Operating income was $45.4 million, or 41.4% of revenues, for the first quarter of 2009 compared with the operating income of $37 million, or 37.9% of revenues, for the year-ago quarter. EBITDA for the first quarter of 2009 was $60.3 million compared to first quarter 2008 EBITDA of $49.2 million. The main reasons for the raise in revenues, operating income, net income and EBITDA were the incremental contribution of vessels added to Hornbeck Offshore Services fleet since the first quarter of 2008 and favorable new generation offshore supply vessel (OSV) market conditions.
Upstream Segment: Revenues from the upstream segment were $90.6 million for the first quarter of 2009, up 34.2% from $67.5 million in the year-ago quarter. Upstream operating income raised 52.4% to $44.2 million for the first quarter of 2009 from $29 million in the year-ago quarter. The higher upstream revenues and operating income were driven by the full- or partial-quarter contributions from seven new generation OSVs and two MPSVs that were placed in service on different dates since the first quarter of 2008, and, to a smaller extent, a market-driven raise in new generation OSV dayrates working globally. Average new generation OSV dayrates for the first quarter of 2009 enhanced to $23,085 compared to $21,020 in the year-ago quarter. New generation OSV utilization was 93.0% for the first quarter of 2009, which was in-line with the same period in 2008.
Downstream Segment: Revenues from the downstream segment of $19.1 million for the first quarter of 2009 decreased by $11 million, or 36.5%, compared to $30.1 million in the year-ago quarter. Downstream revenues were unfavorably impacted by continued lower demand for the company’s ocean-going tug and tank barge (TTB) equipment, which resulted in a 35.0% decline in fleetwide effective TTB dayrates from the year-ago quarter. Hornbeck Offshore Services double-hulled tank barge average dayrates were $20,406 for the first quarter of 2009 compared to $21,781 in the year-ago quarter. Utilization for the double-hulled tank barge fleet was 80.0% for the first quarter of 2009 compared to 91.1% in the year-ago quarter .The decrease in Hornbeck Offshore Services double-hulled tank barge utilization was the result of a recent decline in market demand for double-hulled equipment, particularly black-oil barges. The company’s single-hulled tank barge average dayrates were $15,710 for the first quarter of 2009, a decline of $1,227, or 7.2%, from $16,937 for the same period in 2008. This decrease was mainly due to continued soft demand for this type of equipment. In addition, dayrates in the year-ago quarter included the favorable impact of one singled-hulled vessel, which is now stacked, performing non-traditional tank barge services to upstream customers at premium dayrates. Single-hulled tank barge utilization was 37.6% for the first quarter of 2009 compared to 81.8% in the year-ago quarter. In recognition of the soft market conditions for single-hulled equipment that began in the second quarter of 2008, the company stacked six single-hulled tank barges and three lower-horsepower tugs on various dates since April 2008. Effective single-hulled tank barge utilization, which excludes the impact of stacked tank barges, was 82.7% for the three months ended March 31, 2009. On March 19, 2009, the company sold its oldest stacked tug, the Stapleton Service, for net cash proceeds of $0.9 million, which resulted in a $0.2 million pre-tax gain ($0.2 million after-tax or $0.01 per diluted share).
General and Administrative (G&A): G&A expenses of $8.8 million for the first quarter of 2009 were 8% of revenues compared to $8.6 million, or 8.8% of revenues, in the year-ago quarter. First quarter G&A expense margin was below the company’s 2009 annual guidance range of 9% to 10% of revenues. Hornbeck Offshore Services allocated 82% of its first quarter G&A expenses to the upstream segment and 18% to the downstream segment.
Depreciation and Amortization: Depreciation and amortization expense was $15.1 million for the first quarter of 2009, or $2.9 million higher than in the year-ago quarter. This raise was driven by incremental depreciation related to the full- or partial-quarter contribution from newbuild vessels that were placed in service since the first quarter of 2008 and the higher cost of regulatory drydock events, partly couterbalanced by the decrease in depreciation and amortization following the sale of four conventional OSVs during 2008. Depreciation and amortization expense is anticipated to continue to increase from current levels as the vessels remaining under the company’s existing newbuild and conversion programs are placed in service and when these and any other recently acquired and newly constructed vessels undergo their initial 30-month and 60-month recertifications.
Earnings Outlook
Annual 2009 Guidance: Hornbeck Offshore Services anticipates total EBITDA for fiscal 2009 to range between $230 million and $250 million and expects full-year diluted EPS for fiscal 2009 to range between $3.39 and $3.86. Excluding the recently adopted APB 14-1 non-cash OID interest expense, Adjusted EPS for fiscal 2009 is anticipated to range between $3.50 and $3.97.
Key Assumptions: Hornbeck Offshore Services forward earnings guidance, outlined above and in the attached data tables, assumes that current upstream and downstream market conditions remain constant. Fleetwide average new generation OSV dayrates are anticipated to be in the $20,000 to $22,000 range and fleetwide new generation OSV utilization is anticipated to average in the high-80% to low-90% range for the annual 2009 guidance period. The downstream segment is projected to contribute 2009 EBITDA in the range of 6% to 10% of the mid-point of the company-wide 2009 guidance range.
Hornbeck Offshore Services full-year 2009 upstream guidance includes a partial-year contribution from additional vessels to be delivered under its MPSV program and its fourth OSV newbuild program with the estimated newbuild delivery expectations discussed below. In recognition of considerably decreased demand on the shallow-shelf for conventional vessels in early 2009, the annual 2009 guidance reflects the recent stacking of five conventional OSVs, which Hornbeck Offshore Services considers non-core assets. The 2009 downstream guidance primarily reflects a full-year contribution from the company’s fleet of nine double-hulled barges and, to a lesser extent, a full- or partial-year contribution from the company’s active single-hulled barges, as applicable.
Hornbeck Offshore Services anticipates that cash operating expenses per vessel-day in fiscal 2009 will not considerably increase over fiscal 2008 levels, excluding contract-related costs recoverable through higher dayrates or other revenue. Annual G&A expenses are anticipated to be in the range of 9% to 10% of revenues for fiscal 2009. The projected annual FAS 123R stock-based compensation expense, depreciation, amortization and net interest expense that underpin Hornbeck Offshore Services diluted EPS guidance for the full-year 2009 are included in the attached data tables. Projected quarterly FAS 123R stock-based compensation expense, depreciation, amortization and net interest expense for the quarter ending June 30, 2009 are anticipated to be $2.4 million, $11.4 million, $5.9 million and $4.7 million, respectively. Hornbeck Offshore Services annual effective tax rate is expected to be 36.3% for fiscal 2009.
