Superior Offshore Sees 3Q07 Revenues Increase
Superior Offshore reported revenues of $75.5 million for the third quarter of 2007, compared with revenues of $64.4 million in the third quarter of 2006. The Company reported net income of $3.6 million, or $0.14 per diluted share, in the third quarter of 2007, compared with net income of $13.7 million, or $0.92 per diluted share, in the third quarter of 2006. Included in net income for the third quarter of 2007 were charges totaling $0.9 million, or $0.03 per share, related to the sale of the Belle Chasse fabrication facility and Sarbanes-Oxley implementation.
Adjusted EBITDA, defined as EBITDA (earnings before interest expense net of capitalized interest, income taxes, depreciation and amortization and loss on extinguishment of debt), which is a non-GAAP financial measure, plus stock-based compensation was $11.1 million in the third quarter of 2007, compared with $22.8 million in the third quarter of 2006. A reconciliation of Adjusted EBITDA to the Company's net income is found at the end of this news release.
Third quarter 2007 revenues were significantly enhanced by the ongoing BP Trinidad project but were negatively impacted by the dry-dockings of the Superior Endeavour and Gulmar Falcon. Both vessels have returned to service and are currently on hire, although neither generated any revenue in the third quarter of 2007. Four-point surface diving vessel utilization and dayrates, along with "call-out" emergency response diving services, were significantly lower in the third quarter of 2007, compared to the same period in 2006, as demand for surface diving support in the Gulf of Mexico remained soft. The dry-dockings of the two vessels, and the lower four-point and call-out diving services demand, significantly reduced third quarter 2007 Adjusted EBITDA compared to the third quarter of 2006.
James J. Mermis, Superior Offshore's president and chief executive officer, stated, "Third quarter 2007 results reflect the Company's continued progress in transforming Superior Offshore into an international subsea construction and commercial diving service company. Approximately 80 % of revenues for the third quarter came from outside the Gulf of Mexico.
"During the third quarter of 2007, we realized improved vessel utilization as compared with the first half of the year. All of our dynamically positioned vessels are currently under hire, except for the Toisa Puma, which is in dry dock until early December 2007. Three of our vessels are working on our BP Trinidad project -- the largest project in company history. We expect to keep some of our assets in Trinidad after the BP project is completed around the end of the year, and we have been awarded a project with another E&P company when assets become available. We have established an office in Trinidad to pursue additional work opportunities in the region.
"Our transformation was further accelerated with our recently announced acquisition of Ocean Flow International, LLC, a subsea engineering and project management firm, which is expected to close by the end of November. The opening of our Dubai office and the addition of Ocean Flow will enable us to focus on complementary services and to offer a broader range of services to a broader range of customers, allowing us to compete for larger-scale projects with longer contract terms and higher margins.
"Looking at the fourth quarter of 2007, we expect revenues to benefit from the Superior Endeavor and Gulmar Falcon returning to work, and we are also refocusing on our 24-hour call-out diving services for emergency repair and maintenance.
"As we move into 2008, we expect the continued weakness in the shallow water Gulf of Mexico to be offset by increased international and deep water work. The four-point market is still very challenging in the Gulf, and we are looking at potential opportunities to relocate those assets to international markets where they can realize higher utilization and pricing -- and we can get enhanced marketing exposure for Superior in these markets. It is also important to note that all of our special dry-docks will be completed in 2007, and we currently have only one 30-day dry-docking scheduled for 2008," concluded Mermis.
For the nine months ended September 30, 2007, Superior Offshore reported revenues of $171.7 million, compared with revenues of $174.4 million for the first nine months of 2006. The Company reported a net loss of $1.0 million, or $0.05 per share, for the first nine months of 2007, compared with net income of $37.7 million, or $2.54 per diluted share, for the same period in 2006. Included in net income for the first nine months of 2007 were charges totaling $4.4 million, or $0.22 per share, related to the early extinguishment of debt, the sale of the Belle Chasse fabrication facility and Sarbanes-Oxley implementation.
