GulfMark Offshore Announces Fourth Quarter and Full Year 2011 Operating Results

Thursday, Feb 23, 2012

GulfMark Offshore, Inc. (NYSE:GLF) today announced the results of operations for the three- and twelve-month periods ended December 31, 2011. For the three months ended December 31, 2011, revenue was $99.9 million, and net income for the same period was $23.6 million, or $0.90 per diluted share. For the twelve months ended December 31, 2011, consolidated revenue was $381.9 million and net income was $49.9 million, or $1.91 per diluted share.

Bruce Streeter, President and CEO, commented, "Year over year, fourth quarter revenue was up 14%, and although typical seasonality brought revenue down slightly in the fourth quarter as compared to the third quarter, a progressive improvement in results continued as each quarter of 2011 developed. We are optimistic about the outlook for 2012 and beyond for all of our markets.

"During 2011 we made a significant commitment to upgrade our fleet in the North Sea, and last month we announced the decision to build another Arctic-class vessel for the North Sea and the purchase of a DP2 certified vessel for the U.S. Gulf of Mexico. These capital commitments and fleet changes are being done to high-grade our fleet in these two geographic areas, and we look forward to making additional commitments and fleet changes as similar opportunities present themselves."

Consolidated Fourth Quarter Results

Consolidated revenue for the fourth quarter of 2011 was $99.9 million, a decrease of 4%, or $3.9 million, from the third quarter. However, consolidated operating income was up $7.4 million, or 32%, from the third quarter amount. The increase in sequential quarterly operating income was driven by an absence of drydock expense in the quarter and lower direct operating expenses, which overcame the drop in quarterly revenue.

The operating results for the quarter include a net gain of $0.01 per diluted share related to two items associated with fleet changes and modifications: The Company sold a vessel in the North Sea fleet in October that resulted in a gain of $0.08 per diluted share, and the Company recorded an impairment charge of ($0.07) per diluted share on an inactive, 1984 built vessel classified as held for sale. This vessel is also based in the North Sea but has been excluded from the active vessel fleet count since 2009.

Regional Results for the Fourth Quarter

In the North Sea region, revenue was $44.0 million, down $5.2 million, or 11%, from the third quarter. The decrease in revenue was due principally to lower utilization, which decreased from 97% in the third quarter to 92% in the fourth quarter. The lower utilization is consistent with seasonal patterns the North Sea and is also reflective of a comparatively strong third quarter. Contributing to the decrease in revenue for the fourth quarter was the sale in October of a 1983 built U.K. flagged, 224 foot PSV that contributed approximately $1 million of revenue in the third quarter.

Revenue for the Americas region was $40.0 million, an increase of $2.1 million, or 6%, over the third quarter amount. The higher revenue amount was driven by an increase in utilization, which improved 4 percentage points to 85% for the quarter.

During the fourth quarter, revenue in the Southeast Asia region was $15.9 million, a decrease of approximately $0.8 million, or 5%, from the third quarter amount. Although down sequentially, revenue in Southeast Asia has continued to gradually improve as a result of increasing utilization. During the first half of 2011, utilization in the region was 83%, and during the last half of 2011 utilization was 87%.

Consolidated Operating Expenses for the Fourth Quarter

Direct operating expenses for the fourth quarter were $43.3 million, a decrease of $4.8 million, or 10%, from the third quarter amount. The resulting average quarterly run rate for direct operating expenses in 2011 was $46 million, which was above the Company's original 2011 guidance but lower than anticipated as of last quarter. The decrease in direct operating expenses for the quarter was due mainly to the strengthening of the U.S. dollar against foreign currencies, and lower than anticipated crew salaries and benefits. There was no drydock expense in the fourth quarter, as the Company completed its annual drydock program in the third quarter. Full-year drydock expense was $15.9 million, approximately $1 million under the Company's full-year guidance. Consolidated general and administrative expenses were $11.3 million for the fourth quarter, and full-year results were consistent with the Company's anticipated average quarterly run rate for 2011 of $11.5 million.

Results of Operations for the Year

Consolidated revenue for the year ended December 31, 2011 was $381.9 million, an increase of $22.1 million, or 6%, from the prior year. Consolidated operating income for the year before special items was $78.3 million, an increase of $12.3 million, or 19%, from the prior year. Earnings per diluted share before special items was $1.90, an increase of $0.04 over the prior year amount. A reconciliation of amounts before special items to their reported amounts under U.S. GAAP is included in the tables below.

Liquidity and Capital Commitments

Cash flow from operations totaled $43.3 million in the fourth quarter of 2011. Cash on hand at December 31, 2011 was $128.8 million, and as of that date there was $6.0 million drawn on the Company's revolving credit facility. Total debt at December 31, 2011 was $307.5 million, and debt, net of cash on hand, was $178.7 million.

Subsequent to year-end, the Company agreed to extend the maturity of the term-loan facility to July 1, 2014 and to discontinue the $8.3 million quarterly principal amortization, in exchange for a fee and modifications to certain covenants under the existing agreement.

Capital expenditures during the fourth quarter totaled $37.3 million, which included $31.3 million of progress payments on the construction of new vessels. The total of capital expenditures during 2011 was $52.3 million, and of that total $36.6 million related to progress payments on the construction of new vessels and $15.7 million related to other capital projects.

As of December 31, 2011, the Company had approximately $254 million of remaining capital commitments related to the construction of seven vessels. Anticipated progress payments over the next three calendar years are as follows: $88 million in 2012; $160 million in 2013; and $6 million in 2014. The Company expects to fund the construction contract commitments from cash on hand and cash generated by operations through 2014.

Source: GulfMark Offshore

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