The recently enacted "American Jobs Creation Act" gives significant tax breaks to a number of U.S. industries--including shipping.
MARINE LOG and BLANK ROME will present a senior level seminar CHANGES IN U.S. TAXATION OF SHIPPING INCOME in Stamford, Conn. on April 5 & 6, 2004
Make sure you know how the new tax rules work!
February 24, 2005
Hornbeck Offshore revenues soar
"We are very pleased that we were able to continue the trend of exceeding our own expectations in all key performance measures in our first year as a publicly traded company," said President and CEO Todd Hornbeck as Hornbeck Offshore Services, Inc. today announced today its results for the fourth quarter and year ended December 31, 2004
Hornbeck said a major contributor to success was "our ability to move our utilization-adjusted, or effective, OSV dayrate up nearly 50 percent since the market trough in April 2004."
Fourth quarter revenues increased 29.5 percent to $37.8 million compared to $29.2 million for the fourth quarter of 2003.
The $8.6 million increase was primarily driven by improved OSV market conditions in the U.S. Gulf of Mexico and continued tightening in the supply of single-hulled equipment in the northeast U.S. as a result of OPA-mandated fourth quarter retirements.
Operating income was $10.2 million, or 27.0 percent of revenues, for the fourth quarter of 2004 compared to $8.4 million, or 28.8 percent of revenues, for the same quarter in 2003.
Higher dayrates and utilization in both segments contributed to an increase in EBITDA to $16.7 million, or 22.8 percent over the fourth quarter of 2003, and near the high-end of the company's upwardly revised guidance range of $15.5 to $17.0 million for the fourth quarter of 2004.
The company recorded a $10.1 million loss, or $0.48 loss per share, in the fourth quarter 2004 which included a $22.4 million ($14.7 million after-tax) charge for the early extinguishment of debt. This charge was incurred in connection with the refinancing of the company's 10.625 prcent senior notes due 2008 with new 6.125 percent senior notes due 2014. Excluding this $0.70 per share charge, net income for the fourth quarter of 2004 was $4.7 million, or $0.22 earnings per diluted share. This compares to net income of $2.1 million, or $0.14 per diluted share, for the fourth quarter of 2003. The average number of basic shares outstanding increased 43.4 percent to 20.8 million in the fourth quarter of 2004 from 14.5 million in the fourth quarter of 2003, primarily as a result of the company's March 2004 initial public stock offering.
"Since May 2004," commented Todd Hornbeck, "oil companies have increased their emphasis on replacing reserves through the drill bit and are devoting significant capital to deepwater, ultra-deepwater and deep-shelf oilfield projects. In the fourth quarter, our OSV segment continued to capitalize on this market recovery as we maintained near full utilization while further increasing fleet average dayrates by roughly $800 over the third quarter. We were also pleased with the performance of our tug and tank barge segment, which finished the year stronger than expected due to improving supply-demand fundamentals related to OPA 90."
OSV Segment: Revenues from Hornbeck's OSV segment were $22.2 million for the fourth quarter of 2004, an increase of 28.3% from $17.3 million for the same period in 2003. The net increase in segment revenues is due to the quarter-over-quarter increase in average dayrates and utilization rates. Hornbeck's utilization rate was 94.3 percent for the three months ended December 31, 2004, which was higher than the 85.5 percent achieved for the same period of 2003. The average OSV dayrate in the fourth quarter of 2004 was $10,926 compared to $9,769 for the same period of 2003. On a sequential basis, fourth quarter 2004 average fleet utilization increased slightly from 93.2 percent, while average dayrates improved 8.2 percent, or $830 per day, over the third quarter of 2004. Slightly offsetting the improved market conditions was an increase in segment costs stemming primarily from discretionary vessel maintenance, higher insurance costs and higher than expected general and administrative (G&A) expenses. The net result was a modest improvement in sequential quarterly operating income to $7.8 million from $7.7 million.
Tug and Tank Barge Segment: Tug and tank barge (TTB) segment revenues for the fourth quarter of 2004 were up 30.0 percent over the same period in 2003 to $15.6 million, and operating income increased by $0.5 million to $2.4 million. Utilization in the tug and tank barge segment increased to 82.1 percent from 76.1 percent in last year's fourth quarter and average dayrates grew to $12,642 from $10,537 during the same period. While the fourth quarter 2004 operating margin of 15.5 percent was down slightly from 16.2 percent for the same period last year, it was up sequentially from 12.1 percent in the third quarter of 2004.
