February 21, 2008
Expansion pays off for Hornbeck Offshore
Fleet expansion and favorable market conditions saw Hornbeck Offshore Services, Inc. (NYSE: HOS) report results for the fourth quarter and year ended December 31, 2007 that included:
The company says the primary reasons for the increase in revenues, operating income, EBITDA and net income were the incremental contribution of recently acquired and newly constructed vessels and favorable market conditions for both segments of its business.
OSV Segment. Revenues from the offshore supply vessel ("OSV") segment were $72.2 million for the fourth quarter of 2007, an increase of 83.7% from $39.3 million for the same period in 2006. OSV operating income nearly doubled to $32.7 million for the fourth quarter of 2007 from $17.0 million for the fourth quarter of 2006. The OSV revenues and operating income increase was primarily due to the full-quarter contribution from twenty OSVs (the "Sea Mar Fleet") acquired in August 2007 from affiliates of Nabors Industries, Ltd. and a market-driven increase in new generation OSV effective dayrates of approximately $3,700. Average OSV dayrates for the fourth quarter of 2007 improved 15.3%, or $2,963 per day, to $22,315 compared to $19,352 for the same period in 2006. OSV utilization was 90.4% for the fourth quarter of 2007 compared to 84.9% during the same period in 2006. Hornbeck Offshore attributes the increases in utilization and dayrates to favorable market conditions for new generation OSVs in the deepwater and ultra-deepwater U.S. Gulf.
Tug and Tank Barge Segment. Revenues from the tug and tank barge ("TTB") segment of $28.8 million for the fourth quarter of 2007 increased by $2.8 million, or 10.8%, compared to $26.0 million for the same period in 2006. This revenue increase was primarily related to the full-quarter contribution of the Energy 6506 and a partial-quarter contribution from the Energy 6507, two double- hulled tank barges delivered under the company's second TTB newbuild program in August 2007 and November 2007, respectively. Average TTB dayrates rose $1,656 to $18,455 from $16,799 in the fourth quarter of 2006. Utilization in the TTB segment for the fourth quarter of 2007 was 87.1% compared to 92.4% in the prior-year quarter. Operating income for the fourth quarter of 2007 was up 15.7% to $8.1 million, or 28.0% of revenues, compared to operating income for the fourth quarter of 2006 of $7.0 million, or 26.9% of revenues, excluding the $1.5 million gain on sale of an ocean-going tug in October 2006.
On February 20, 2008, the Hornbeck Offshore completed its plans to increase the $100.0 million borrowing base of its existing senior secured revolving credit facility to $250.0 million, the maximum amount of its "accordion" feature. As required by the September 2006 credit agreement, the company posted 16 additional OSVs as collateral. While presently undrawn, the expanded credit facility is expected to fund, during the peak of its aggregate construction draw schedule, a portion of the company's on-going newbuild and conversion programs. Any such draw is projected to be repaid in full by the end of the construction cycle in 2010.
Capital Expenditures Outlook
Hornbeck Offshore expects total maintenance capital expenditures for the full-year 2008 to be approximately $68.3 million, including approximately $24.6 million of non-vessel related expenditures primarily related to the shore-base adjacent to HOS Port..
Update on MPSV Program. In January 2008, Hornbeck Offshore closed on its acquisition of the shipyard contract for the Superior Achiever, a T-22 class DP-3 new generation multi-purpose support vessel ("MPSV") and related owner-furnished equipment, from Superior Offshore International, Inc. The company's MPSV program now consists of two U.S.-flagged coastwise sulfur tankers being converted in a domestic shipyard into 370 class DP-2 new generation MPSVs and two newbuild T-22 class DP-3 new generation MPSVs, including the Superior Achiever, that are being constructed in a foreign shipyard. These four MPSVs are expected to be placed in service on various dates in 2008 and 2009. The first converted DP-2 MPSV is expected to be delivered in the third quarter of 2008 and the second converted DP-2 MPSV is expected to be delivered in late-2008 or early-2009. The first newbuild DP-3 MPSV is expected to be delivered in the fourth quarter of 2008 and the second newbuild DP-3 MPSV is expected to be delivered in the fourth quarter of 2009. The aggregate cost for MPSV program, inclusive of the Superior Achiever, is expected to be approximately $450.0 million. From the inception of this program through December 31, 2007, the company has incurred $145.9 million, or 32.4%, of total project costs, including $22.7 million incurred during the fourth quarter of 2007.
Update on OSV Newbuild Program No. 4. In January 2008, the company expanded its fourth OSV newbuild program to include two additional 240 ED class OSVs. This program now consists of vessel construction contracts with three domestic shipyards to build six proprietary 240 ED class OSVs, nine proprietary 250 EDF class OSVs and one 285 class new generation OSV. These 16 new generation OSVs are expected to be placed in service on various dates from 2008 to 2010. The first vessel is expected to be placed in service in the second quarter of 2008 with the remaining vessels to be delivered at a rate of one or two per quarter through 2010. The company's current guidance assumes an average number of new generation OSVs of 37 to 38 vessels in service for 2008. The aggregate cost for the fourth OSV newbuild program, including the recently announced additional vessels, is expected to be approximately $393.0 million. From the inception of this program through December 31, 2007, the company has incurred $93.6 million, or 23.8%, of total project costs, including $38.4 million incurred during the fourth quarter of 2007.
Update on TTB Newbuild Program No. 2. The company's second TTB newbuild program consists of vessel construction contracts with three domestic shipyards to build three 60,000-barrel double-hulled tank barges and retrofit four 3,000 horsepower ocean-going tugs that were purchased in July 2006. During the second half of 2007, the company delivered four vessels under this program. The newbuild tank barge, Energy 6506, and the retrofitted ocean- going tug, Michigan Service, were placed in service in the third quarter of 2007. The retrofitted ocean-going tug, Huron Service, and the newbuild tank barge, Energy 6507, were placed in service in the fourth quarter of 2007. The retrofitted ocean-going tug, Superior Service, and the newbuild tank barge, Energy 6508, are expected to be placed in service by the end of the first quarter of 2008. The final retrofitted ocean-going tug, Erie Service, is expected to be delivered during the second quarter of 2008. The company estimates the aggregate cost of its second TTB newbuild program to be approximately $77.0 million. From the inception of this program through December 31, 2007, the company has incurred $69.0 million, or 89.6%, of total project costs, including $8.1 million incurred during the fourth quarter of 2007.