and decreased 25.7% compared to $97.3 million for the fourth quarter of 2010. Operating income was $0.7 million, or 1.0% of revenues, for the first quarter of 2011 compared to $15.7 million, or 18.2% of revenues, for the prior-year quarter; and $18.7 million, or 19.2% of revenues, for the fourth quarter of 2010. The Company recorded a net loss for the first quarter of 2011 of ($9.0 million), or ($0.34) per diluted share, compared to net income of $2.6 million, or $0.09 per diluted share, for the year-ago quarter; and net income of $2.6 million, or $0.10 per diluted share, for the fourth quarter of 2010. EBITDA for the first quarter of 2011 was $21.3 million compared to first quarter 2010 EBITDA of $33.5 million and fourth quarter 2010 EBITDA of $38.9 million. Included in first quarter 2011 results was a $0.6 million ($0.4 million after-tax, or $0.01 per diluted share) gain on the sale of the Company’s last four remaining single-hulled tank barges for net cash proceeds of $2.1 million compared to a $0.5 million ($0.3 million after-tax, or $0.01 per diluted share) gain on the sale of one conventional offshore supply vessel (“OSV”) for net cash proceeds of $1.3 million in the first quarter of 2010. For additional information regarding EBITDA as a non-GAAP financial measure, please see Note 11 to the accompanying data tables.
Upstream Segment.Revenues from the Upstream segment were $61.3 million for the first quarter of 2011, a decrease of $15.3 million, or 20.0%, from $76.6 million for the first quarter of 2010; and a decrease of $24.1 million, or 28.2%, from $85.4 million for the fourth quarter of 2010. Vessels operating in Brazil and vessels that were added to the Company’s Upstream fleet through its fourth OSV newbuild program accounted for increases of $10.5 million and $1.2 million, respectively, of Upstream revenues over the first quarter of 2010. However, these higher revenues were more than offset by (i) a $10.0 million revenue decline from vessels that have been stacked since March 31, 2010, in response to weak market conditions; (ii) a $16.3 million decrease in revenue from new generation OSVs and MPSVs that were in-service during each of the quarters ended March 31, 2011 and 2010; and (iii) a $0.7 million decline in activity at the Company’s shore-base facility in Port Fourchon. Upstream operating income decreased $16.3 million to $0.9 million, or 1.5% of revenues, for the first quarter of 2011 from $17.2 million, or 22.5% of revenues, for the first quarter of 2010. Average new generation OSV dayrates for the first quarter of 2011 were $21,011 compared to $19,986 for the same period in 2010 and $20,694 for the fourth quarter of 2010. New generation OSV utilization was 59.0% for the first quarter of 2011 compared to 72.9% during the year-ago quarter and 66.3% for the sequential quarter. New generation OSV utilization and Upstream operating income for the first quarter of 2011 declined from the sequential quarter largely due to the completion of post-Macondo oil spill response activities in the Gulf of Mexico (“GoM”) during the fourth quarter of 2010. Utilization of the Company’s four MPSVs decreased dramatically from the fourth quarter, stemming from the drop-off in clean-up efforts combined with a lack of drilling permits, which significantly contributed to the sequential quarter revenue decline. The Company had an average of 14.4 stacked new generation OSVs during the first quarter of 2011 compared to quarterly averages of 8.0 stacked vessels during the year-ago quarter and 9.4 stacked vessels during the sequential quarter. Effective new generation OSV utilization for the Company’s active fleet, which excludes the impact of stacked vessels, was 82.2% for the first quarter of 2011 compared to 87.3% for the year-ago quarter and 81.3% for the sequential quarter.
Downstream Segment.Revenues from the Downstream segment of $10.9 million for the first quarter of 2011 increased by $1.3 million, or 13.5%, compared to $9.6 million for the same period in 2010, but were lower than the sequential quarter by $1.0 million, or 8.4%. The year-over-year revenue increase was largely due to fewer days out-of-service for regulatory drydockings during the first quarter of 2011 and, to a lesser extent, a slight improvement in Northeast market conditions. The Company’s double-hulled tank barge average dayrates were $16,377 for the first quarter of 2011 compared to $15,816 for the same period in 2010 and $16,782 for the sequential quarter. Utilization for the double-hulled tank barge fleet was 82.3% for the first quarter of 2011 compared to 75.1% for the year-ago quarter and 85.6% for the sequential quarter. The sequential decline in Downstream revenues, dayrates and utilization are largely due to the conclusion of oil spill response efforts in the GoM during the fourth quarter of 2010.
General and Administrative (“G&A”). G&A expenses of $9.9 million for the first quarter of 2011 were 13.7% of revenues compared to $8.9 million, or 10.3% of revenues, for the first quarter of 2010. This increase in G&A was wholly attributable to higher reserves associated with oil spill response-related receivables and a greater concentration of foreign-sourced customer billings. The Company allocated 91% of its first quarter 2011 G&A expenses to the Upstream segment and 9% to the Downstream segment.
Depreciation and Amortization. Depreciation and amortization expense was $20.6 million for the first quarter of 2011, or $2.8 million higher than the prior-year quarter. This increase was due to the incremental depreciation related to four new generation OSVs and one MPSV that were placed in service during 2010. Depreciation and amortization expense is expected to continue to increase from current levels when any recently acquired or newly constructed vessels undergo their initial 30-month and 60-month recertifications.
Interest Expense. Interest expense increased $3.2 million during the three months ended March 31, 2011 compared to the same period in 2010, primarily due to a decline in construction work-in-progress. As the Company no longer has any vessels under construction or conversion, interest expense for the first quarter of 2011 increased from the year-ago quarter due to lower capitalized interest. The Company did not record any capitalized construction period interest for the first quarter of 2011, compared to $2.6 million for the year-ago quarter, or 18% of its total interest costs for such quarter.
Future Outlook
Based on the key assumptions outlined below and in the attached data tables, the following statements reflect management’s current expectations regarding future operating results and certain events. These statements are forward-looking and actual results may differ materially. Other than as expressly stated, these statements do not include the potential impact of any additional future long-term contract repositioning voyages; unexpected vessel repairs or shipyard delays; or future capital transactions, such as vessel acquisitions or divestitures, business combinations, financings or unannounced newbuild programs that may be commenced after the date of this disclosure. Additional information concerning forward-looking statements can be found on page 7 of this news release.