Seacor hit by weak offshore market but more positive about year aheadCompany News // March 30, 2017
Charles Fabrikant, Executive Chairman and Chief Executive Officer of Seacor, says the company's operating income before depreciation, amortization and impairments was slightly better in the fourth quarter of 2016 than the preceding quarter but says the company's results "do not deserve accolades."
"During the past 12 months, our Offshore Marine Services' customers cut back on exploration, development, maintenance, and deferred regulatory requirements when possible. The cutbacks were indiscriminate, impacting projects in deep water and shelf. With the exception of Saudi Arabia and the eastern Mediterranean, every geographic region suffered.
"The dismal outlook prophesied in my annual letter of last April was, sadly, correct. I do think 2017 offers better prospects for activity on the shelf, more dollars for maintenance, and attention to regulatory obligations. I also believe that by the end of 2017, or early 2018, activity will increase in Mexico. The potential is mostly in shallow
water. Unfortunately, the prospects for deep water and frontier drilling are still bleak.
"I also believe that the sale of mature properties, which are no longer major holdings for large oil companies, to
independents could eventually bring activity as new owners are more likely to focus on squeezing out additional barrels from aging installations.
"Finally, based on published data, 25 FPSOs are due to be placed in service between 2017 through 2019, and there will be 238 platforms installed, although some will be quite simple and not manned.
"In short," said Mr Fabrikant, "I think there is reason to be somewhat optimistic now, although I make this statement with considerable trepidation, particularly because a swoon in oil prices could easily destroy confidence and suffocate a recovery. Based on our assessment of opportunity, we are activating some equipment which has previously been idle, adding reactivation and operating expenses to future periods. There is no guarantee that day rates in the short run will justify this decision as current market rates are unrewarding."
"Given the impact of impairment charges on 2016 results, a comment is in order. The impairment charges covered a range of assets and investments in our joint ventures. As noted in last April's letter, an impairment analysis is not an exact science. Our marks to 'fair value' in 2016 are based on the best information available to us. Time will tell if these marks are also reflective of long-term value."
Seacor's Offshore Marine Services division had an operating loss of US$82.7 million compared with US$41.1 million
in the preceding quarter. As a consequence of continuing difficult market conditions, it recognized impairment charges of US$69.1 million in the fourth quarter and US$29.2 million in the preceding quarter primarily associated with its anchor handling towing supply fleet. OIBDA, excluding impairment charges, was US$0.2 million on operating revenues of US$44.4 million compared with US$2.4 million on operating revenues of US$54.1 million in the preceding quarter.
Excluding windfarm utility vessels, but including cold-stacked vessels (those that are not currently available for active service), utilization of the division's fleet decreased from 47 per cent to 39 per cent and average rates per day worked decreased by 10 per cent from US$10,089 to US$9,093. Days available for charter were 9 per cent higher in the fourth quarter primarily due to the acquisition of 11 vessels at a bankruptcy auction during the preceding quarter. These vessels were idle when purchased and are still not being marketed, hence contributing to the overall decline in fleet utilization.