SEACOR Marine Announces Results for Its Fourth Quarter and Year Ended December 31, 2017

SEACOR Marine Announces Results for Its Fourth Quarter and Year Ended December 31, 2017

SEACOR Marine Holdings Inc. (NYSE:SMHI) (the “Company”), a leading provider of global marine and support transportation services to offshore oil and natural gas exploration, development and production facilities worldwide, today announced results for its fourth quarter and year ended December 31, 2017.

Net income attributable to SEACOR Marine Holdings Inc. was $29.0 million ($1.20 per diluted share) for the fourth quarter ended December 31, 2017. Net loss attributable to SEACOR Marine Holdings Inc. was $32.9 million ($1.87 per diluted share) for the year ended December 31, 2017.

Results for the fourth quarter ended December 31, 2017 included the following:

• Improved direct vessel profit (“DVP”) of $11.7 million compared with $9.4 million in the preceding quarter.
• Impairment charges of $11.8 million primarily associated with the Company’s anchor handling towing supply fleet.
• Income tax benefits of $50.7 million recognized as a result of new U.S. tax legislation, commonly referred to as the Tax Cuts and Jobs Act, signed into law on December 22, 2017.

John Gellert, the Company’s Chief Executive Officer, commented:

“Operating results continued to improve in the fourth quarter.

We continue to see strengthened demand for platform and well services performed by our liftboat fleet both domestically and internationally, which helped to drive our improved results. With the consolidation of the SEACOR and Montco liftboat fleets in February, we enter the 2018 maintenance and construction season in the Gulf of Mexico with a larger, more capable liftboat fleet that is well positioned to meet growing demand.

The four PSVs we acquired in December are generating positive operating results and have already benefited from a tightening market for active vessels. We are closely evaluating opportunities for the newbuild SEACOSCO joint venture PSVs and are confident of securing charters for some of these vessels as the year progresses.

Our results reflect increasing seasonality in some of our asset classes, especially liftboats in the Gulf of Mexico and wind farm utility vessels in the North Sea. However, we remain optimistic that higher oil and natural gas prices are helping build a foundation for an eventual recovery in offshore activity worldwide. By leveraging our diverse fleet, which has been buttressed by recent acquisitions, we believe we are well positioned to service a wide variety of offshore activities as they develop in the coming year.”

For the fourth quarter and year ended December 31, 2016, net loss attributable to SEACOR Marine Holdings Inc. was $61.6 million ($3.48 per diluted share) and $132.0 million ($7.47 per diluted share), respectively. Net loss attributable to SEACOR Marine Holdings Inc. for the preceding quarter ended September 30, 2017 was $20.5 million ($1.25 per diluted share).

A comparison of results for the fourth quarter ended December 31, 2017 with the preceding quarter ended September 30, 2017 is included below.

Operating Revenues. Time charter revenues were $0.5 million higher compared with the preceding quarter. On a total fleet basis, time charter revenues increased by $0.8 million from improved utilization, $0.7 million from net fleet additions and $0.3 million due to favorable changes in currency exchange rates. Time charter revenues decreased by $1.0 million due to a reduction in average rates per day worked and $0.3 million due to the repositioning of vessels between geographic regions. Other marine services revenues were $1.0 million higher compared with the preceding quarter primarily due to the collection in the fourth quarter of previously deferred revenues.

On a total fleet basis, excluding wind farm utility vessels but including cold-stacked vessels, utilization of the fleet increased from 49% to 51%, and average rates per day worked increased from $8,565 to $8,583. Days available for charter were 1% higher in the fourth quarter primarily due to net fleet additions.

