Gulfmark Offshore (GLF) Tops Q4 EPS by 13c; Will Suspend Dividend

Gulfmark Offshore (NYSE: GLF) reported Q4 EPS of $0.29, $0.13 better than the analyst estimate of $0.16. Revenue for the quarter came in at $116.1 million versus the consensus estimate of $116.34 million.

Quintin Kneen, President and CEO, commented, "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. Those facts are nice to mention, but our focus remains on return-on-capital, and by that measure the quarterly results, although above our guidance, were below our long-term expectations. Although the industry forecasts are unusually unclear, our outlook indicates that meeting our long-term return-on-capital expectation will become more difficult without adjusting our cost structure, capital spending, and capital structure.

"Downturns tend to present themselves swiftly and often bring the retrospective regret of not acting sooner. Fortunately, downturns decelerate new-build orders and accelerate the scrapping of older vessels; unfortunately, we have not yet seen enough change in the pace of those activities to diminish our current concerns. The softness in the market we experienced in the fourth quarter was more about vessel oversupply than decreasing demand. But our outlook is for demand now 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. These supply and demand fundamentals are leading us to prepare for a longer-than-average vessel industry downturn.

"Adjusting our cost structure, opportunistically selling vessels, building flexibility into our capital structure and, as always, continuing to find and foster cost efficiencies are our top priorities for 2015. Compared with 2014, we anticipate materially reducing direct operating and general and administrative expenses. We successfully completed three vessel sales since our last earnings press release and are having discussions with our ship builders to extend the delivery dates of and payments for the three remaining vessels in our new-build program. Also, we amended our bank facilities to loosen financial covenants and help ensure liquidity.

"We have been very focused on return-on-capital and return-of-capital over the past two years, returning approximately $150 million to shareholders in just over two years. Nothing about the outlook of the downturn has changed our philosophy; however, a steep decrease in the anticipated 2015 return-on-capital has caused us to revisit the near-term returns-of-capital. After purchasing $48 million worth of our own shares in the fourth quarter, representing approximately 6% of the company, we have stopped purchasing shares. Additionally, the Board of Directors, after careful consideration of current market conditions, our outlook and the uncertainty in the macro environment, has chosen to suspend the dividend.

"We now expect 2015 revenue to be between $350 and $400 million. We expect full-year fleet-wide utilization to be between 75% and 80%, and we expect our global average day rate for the year to fall by approximately 15% to 20%. We expect revenue in the first quarter to be between $85 and $90 million.

"We are committed to the long-term growth in value of our company. We are not deviating from the objective of improving our long-term returns on invested capital. While the severity and length of this downturn are currently unknown, we are acting today as if the inevitable upturn is still several quarters away. As such, we are adjusting our cost structure, capital spending, and capital structure to reflect this belief."

For earnings history and earnings-related data on Gulfmark Offshore (GLF) click here.

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