Hornbeck Offshore Services (HOS) recorded net income for the second quarter of 2015 of $19.2 million, or 53 cents a share, compared to net income of $31.2 million, or 85 cents a share, for the year-ago quarter, and net income of $35.9 million, or 99 cents a share in the first quarter of 2015.
Revenues were $136.4 million for the second quarter of 2015, a decrease of $34.7 million, or 20.3%, from $171.1 million for the second quarter of 2014; and an increase of $1.8 million, or 1.3%, from $134.6 million for the first quarter of 2015. The year-over-year decrease in revenues was primarily due to soft market conditions in the Gulf, which led to the company’s decision to stack 18 OSVs in the fourth quarter of 2014 and in 2015. For the three months ended June 30, HOS had an average 17.6 vessels stacked compared to none in the prior-year quarter and 9.5 in the sequential quarter.
The oil and gas industry in the Gulf of Mexico has been in the grips of a downturn the past several months. More disconcerting, however, is the mystery as to when it will cycle back up. Everyone knows it will. Nobody knows when.
“The market is very sloppy and weak,” Todd Hornbeck, the company’s chairman, president and CEO, said during HOS’s second-quarter conference call in late July. “We relatively had decent earnings last quarter, but the ability to repeat those earnings is difficult, if not impossible to predict with any level of confidence.”
Hornbeck said HOS must put itself in a position to take advantage of the situation in the Gulf when activity begins to increase. “The sustained level of deepwater drilling units active in the Gulf of Mexico is indicative we think of the long-term promise that this market holds,” he said. “After all, we’ve seen a 50% drop in the commodity price of oil and yet there are still as of [July 30] 40 or so deepwater units actively drilling in the Gulf of Mexico. We see that level remaining flat for the time being, but is still at historically high levels. Plus, we expect five additional high-spec floating rigs mobilized to the Gulf of Mexico over the next 12 months.”
Stacking vessels presents a real problem for any offshore company when the cycle takes a turn to the north because mariners must be available to crew the vessels. “While we have held our own in comparison to the first quarter, we take little solace given that vessel stackings that made it possible resulted in the loss of human capital in which we have invested significantly and who have helped us to build our company.”