"We also believe that the dual diver accreditation of ADCI and IMCA status will give us a significant advantage as we move into the international arena," added Mermis. "We currently employ over 300 international divers who hold dual certificates, and are currently in the process of dual-certifying more than 60 U.S. divers."
2007 and 2008 Outlook:
Based on our current estimates, the timing of project work and current market conditions, the Company expects that full-year 2007 revenue will range between $265 million and $275 million.
Adjusted EBITDA for the fourth quarter of 2007 is expected to be between $16 million and $18 million. Earnings per diluted share for the fourth quarter of 2007 is expected to range from $0.12 to $0.16, which will include one-time charges related to severance costs and extinguishment of debt expected to be $0.16 to $0.20 per diluted share.
Based on our current estimates, the timing of project work and current market conditions, the Company estimates 2008 revenues will be $320 million to $350 million, which does not include any revenue from the Superior Achiever. The Achiever is expected to be placed into service in the second half of 2008.
These projections for 2007 and 2008 constitute forward-looking statements and are subject to substantial risks and uncertainties. Actual future results could differ materially from these projections as a result of a number of factors, including, but not limited to, our ability to be selected for new projects, the availability of charter vessels on suitable terms, possible shipyard delays, project delays and adverse weather conditions in the Gulf of Mexico as well as other factors described in the Company's filings with the Securities and Exchange Commission.
- The Superior Endeavour, a DP II saturation Dive Support Vessel ("DSV"), returned to service in September 2007 on a saturation diving project in the U.S. Gulf of Mexico and began generating revenues in October. It has committed work through December 2007;
- The Gulmar Condor, a DP II saturation DSV, experienced nearly full utilization during the third quarter of 2007 while working in Trinidad. Installation of a saturation diving system and work-class remotely operated vehicle ("ROV") was completed during the quarter. This vessel has a deepwater heave-compensated crane and is currently being bid on projects that capitalize on synergies that will be provided by Ocean Flow in the deepwater market. She will enable Superior Offshore to secure the track record needed before final commissioning of the Superior Achiever;
- The Seamec III, a DP II saturation DSV, is on hire in Trinidad and experienced nearly full utilization during the third quarter. The Company is currently marketing her in Trinidad and is seeking opportunities to keep her utilized in the area after completion of the BP project;
- The Adams Surveyor, a DP II vessel, is currently providing deepwater ROV services in the U.S. Gulf of Mexico. This vessel experienced strong utilization during the third quarter, and the Company is negotiating for another ROV vessel to be chartered into the fleet;
- The Gulmar Falcon, a DP II DSV, returned to service in October 2007 on a saturation diving project in the U.S. Gulf of Mexico and began generating revenues in November. She has committed work in the Gulf for the remainder of this year and will come up for re-charter in April 2008. Assuming utilization of its DP assets remains strong as anticipated, Superior Offshore will negotiate a renewal of her charter;
- The Toisa Puma, a DP II vessel, is in drydock and has not generated any revenues to date. Superior Offshore is currently engaged in a dispute with the vessel's owner regarding the vessel's readiness for its intended use;
- The Crossmar XIV, an anchored subsea construction barge, is currently on hire in Trinidad and based on weather could see utilization there through the end of this year. The Company is working with its partner, Crossmar, to secure additional work for the vessel, either in Trinidad or the Gulf of Mexico;
- The Gulf Diver III, V and VI four-point surface diving vessels continued to experience low utilization and declining dayrates due to decreasing demand in the Gulf of Mexico. Superior Offshore is exploring the possibility of moving some of these vessels to locations outside of the Gulf of Mexico. The Company is currently considering several strategic alternatives for the Gulf Diver IV, including refurbishment or sale;
- Construction of the Superior Achiever, a 430-foot DP III vessel, remains on schedule, with delivery expected in the second half of 2008.