Revenues for 2004 increased 19.4 percent to $132.3 million compared to $110.8 million for 2003, primarily as a result of an increase in the average size the OSV fleet by 5.5 vessels. Operating income was $35.8 million, or 27.1 percent of revenues, for 2004 compared to $35.7 million, or 32.2 percent of revenues, for 2003. EBITDA for 2004 grew to $59.5 million, or 9.8 percent over EBITDA of $54.2 million for 2003. The net loss for 2004 was $2.5 million, or $0.13 loss per share, which included the $22.4 million ($14.7 million after-tax) charge for the early extinguishment of debt. Excluding this $0.75 per share charge, net income for 2004 was $12.2 million, or $0.62 earnings per diluted share. This compares to net income of $11.2 million, or $0.82 per diluted share, for 2003. The average number of basic shares outstanding during 2004 increased 44.0 percent to 19.3 million from 13.4 million 2003, primarily as a result of the company's initial public stock offering.
Construction Program Update
"With another round of industry OPA 90 retirements this past quarter," said Todd Hornbeck, "we removed three of our single-hulled barges from service at the end of December as required. To replace these vessels and expand our fleet capacity, we have contracted with shipyards for the construction of five new double-hull tank barges. The first two new barges of this program were expected to be delivered in December of last year, just in time to replace the capacity of the retiring barges."
"Last quarter we reported that the construction of the first two barges under our current newbuild program had been delayed by their respective shipyards to between February and April of 2005. The shipyards are now indicating, however, that the delivery dates may be further delayed and we currently expect to receive one in April and the other in June. The impact of these revised delivery dates has been included in our 2005 guidance... Under the shipyard contracts, we expect to receive liquidated damages for these delays, which will result in a favorable adjustment to the capital cost of the vessels. Based on current shipyard schedules, we still expect to take delivery of the remaining three tank barges near the end of 2005, as originally planned."
Bond Refinancing. On January 14, 2005, Hornbeck Offshore redeemed the remaining balance of $15.5 million in aggregate principal amount of its 10.625 percent senior notes due 2008. The redemption was funded with proceeds raised in the company's November 2004 issuance of $225 million in aggregate principal amount of 6.125 percent senior notes due 2014. As a result, the company expects to record an additional after-tax loss on early extinguishment of debt of approximately $1.1 million, or $0.05 per diluted share, during the first quarter 2005.
On February 7, 2005, the company commenced an exchange offer whereby the 6.125 percent Series A senior notes due 2014, would be exchanged for 6.125 percent Series B senior notes with substantially similar terms, the offering of which was publicly registered. The exchange offer is expected to be completed in March 2005.
Jim Harp, the company's Executive Vice President and CFO, stated, "We believe that the pricing of our recent bond refinancing represents the lowest coupon (6.125 percent) and lowest Treasury spread (T+198 bps) in the history of oil service 'high yield' transactions. As a result, we expect our annualized interest expense, before allocation of construction period interest, to decrease by over $5 million even though our long-term debt has increased by $50 million. This bond refinancing lowered the effective interest rate on our senior notes from 11.2 percent to 6.4 percent and extended their maturity by six years. The full benefit of this refinancing will be realized upon the deployment of the approximately $25 million of excess proceeds raised, after deal costs."
Vessel Acquisition: On January 19, 2005 the company acquired a new generation 240 ft class, 8,000 brake horsepower, anchor-handling towing supply (AHTS) vessel from a private owner. This vessel, which will be renamed the HOS Saylor, is Hornbeck's first foreign-flagged vessel. Upon acquisition, Hornbeck immediately deployed the vessel under a new three-year time charter with one of its OSV customers in Trinidad.
Hornbeck added, "This strategic vessel acquisition complements our growing market presence in Trinidad. While this vessel has anchor-handling capabilities, we are currently using it primarily as a supply vessel and for towing jackup rigs."
For the full quarterly and annual release from Hornbeck Offshore, go to http://ir.hornbeckoffshore.com/phoenix.zhtml?c=132245&p=irol-newsArticle&ID=678424&highlight=
The company will hold a conference call to discuss its 2004 fourth quarter and year end financial results and recent developments at 11:00 a.m. Eastern (10:00 a.m. Central) today, February 24, 2005. To participate in the call, dial (303) 275-2170 and ask for the Hornbeck Offshore call at least 10 minutes prior to the start time, or access it live over the Internet by logging onto the web at http://www.hornbeckoffshore.com/, on the "IR Home" page of the "Investors" section of the Company's website. To listen to the live call on the web, please visit the website at least fifteen minutes early to register, download and install any necessary audio software.
For those who cannot listen to the live web cast, an archive will be available shortly after the call for a period of 30 days on the "IR Home" page under the "Investors" section of the Company's website. Additionally, a telephonic replay will be available through March 31, 2005, and may be accessed by calling (303) 590-3000 and using the pass code 11023128.