February 18, 2010
Trico Marine benefits from Norwegian tax ruling
A Norwegian Supreme Court ruling is benefiting The Woodlands, Texas, based Trico Marine Services, Inc. (Nasdaq:TRMA), whose operations include Haugesund, Norway, based DeepOcean.
Beginning in the first quarter of 2008, several Norwegian ship owning companies initiated legal proceedings against the Norwegian government claiming that the claw-back rules under the newly enacted tonnage tax regime represented a violation of the Norwegian Constitution's ban on retroactive legislation. On February 12, 2010, the Norwegian Supreme Court ruled in favor of the ship owners and came to the conclusion that the transitional rules, where the untaxed profits under the old tonnage tax regime became payable when entering into the new regime were unconstitutional. As a result of the ruling, Trico Marine expects to recognize approximately $44 million in income in the first quarter of 2010, including approximately $4 million of cash savings that would have become due in 2010 and $8 million in cash refunds related to prior year tax payments. Going forward, $36 million of payments over the next eight years will no longer be required.
Meantime, Trico Marine today reported fourth quarter 2009 revenues of $151 million and an operating loss of $129 million, after a non-cash charge of approximately $120 million relating to impairments and the costs associated with the early termination of a vessel contract. The previously announced impairment, related to the expected cancellation of four newbuild contracts, reduces the company's capital expenditure obligations, net of refund guarantees, by $100 million.
Summary Results and Recent Developments
Total revenues for the fourth quarter of 2009 were $150.8 million, compared to $189.9 million for the third quarter. EBITDA for the fourth quarter was $3.5 million, compared to $27.7 million in the third quarter. A Reconciliation table.
Trico Marine says primary reasons for the reduction in revenues and EBITDA were lower utilization of vessels in the Subsea Services and Subsea Protection and Trenching divisions, related to seasonality in the North Sea and the weak market conditions in the North Sea and Asia Pacific regions. The company also had one construction vessel undergoing a combined regulatory drydocking and upgrade in vessel capability for 75 days prior to starting a new one year contract in Mexico. The combined dry docking cost and lost earnings aggregated approximately $5 million in the quarter. The decision to terminate a time charter of a consistently under-utilized survey vessel within DeepOcean's fleet and the decision to keep vessels in certain emerging subsea markets for long-term contracts commencing in 2010 rather than mobilize them for spot contracts also contributed to low utilization during the fourth quarter. However, the average day rates for subsea service spreads remained relatively flat between the third and fourth quarters 2009.
Trico Marine continued to reduce its exposure to the towing and supply business, especially in the North Sea, by completing four asset sales for total proceeds of approximately $40 million in the fourth quarter at attractive EBITDA multiples. Since the end of the fourth quarter through today, the company has reached definitive agreements for approximately $20 million in additional sales of non-core assets.
Trico Marine says its current view of the worldwide OSV market is that "prices and utilization in virtually all markets will remain very weak with the anticipated level of newly built vessels to be delivered in 2010 and 2011." Since September 30, 2009 through today, the company further reduced its remaining fleet of OSV's from 45 to 37 vessels.
At December 2009, the Company had $53 million in cash and $734 million in total debt. $53 million of the total debt is classified as due and payable within twelve months compared to $240 million prior to the completion in the fourth quarter of a $400 million high yield bond offering. At December 2009, the company's cash and credit availability was $63 million. Committed capital expenditures are $38 million. The company is currently pursuing a number of transactions in order to increase its liquidity to levels sufficient to meet its commitments, including, but not limited to, additional sales of non-core OSV assets. Management of the Company's capital structure and debt reduction remain the Company's highest priorities.
Chairman and Chief Executive Officer, Joseph S. Compofelice, commented, " In the fourth quarter, revenues and earnings reflected the soft market conditions in the oilfield in general, especially where we experienced continued weakness in the North Sea. While both CTC Marine and Deep Ocean have made good progress winning work outside the North Sea, I expect to see much more progress in all of our markets in the last three quarters of 2010 and into 2011. We are noticing an increase in tender offers and inquiries since the beginning of the year in most international markets. Based on the current and expected level of subsea completion awards and levels of tendering activity for the company, we are cautiously optimistic about the future growth and profitability of our subsea businesses."
The company says that "operating results in the fourth quarter and early into the first quarter 2010 continue to reflect weakness in the North Sea and the Asia Pacific region, but we are encouraged by certain recent developments which we anticipate will be reflected in our results commencing in the second quarter of 2010. We currently have approximately two-thirds of our 2010 expected revenues under contract with promising prospects targeted for the remainder of the year."
The company says its backlog is approximately $600 million of termed out or long-term contracts spread principally across the Subsea Services and Towing and Supply businesses. "In the fourth quarter of 2009, approximately 82 percent of our revenues were generated through our subsea businesses," it notes.