Direct Vessel Profit (“DVP”) ⁽¹⁾ by Region. DVP was $11.7 million compared with $9.4 million in the preceding quarter, an increase of $2.3 million. In addition to improved operating revenues of $1.5 million, operating expenses (excluding leased-in equipment) were $0.8 million lower compared with the preceding quarter. Results by region are as follows:

United States, primarily Gulf of Mexico. Direct vessel profit was $1.3 million compared with direct vessel loss of $2.1 million in the preceding quarter, a $3.4 million improvement of which $1.7 million was associated with the liftboat fleet. Time charter revenues were $1.0 million higher compared with the preceding quarter. On a total fleet basis, time charter revenues increased by $0.7 million from improved utilization and $0.3 million from fleet additions. On a total fleet basis, including cold-stacked vessels, utilization of the fleet increased from 16% to 18%, and average rates per day worked improved by 11% from $7,212 to $8,027. Days available for charter were materially unchanged. Operating expenses (excluding leased-in equipment) were $2.4 million lower compared with the preceding quarter. Personnel costs were $0.6 million lower primarily due to the cold-stacking of additional vessels. Repairs and maintenance and drydocking expenses were $1.9 million lower primarily due to costs associated with the reactivating of previously cold-stacked vessels during the preceding quarter. As of December 31, 2017, the Company had 34 of 42 owned and leased-in vessels cold-stacked in the U.S. (ten anchor handling towing supply vessels, 13 fast support vessels, nine liftboats, one supply vessel and one specialty vessel) compared with 31 of 42 vessels as of September 30, 2017. As of December 31, 2017, the Company had one supply vessel retired and removed from service in this region.

Africa, primarily West Africa. DVP was $3.8 million compared with $2.6 million in the preceding quarter, a $1.2 million improvement. Time charter revenues were $0.2 million lower compared with the preceding quarter. On a total fleet basis, time charter revenues decreased by $0.2 million due to reduced utilization, $0.1 million due to a reduction in average day rates and $0.4 million due to the repositioning of vessels between geographic regions. Time charter revenues were $0.5 million higher due to fleet additions. On a total fleet basis, including cold-stacked vessels, utilization of the fleet increased from 71% to 75%, and average rates per day worked decreased by 1% from $10,611 to $10,517. Days available for charter decreased by 5% in the fourth quarter primarily due to the retirement and removal from service of one vessel. Other marine services revenues were $1.3 million higher compared with the preceding quarter primarily due to the collection in the fourth quarter of previously deferred revenues. As of December 31, 2017, the Company did not have any of its 16 owned and leased-in vessels cold-stacked in Africa compared with one of 14 vessels as of September 30, 2017. As of December 31, 2017, the Company had one fast support vessel and one specialty vessel retired and removed from service in this region.

Middle East and Asia. Direct vessel loss was $0.2 million compared with $0.5 million in the preceding quarter, including an improvement of $1.7 million on the liftboat fleet and a decline of $1.9 million on the fast support fleet. Time charter revenues were $1.2 million higher compared with the preceding quarter. Time charter revenues were $2.1 million higher due to increased utilization, $0.1 million higher due to the repositioning of vessels between geographic regions and $1.0 million lower due to a decrease in average rates per day worked. On a total fleet basis, including cold-stacked vessels, utilization of the fleet increased from 61% to 68%, and average rates per day worked decreased by 5% from $7,138 to $6,784. Days available for charter increased by 6% primarily due to the repositioning of vessels between geographic regions. Operating expenses (excluding leased-in equipment) were $1.1 million higher compared with the preceding quarter primarily due to increased drydocking activity on the fast support fleet and the repositioning of vessels between geographic regions. As of December 31, 2017, the Company had two of 25 owned and leased-in vessels cold-stacked in the Middle East and Asia (one anchor handling towing supply vessel and one wind farm utility vessel) compared with one of 25 vessels as of September 30, 2017. As of December 31, 2017, the Company had one specialty vessel retired and removed from service in this region.

Brazil, Mexico, Central and South America. DVP was $2.1 million compared with $2.2 million in the preceding quarter. Time charter revenues were $0.1 million higher compared with the preceding quarter. On a total fleet basis, including cold-stacked vessels, utilization of the fleet increased from 49% to 50%, average rates per day worked increased from $16,060 to $16,718 and days available for charter were unchanged. Operating expenses (excluding leased-in equipment) were $0.2 million higher compared with the preceding quarter. As of December 31, 2017 and September 30, 2017, the Company had one of four owned and leased-in vessels cold-stacked in Brazil, Mexico, Central and South America (one fast support vessel).

