GulfMark Offshore, Inc. (NYSE:GLF) announced the results of operations for the three- and twelve-month periods ended December 31, 2012. For the three months ended December 31, 2012, consolidated revenue was $95.0 million, and the net loss for the same period was $4.9 million, or $0.19 per diluted share. For the twelve months ended December 31, 2012, consolidated revenue was $389.2 million and net income was $19.3 million, or $0.73 per diluted share.
Bruce Streeter, President and CEO, commented, "We have emphasized the cyclicality of our business and our belief that 2012 was a year where we positioned GulfMark to take advantage of the strong upside that appears to be developing. Since 2009, we have seen year-over-year improvement in the global market for our vessels, and we continue to see an improving and expanding marketplace as we look ahead. The U.S. Gulf of Mexico is developing into a very strong market, with utilization levels near 100% for several of the weeks thus far this year. The North Sea continues to be a strong market and current indications point to a meaningful increase in drilling activity for the 2013 season. A variety of reasons led to a weaker spot market than anticipated in 2012, however, the growth in the drilling fleet, the number of sanctioned projects and, in particular, the very positive planning in Norway point to future opportunities. Southeast Asia, although down noticeably in the fourth quarter, is showing strong signs of improvement in Malaysia and Indonesia. Operating costs, driven largely by mariner labor costs, continue to put pressure on profitability, but we are pushing costs through to operators as contracts roll over and anticipate that these cost pressures will wane as the current backlog of new vessels are delivered in 2013 and 2014.
"During 2012 we took significant steps to upgrade the competitiveness of our global operations. In the U.S. Gulf of Mexico we upgraded the fleet, through the reallocation of capital, from smaller vessels into larger higher margin vessels. In the North Sea, we took a similar step with the divestiture of an older non-core vessel and the purchase of a vessel that complements our strong franchise position there. We relocated two vessels from Brazil to Southeast Asia, where we believe we will see significant improvements in profitability. In Southeast Asia, we also initiated a restructuring in the third quarter to better position ourselves to take advantage of what we see as an improving market. Also, on top of all of this, we have an 11 vessel new-build program that begins to deliver cutting edge vessels into these markets in the second quarter of 2013.
"We continue to focus on the strength of our fleet and investing in the fleet for the future. In addition to these operational improvements, in December we began to take advantage of the low price for our stock through the implementation of a stock repurchase program, and simultaneously we made the decision to begin to return a portion of the annual cash flows to stockholders with the initiation of a $1.00 per share annual dividend, and a subsequent $0.25 per share quarterly dividend. We believe that the operational improvements discussed above, in combination with the initiation of the dividend and the stock repurchase program, will create meaningful value for our stockholders over the next several years."
Consolidated Fourth Quarter Results
Consolidated revenue for the fourth quarter of 2012 was $95.0 million, a decrease of 7%, or $6.8 million, from the third quarter. Consolidated operating income was down $15.8 million as a result of a combination of lower quarterly revenue, coupled with approximately $3.0 million of higher direct operating expenses during the quarter, no gains on asset sales, (which amounted to $3.9 million in the third quarter), an impairment charge of $0.3 million, and an increase in bad debt expense of $2.3 million.
Net loss for the quarter also included a write-off of $0.6 million of unamortized debt fees resulting from the termination of the facility agreement.
Regional Results for the Fourth Quarter
In the North Sea region, fourth quarter revenue was $39.5 million, down $2.3 million, or 5%, from the third quarter. As is typical in the fourth quarter, the decrease in revenue was due principally to lower utilization, which decreased from 93% in the third quarter to 85% in the fourth quarter. This lower utilization is consistent with seasonal patterns in the North Sea. The average day rate for the North Sea region was relatively flat compared to the third quarter average. The principal driver of the lower utilization was the activity levels of the three UT722L anchor handlers, which combined had a utilization average of 86% in the third quarter and 51% in the fourth.
Fourth quarter revenue for the Americas region was $41.9 million, down slightly from the third quarter. The average day rate increased 2% from the prior quarter and utilization was up marginally, however there was one less vessel operating in the Americas region during the quarter.
During the fourth quarter, revenue in the Southeast Asia region was $13.6 million, a decrease of approximately $4.0 million, or 23%, from the third quarter amount. Although down sequentially, the reduction is a temporary consequence of our third quarter management restructuring. The Company anticipates that the effects of the restructuring will begin to benefit the Company in the second quarter of 2013.
Consolidated Operating Expenses for the Fourth Quarter
Direct operating expenses for the fourth quarter were $51.8 million, an increase of $3.0 million, or 6%, from the third quarter. The increase was driven largely by two factors: an increase in estimated pension liabilities of approximately $1.0 million, and approximately $1.0 million for higher fuel costs due to unanticipated vessel relocations.
Drydock expense in the fourth quarter was $9.9 million and full-year drydock expense was $33.3 million, consistent with the latest guidance.
General and administrative expense was $16.1 million for the fourth quarter, approximately $4.1 million over the anticipated 2012 quarterly run rate of $12 million. The increase was driven largely by two factors: the write-off of $2.3 million in receivables in the U.K., related mainly to a customer that suddenly filed for bankruptcy, and $1.5 million of additional severance and other costs associated with the management restructuring in Southeast Asia.
Results of Operations for the Year
Consolidated revenue for the year ended December 31, 2012 was $389.2 million, an increase of $7.3 million, or 2%, from the prior year. Consolidated operating income for the year was $51.0 million, a decrease of $27.5 million, or 35%, from the prior year. Earnings per diluted share for the year was $0.73.
Liquidity and Capital Commitments
Cash flow from operations totaled $37.6 million in the fourth quarter of 2012. Cash on hand at December 31, 2012 was $185.2 million, and as of that date there were no amounts drawn on the Company's $150.0 million revolving credit facility. Total debt at December 31, 2012 was $501.0 million, and debt, net of cash on hand, was $315.8 million.
Capital expenditures during the fourth quarter totaled $81.5 million, which included $50.5 million of progress payments on the construction of new vessels and the purchase of a PSV in the North Sea for $28.6 million.
As of December 31, 2012, the Company had approximately $276 million of unfunded capital commitments related to the construction of 11 vessels. Anticipated progress payments over the next three calendar years are as follows: $228 million in 2013; $38 million in 2014; and $10 million in 2015. The Company expects to fund the construction contract commitments from cash on hand and cash generated by operations through 2014.
CEO Bruce Streeter commented on the outlook for the Company, stating, "We remain extremely confident that 2013 is going to be a strong year for GulfMark. We have 11 vessels under construction, eight of which will be delivered during the year, and another three vessels going through our extremely successful stretch transformation. I continue to be optimistic about our business and the investments we are making around the world in both our people and in our vessels. The continuing drive to make the Company better for our customers and our stockholders requires the relentless attention of all of our employees, and, as always, I want to thank the roughly 1700 mariners and 200 shore-based employees who support our customers and who dedicate themselves to safe and efficient operations every day."
This article is for information and discussion purposes only and does not form a recommendation
to invest or otherwise. The value of an investment may fall. The investments referred to in this
article may not be suitable for all investors, and if in doubt, an investor should seek advice from
a qualified investment adviser. More