conference call:
a) market is picking up in Brazil, west Africa. they have significant presence in Brazil where day rates are equivalent to the north sea and the boats used in Brazil are Trico specific, i.e., requires rigged vessels for deep water. will be positive toward earnings next quarter and in the 4th when second vessel there is launched. fully realized in 1999. launched a vessel with Petrobras for 3rd quarter with 5 year contract
b) 60% of costs relative to ships are labor related; if day rates in the us gulf fall further, "permanent" drydock of a vessel would cause operating expenses per vessel to be significantly less, thus earnings to reflect decrease in costs (example - earnings in 1997 on $26 million in revenue were $.51, earnings this quarter on $52 million in revenue were $.58; the main difference being operating expenditures increasing on a greater number of ships utilized; so you decrease the number of ships, you decrease costs, earnings remain fairly constant
c) number of new ships entering the gulf has significantly slowed. several firms wanting out of their new ship build contracts as you can't profitably run a new build supply boat for less than $6500 a day, other older ships being mothballed as they can't operate profitability in a $6000 rate market; thus number of available ships is begining to tighten again
d) they've got $15 million in cash.
e) are considering intiating a stock buy back program
f) utilization ratio will increase sligthly for the third quarter and be in the high 80 percent range in the 4th quarter as the number of ships coming off drydocking increases
g) current drydocking of vessels and upgrades has the effect of increasing future earnings as the cost to operate the upgraded vessesl decreases significantly. they stated that other firms (they were suggesting TDW, possibly) will experience future earnings dilution as they forstall upgrading their vessels
h) contracts in the North Sea are running from one year to five years. two vessels used on the spot market, remaining 14 under long term contract. spot market rates have been ranging from $15K a day up to $45K a day depending on situation. very solid contracts in the north sea/relationship with Seavik
i) revolving credit at around $100 million. they showed bank various scenarios of operation of projected future earnings and cash flow wherein day rates would range from $4000 to $8000 average on supply boats and bank was "pleased" (their own words) with what they saw, even at the low end of the range. interest rates on debt are about 5.75% to 6% which is quite good
j) lift boat day rates haven't varied at all in the gulf. lift boat utilization will increase in the 3rd quarter as their two LARGEST (i.e. commands higher rates) lift boats come off drydocking and back into service
k) rig count in the gulf has stabilized, no specific weakness they see there
l)4 to 5 new vessels coming into the market which will be earnings positive for the 3rd quarter and an additional 4 in the 4th quarter for a total of 8 new vessels revenue positive for the remaining 2nd half of the year
m) rate reduction in the gulf has been at the hands of TDW as TDW has saught to decrease capacity in the gulf of new entry competitors; it's obviously worked as contracts for several new builds have been mothballed and/or several delays for new builds have been requested by competitors
n) they see supply boat rates in the gulf to range between $6K and $6.5K for the 4th quarter. 3rd quarter day rates will be higher as day rates in July have already averaged $7200 and will continue to be in that range for the remainder of the 3rd quarter |