Europe, primarily North Sea. DVP was $4.7 million compared with $7.2 million in the preceding quarter, a decrease of $2.5 million. Time charter revenues were $1.7 million lower primarily due to a seasonal reduction in utilization of the wind farm utility vessels. For the standby safety fleet, utilization decreased from 84% to 82%, and average rates per day worked increased from $8,650 to $8,660. For the wind farm utility vessels, utilization decreased from 94% to 73%, and average rates per day worked increased from $2,221 to $2,330. As of December 31, 2017, the Company had 19 owned standby safety vessels and 35 owned wind farm utility vessels in Europe.

Administrative and general. Administrative and general expenses were $2.0 million higher compared with the preceding quarter primarily due to higher director compensation costs and higher legal and professional fees.

Depreciation and amortization. Depreciation and amortization costs were $4.4 million higher compared with the preceding quarter, of which $2.8 million was associated with the fourth quarter reduction in the depreciable lives of three offshore support vessels to their next regulatory survey dates in 2018.

Asset Dispositions and Impairments. During the fourth quarter, the Company recognized impairment charges of $11.8 million associated with the Company’s anchor handling towing supply fleet. In addition, the Company sold three offshore support vessels previously retired and removed from service and one other offshore support vessel for net proceeds of $0.7 million and losses of $0.5 million. During the preceding quarter, the Company recognized impairment charges of $9.9 million associated with one fast support vessel removed from service and two specialty vessels. In addition, the Company sold two offshore support vessels previously retired and removed from service and other equipment for net proceeds of $0.2 million and gains of $0.2 million.

Derivative gains (losses). Net derivative gains during the fourth quarter and preceding quarter of $7.5 million and $13.0 million, respectively, were primarily due to reductions in the fair value of the Company’s conversion option liability on its 3.75% Convertible Senior Notes. The reductions in the conversion option liability were primarily the result of declines in the Company’s share price and estimated credit spread.

Income tax benefit. The Company’s effective income tax rate of 156% in the fourth quarter was higher than the Company’s statutory rate of 35% primarily due to income tax benefits of $43.7 million recognized as a result of new U.S. tax legislation signed into law on December 22, 2017. The majority of the income tax benefits recognized were due to a reduction in U.S. tax rates from 35% to 21% applied to the Company’s domestic basis differences and the elimination of previously accrued deferred taxes on the unremitted earnings of the Company’s foreign subsidiaries.

Equity in earnings (losses) of 50% or less owned companies. Equity earnings of $9.4 million in the fourth quarter included income tax benefits of $7.1 million recognized as a result of new U.S. tax legislation. The majority of the income tax benefits recognized were due to a reduction in U.S. tax rates from 35% to 21% applied to the Company’s basis differences in its domestic joint ventures and the elimination of previously accrued deferred taxes on the unremitted earnings of the Company’s foreign joint ventures. Equity losses of $7.3 million in the preceding quarter included an impairment charge of $8.3 million, net of tax, related to the Company’s investment in Dynamic Offshore Drilling Ltd.

Capital Commitments. As of December 31, 2017, the Company had capital commitments of $66.7 million that included four fast support vessels, three supply vessels and two wind farm utility vessels. The delivery dates and payment of certain costs (originally scheduled for payment in 2018, 2019 and 2020) for two of the fast support vessels are uncertain as the Company, at its option, may defer their construction for an indefinite period of time. The Company’s capital commitments by year of expected payment are as follows (in thousands):

Subsequent to December 31, 2017, the Company committed an additional $11.0 million ($10.1 million to be paid in 2018 and $0.9 million to be paid in 2019) to acquire two additional wind farm utility vessels and convert two of its existing supply vessels to a standby safety configuration.

On January 17, 2018, the Company announced the formation of SEACOSCO Offshore LLC (“SEACOSCO”), a Marshall Islands entity jointly owned by the Company and affiliates of COSCO SHIPPING GROUP, the world’s largest ship owner. SEACOSCO entered into contracts for the purchase of eight Rolls-Royce designed, new construction platform supply vessels. The Company’s total committed investment for construction and working capital requirements is approximately $27.5 million, with approximately $20.0 million payable in the first quarter of 2018 and the remaining balance due over the next 14 months.

Liquidity and Debt. As of December 31, 2017, the Company’s balances of cash, cash equivalents, restricted cash, and construction reserve funds totaled $157.9 million and its total outstanding debt was $314.9 million (net of $33.2 million in discount and issue costs).

