Wednesday, February 6, 2013

Hornbeck Offshore Announces Fourth Quarter 2012 Results ($HOS)

Just released:

  • The sequential increase in dayrates was primarily driven by improved market conditions in the GoM and Puerto RicoUtilization for the double-hulled tank barge fleet was 99.3% for the fourth quarter of 2012 compared to 87.3% for the year-ago quarter and 93.4% for the sequential quarter.  The increase in utilization over the prior-year quarter is primarily due to increased demand for the Company’s tugs and tank barges driven by the activity in the Eagle Ford Shale and a tight market for clean petroleum product capacity in the Northeast U.S.
  • After adjusting for 71 days of fourth quarter downtime for regulatory drydockings, the Company’s commercially available high-spec OSV fleet achieved an effective utilization of 98.8%.    
  • Fourth quarter 2012 revenues increased 8.6% to $133.2 million compared to $122.7 million for the fourth quarter of 2011
  • 4Q2012 utilization for the Downstream fleet was 99% up from 87% in 4Q2011 and 93% in 3Q2012
  • Improved market conditions have allowed the Company to recently increase leading-edge spot dayrates for its 240/265 class DP-2 OSVs to the $38,000 to $42,000 range, up from $30,000 to $36,000 range last quarter.
  • The Company announced today the expansion of its fifth OSV newbuild program by four vessels, as well as its intentions to ultimately build up to eight Jones Act-qualified MPSVs as a subset of its growing OSV newbuild program to service the subsea construction and IRM market that is expected to expand significantly in the GoM beginning in 2015.
Bullish for Conrad - high barge utilization and more activity coming to the GOM. The moronic drilling ban has probably created a gigantic pent up demand for projects that will last years regardless of what oil does.

It's funny because a surge of activity is better for suppliers / vendors than steady constant activity would be. It should mean that capacity is constrained and so they get more of the rents as opposed to the producers. Shipping product is obviously costing more now that barge fleets are fully utilized.

I've written up the GOM market color before, but here are highlights:
  • [Sep 2012]"The Gulf of Mexico, which saw deepwater backlog fall 10% in 2011 following the Macondo moratorium, is back at record backlog and we expect further supply commitments in the coming months."
  • [Oct 2012] "Hercules Offshore backlog per rig is at a 5 year high. Slide 6 shows shallow GOM lease block sales back to early 2008 levels."
  • [Oct 2012] "Both Schlumberger and Baker Hughes had good things to say of the Gulf of Mexico. Calling it 'the fastest growing deepwater market in the world...'"
  • [Oct 2012] "Gulf of Mexico is still one of the best places in the world to invest [...] This is clearly another bright spot in the U.S. for future activity"
  • [Oct 2012] "in the U.S. Gulf of Mexico, we are expecting 2013 demand for our service and product lines that support deepwater drilling to surpass the level we experienced before the Macondo incident in April of 2010. [...] subsea tree installations in the Gulf are not expected to reach the prior peak level of 2008 until 2016.""
  • [Nov 2012] "A resurgence in the Gulf of Mexico offshore markets, spurring both newbuild and conversion projects, and augmented by substantial U.S. government spending, has resulted in shipyard backlogs that are as good as they have been in some time; carrying well into 2014 and beyond"
Historically, oil and gas related work was a big component of Conrad's business. However, the oil price crash and then the post-DWH moratorium resulted in a string of bad years for this segment. Luckily they were able to replace this business with other types of projects. But if both inland barges and energy related business are booming at the same time, revenue and profit margins should both increase substantially.

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