Deep Down Sees Increase in GOM Activities
Deep Down commented that the recently announced 180-day moratorium on exploration drilling in water depths in excess of 500 feet in the Gulf of Mexico (the "Drilling Moratorium") has had no material negative impact on our current operations. However, we have seen an increase in activity in our operations related to cleanup and subsea monitoring in the U.S. Gulf of Mexico.
Additionally, we do not envision that the Drilling Moratorium will have a material impact on the operations of Cuming Corporation. On May 3, 2010, we announced that we had entered into a conditional purchase agreement to acquire Cuming Corporation. Consummation of the transaction remains subject to several conditions which include, among other things, obtaining adequate external financing to fund the approximately $34 million cash component of the purchase price.
Cuming Corporation, which primarily provides buoyancy products for drilling riser systems, had a backlog and signed letters of intent (LOI) of $138 million and $32 million, respectively at March 31, 2010. Recently, the $32 million of LOI's for international projects have become backlog in the form of signed contracts. Over 80% of the Cuming backlog involves drilling vessels that are either contracted for or seeking contracts to work on projects outside the U.S. Gulf of Mexico. Both Deep Down and Cuming continue to bid on deepwater buoyancy product business. We expect that the demand for such products is and will continue to be driven by deepwater exploration and production activity occurring outside the U.S. Gulf of Mexico.
"The impact beyond 2010 of the Drilling Moratorium on our customers' exploration, development and production activities in the U.S. Gulf of Mexico remains unclear, but we continue to monitor and remain actively involved with our customers during this difficult time for our industry. We will continue to support our customers' ongoing operations in the Gulf of Mexico and around the world," stated Ron Smith, Deep Down, Inc. Chief Executive Officer, "and we will continue to provide solutions to meet our customers' needs, for which Deep Down is well known."