The company posted net income of $2,269,000 ($0.07 diluted earnings per share) for the period, compared to $15,471,000 ($0.51 diluted earnings per share) for the first quarter of 2006.
The Company's domestic market for the first quarter of 2007 returned to typical seasonality of marine construction in the U.S. Gulf of Mexico, as operators traditionally delay the start of new construction projects until the summer months to coincide with more favorable weather conditions. The Company's first quarter 2007 results were also significantly affected by a $(8.7) million gross loss on its West Africa Gas Pipeline project. During the pre-commissioning work in late March 2007, the Company discovered two instances of damage to the pipeline. The Company is responsible by contract for the first $1.0 million of repair costs incurred for each of these two occurrences. Additionally, the Company continues to experience inefficiencies with some of its subcontractors and failure of their equipment related to the final phases of the project. The repairs and poor subcontractor productivity will cause further delays and associated costs in completing this project which have increased the estimated losses through completion of the project, which have been recorded, as of March 31, 2007.
The successful execution of a project offshore Colombia for a branch of a major U.S. oil and gas company and the continued work on two significant projects for Pemex offshore Mexico produced solid results for the Company's Latin America operations for the first quarter of 2007. The Company expects to complete the first Pemex project by the end of the second quarter of 2007 and the second Pemex project by the end of the third quarter of 2007. The Company's activities in Southeast Asia also produced good results. The Company's combination barge, the Sea Horizon, is currently on a vessel charter offshore Malaysia, and is expected to continue working on this charter through November 2007.
"We reported solid results for the first quarter of 2007, and we believe that the demand for our services, while reflecting traditional seasonality for the first quarter, will remain strong in 2007," said David W. Sharp, President and Chief Executive Officer of Horizon Offshore, Inc. "There remains a substantial amount of hurricane-related platform salvage work to perform, and high commodity prices continue to drive demand for our services on new construction work. Although we saw the effect of seasonality on our domestic operations in the U.S. Gulf of Mexico, activity in this area for this quarter was higher than historical first quarter activity levels experienced prior to the unprecedented hurricane activity in late 2005."
Horizon and its subsidiaries provide marine construction services for the offshore oil and gas and energy industries. The Company's fleet is used to perform a wide range of marine construction activities, including installation and repair of marine pipelines to transport oil and gas and other sub sea production systems, and the installation and abandonment of production platforms.
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