GulfMark Offshore touts balance sheet’s ‘great shape,’ suspends dividend and share repurchases

By Lisa Kerner

Charlotte, N.C., Feb. 17 – GulfMark Offshore, Inc.’s balance sheet is in “great shape,” according to chief financial officer Jay Mitchell.

“We generated $48.5 million of cash from operations during the quarter,” said Mitchell during GulfMark’s fourth-quarter earnings call on Tuesday.

“Vessel sales, net of cap ex for the quarter, resulted in a cash inflow of about $1 million, and cash on hand at the end of the quarter was $51 million,” he said.

The company had $44 million drawn on its revolving credit facilities at Dec. 31 and ended the year with total debt of about $545 million. GulfMark increased its net borrowings by about $26 million in the fourth quarter.

Mitchell said GulfMark has a $300 million debt facility in the United States and a Kr 600 facility in Norway.

Interest expense for the quarter was $7.3 million and $29.3 million for the full year. First-quarter interest expense is expected to be close to $8 million, and the company anticipates full-year 2015 interest expense to total about $35 million.

GulfMark continued to made progress on restructuring its portfolio of assets during the quarter. “We had two vessel sales during the quarter and one after year-end,” said Mitchell.

Dividends, share buybacks stop

The company paid dividends of $6.1 million and repurchased $48 million of shares in Q4. Dividends for the full-year 2014 totaled $26.2 million.

GulfMark purchased $57.7 million of shares for the year and has purchased $71 million shares under its current $100 million authorization, according to the CFO.

However, regular dividends and share repurchases have been suspended due to market conditions and uncertainty in the macro environment. When asked, management said there was no timeline for reinstating the dividend or share buybacks.

President and chief executive officer Quintin Kneen said GulfMark remains focused on returning capital to stockholders. He noted that the company has returned $150 million to stockholders over the last two years.

Softness in the market in the fourth quarter was “more about vessel oversupply than decreasing demand,” said Kneen. GulfMark’s outlook is for demand to decrease.

“We expect falling demand throughout the year as an indirect result of the sharp decline in oil prices, with even more new-build vessels to be completed and delivered into an already young, large and technologically advanced vessel fleet,” Kneen said.

Since any upturn could be several quarters away, the company is adjusting its cost structure, capital spending and capital structure.

Financial highlights

GulfMark’s consolidated revenue was about $116 million for the quarter and $496 million for the year.

Fourth-quarter net income was $7.3 million, or $0.29 per diluted share. Net income for 2014 was $62.4 million, or $2.39 per diluted share.

“Revenue for the fourth quarter exceeded our revised guidance, revenue for the year was the highest in company history, and this year's operating income was the highest we have ever achieved,” said Kneen.

Capital expenditures during the fourth quarter totaled $15.9 million, including $5.5 million of payments on the construction of new vessels and $10.4 million for vessel enhancements and other capital expenditures, according to the earnings news release.

As of Dec. 31, the company had roughly $78 million of remaining capital commitments related to the construction of four vessels. GulfMark expects to use cash on hand, cash from operations and revolver borrowings to make anticipated progress payments over the next two calendar years of $32 million in 2015 and $46 million in 2016.

Houston-based GulfMark moves equipment, people and supplies to offshore facilities and repositions drilling structures.

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