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GulfMark Offshore announces Q1 2015 operating results

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GulfMark Offshore, Inc. (NYSE:GLF) today announced its results of operations for the three-month period ended March 31, 2015.

For the first quarter ended March 31, 2015, revenue was $89.1 million, and net loss was $5.1 million, or $0.21 per diluted share. Included in the quarterly results is one special item that totals $0.01 per diluted share. Quarterly loss before this special item was $0.20 per diluted share.

Quintin Kneen, President and CEO, commented, “As anticipated, we saw the cyclical downturn affect day rates and utilization across all of our regions during the first quarter. Fortunately, we also saw the benefits of cost reductions, and our results exceeded expectations. Overall, revenue approached the high end of our guidance, and direct operating expenses neared the low end of our guidance range. Reductions to salaries and adjustments to incentive compensation contributed to lower our general and administrative expenses to below the low end of our guidance range.

“At this point in the cycle, our primary focus is on improving operational efficiencies. We decreased total direct operating expenses by almost 12% from the prior quarter. Direct operating expenses are down almost 18% from its peak in the third quarter of 2014, and our objective is to reduce direct operating expenses by an additional 15% from its current level by the end of the third quarter. We have decreased ongoing general and administrative expenses by 27% over the same period. For the next quarter, we anticipate that general and administrative expenses will be approximately $12 million.

“While commodity prices have recently begun to recover, we continue to believe that the headwinds facing our industry are more about vessel oversupply than decreased demand. As such, we are working to adjust our cost structure to advance our competitive position in an oversupplied industry. We have cut our general and administrative expenses and direct operating expenses, and we will continue to implement profit-maximizing strategies throughout the business.

“It is still too early to predict the beginning of the next upturn. Looking forward, we expect revenue in the second quarter to be between $70 and $75 million. We expect fleet-wide utilization to be approximately 70% for the second quarter, and we expect our global average day rate for the second quarter to decrease by approximately 10% sequentially. Due to the quickly changing dynamics of the industry, we are only providing revenue guidance for the upcoming quarter.

“Importantly, we see opportunity in this industry downturn. By reducing our ongoing cost structure while increasing the variable nature of those costs, we believe that we will improve our profitability throughout the industry cycle. As this year progresses, we are rethinking procurement and labor strategies to help meet those goals. As new vessels continue to deliver into the global market, the fundamentals of our industry will become increasingly challenging. We are continuing to create and generate efficiencies that will improve our performance and meet these new challenges. We are confident that we are taking the steps necessary to enable us to profit from the upturn when it arrives.”

Consolidated First-Quarter Results

Consolidated revenue for the first quarter of 2015 was $89.1 million, compared with $116.1 million in the fourth quarter. Consolidated revenue fell due to a 14% sequential decrease in average day rate to $17,961 from $20,939 in the previous quarter, while utilization fell to 77% from 83% in the fourth quarter. Consolidated operating loss was $0.6 million. Excluding special items in both quarters, consolidated operating income sequentially declined to a loss of $0.2 million from income of $16.1 million in the fourth quarter, due to lower revenue offset by lower operating and general and administrative costs.

This quarter includes one special item for a total of $0.3 million net of tax ($0.01 per diluted share). It relates to severance and exit costs in the North Sea and Americas regions as a result of adjustments to the workforce.

Regional Results for the First Quarter

In the North Sea region, first-quarter revenue was $40.2 million, compared with $52.6 million in the fourth quarter. This is a decrease of $12.4 million, or 24%. The average day rate fell to $18,353 from $21,655 in the fourth quarter and utilization weakened by 3 percentage points during the same period. The lower day rate, utilization, and fewer vessel operating days, coupled with a stronger dollar, contributed to the decrease in revenue.

Revenue in the Southeast Asia region was $13.3 million, compared with $15.1 million in the fourth quarter. The change in revenue was due primarily to a decline in average day rate of 6%, to $13,880 from $14,827 in the fourth quarter, offset by a 2 percentage point utilization improvement.

First-quarter revenue for the Americas region was $35.6 million, compared with $48.4 million in the previous quarter. Average day rate decreased 15% from the prior quarter due to the softening in the market. Utilization decreased 12 percentage points to 67% from 79% in the fourth quarter due to a weaker-than-expected spot market and the effect of warm-stacking several vessels in the U.S. Gulf of Mexico. Our utilization in the Americas, exclusive of warm-stacked vessels, was 80% during the first quarter.

Consolidated Operating Expenses for the First Quarter

Direct operating expenses for the first quarter were $51.2 million, a decrease of $6.8 million, or 12%, from the fourth quarter. The decrease was due mainly to lower crew salaries due to warm-stacking in the Americas and cost-cutting measures implemented in the quarter. Drydock expense in the first quarter was $9.0 million, on the low end of our previous guidance. General and administrative expense was $11.0 million for the first quarter, about $1 million lower than the low end of our guided quarterly run rate. Tax benefit during the quarter was $4.2 million, within the guided range.

Liquidity and Capital Commitments

Cash provided by operating activities totaled $2.6 million in the first quarter. Cash on hand at March 31, 2015, was $59.8 million, and $60.0 million was drawn on the revolving credit facilities. Total debt at March 31, 2015, was $560.7 million, and debt net of cash was $500.9 million.

Net capital expenditures during the first quarter totaled $7.2 million, which included $1.5 million of payments on the construction of new vessels and $6.4 million for vessel enhancements and other capital expenditures, offset by proceeds from one vessel sale of $0.7 million. As of March 31, 2015, the Company had approximately $75.0 million of remaining capital commitments related to the construction of three vessels. Anticipated progress payments over the next two calendar years are as follows: $32.0 million in 2015 and $43.0 million in 2016. The Company expects to fund these commitments from cash on hand, cash generated by operations, and borrowings under the revolving credit facilities.

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