On February 9, 2018, the Company announced the formation and capitalization of a joint venture between a wholly owned subsidiary of the Company and Montco Offshore, LLC (“MOI”). The transaction consolidates the fifteen liftboat vessels operated by the Company and six liftboat vessels previously operated by MOI. The consolidated joint venture paid $15.0 million of MOI’s debtor-in-possession obligations and entered into a $131.1 million credit agreement on a non-recourse basis with SEACOR Marine, comprised of a $116.1 million term loan and a $15.0 million revolving loan facility.

SEACOR Marine provides global marine and support transportation services to offshore oil and natural gas exploration, development and production facilities worldwide. SEACOR Marine and its joint ventures operate a diverse fleet of offshore support and specialty vessels that deliver cargo and personnel to offshore installations; handle anchors and mooring equipment required to tether rigs to the seabed; tow rigs and assist in placing them on location and moving them between regions; provide construction, well workover and decommissioning support; and carry and launch equipment used underwater in drilling and well installation, maintenance and repair. Additionally, SEACOR Marine’s vessels provide accommodations for technicians and specialists, safety support and emergency response services.

Certain statements discussed in this release as well as in other reports, materials and oral statements that the Company releases from time to time to the public constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “believe,” “plan,” “target,” “forecast” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements concern management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters. These statements are not guarantees of future performance and actual events or results may differ significantly from these statements. Actual events or results are subject to significant known and unknown risks, uncertainties and other important factors, including decreased demand and loss of revenues as a result of a decline in the price of oil and resulting decrease in capital spending by oil and gas companies, an oversupply of newly built offshore support vessels, additional safety and certification requirements for drilling activities in the U.S. Gulf of Mexico and delayed approval of applications for such activities, the possibility of U.S. government implemented moratoriums directing operators to cease certain drilling activities in the U.S. Gulf of Mexico and any extension of such moratoriums, weakening demand for the Company’s services as a result of unplanned customer suspensions, cancellations, rate reductions or non-renewals of vessel charters or failures to finalize commitments to charter vessels in response to a decline in the price of oil, increased government legislation and regulation of the Company’s businesses could increase cost of operations, increased competition if the Jones Act and related regulations are repealed, liability, legal fees and costs in connection with the provision of emergency response services, such as the response to the oil spill as a result of the sinking of the Deepwater Horizon in April 2010, decreased demand for the Company’s services as a result of declines in the global economy, declines in valuations in the global financial markets and a lack of liquidity in the credit sectors, including, interest rate fluctuations, availability of credit, inflation rates, change in laws, trade barriers, commodity prices and currency exchange fluctuations, the cyclical nature of the oil and gas industry, activity in foreign countries and changes in foreign political, military and economic conditions, changes to the status of applicable trade treaties including as a result of the U.K.’s impending exit from the European Union, changes in foreign and domestic oil and gas exploration and production activity, safety record requirements, compliance with U.S. and foreign government laws and regulations, including environmental laws and regulations and economic sanctions, the dependence on several key customers, consolidation of the Company’s customer base, the ongoing need to replace aging vessels, industry fleet capacity, restrictions imposed by the Jones Act and related regulations on the amount of foreign ownership of the Company’s Common Stock, operational risks, effects of adverse weather conditions and seasonality, adequacy of insurance coverage, the ability of the Company to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, the attraction and retention of qualified personnel by the Company, and various other matters and factors, many of which are beyond the Company’s control as well as those discussed in Item 1A (Risk Factors) of the Company’s Annual Report on Form 10-K and other reports filed by the Company with the SEC. It should be understood that it is not possible to predict or identify all such factors. Consequently, the preceding should not be considered to be a complete discussion of all potential risks or uncertainties and investors and analysts should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which the forward-looking statement is based, except as required by law. It is advisable, however, to consult any further disclosures the Company makes on related subjects in its filings with the Securities and Exchange Commission, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (if any). These statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995.

Please visit SEACOR Marine’s website at www.seacormarine.com for additional information.
For all other requests, contact Erica Bartsch at (212) 446-1875 or ebartsch@seacormarine.com.