COVINGTON, La., March 2, 2015 /PRNewswire/ -- Hornbeck
Offshore Services, Inc. (NYSE: HOS) ("Hornbeck" or "the "Company")
announced today that it has closed the previously announced sale of
three 250EDF class OSVs, the HOS Arrowhead, the HOS
Eagleview and the HOS Westwind, that were previously
chartered to the U.S. Navy. Since their construction in 2008
and 2009, these vessels have supported the U.S. Navy's submarine
fleet on the east and west coast of the U.S. In order for the
Navy to continue receiving the unique capabilities of these
vessels, Congress has required their purchase from the
Company. The three vessels were sold for cash consideration
of $114 million, which is expected to
result in a gain on sale of assets of approximately $33.0 million ($20.8
million after-tax or $0.57 per
diluted share). The proceeds from this transaction will be
used for general corporate purposes that may include retirement of
debt, funding for the acquisition, construction or retrofit of
vessels or discretionary share repurchases. The vessel
purchase agreement includes an option for the acquisition of a
fourth vessel currently under charter to the U.S. Navy, the HOS
Black Powder, that, if exercised as anticipated, would bring
the aggregate sale amount to $152
million, which is expected to result in an aggregate gain on
sale of assets for the four vessels of approximately $44.0 million ($27.7
million after-tax or $0.77 per
diluted share). In addition to these vessel sales, the
Company separately entered into an operations and maintenance
("O&M") contract for the three vessels sold, which contains an
initial term and annual renewal options spanning a 10-year
operating period including annual dayrate escalations.
Associated with the O&M contract, the Company was also awarded
a time charter for the HOS Black Powder that will remain in
effect until the closing of the anticipated sale of the vessel
pursuant to the U.S. Navy purchase option is completed. At
such time, the HOS Black Powder will operate under the same
terms and conditions of the current O&M contract for the other
three vessels. The Company expects to complete the sale of
HOS Black Powder by the end of the third quarter of 2015,
subject to government funding, and all guidance estimates included
below reflect an assumed sale date of September 30, 2015.
The Company's previous guidance estimates last reported on
February 11, 2015 expressly excluded
any contribution from the four vessels involved in these
agreements, including O&M contract revenue and operating costs,
after February 27, 2015. In
recognition of the final terms and conditions of the contracts
mentioned above, the Company now expects to operate the HOS
Black Powder under a 215-day time charter beginning
February 28, 2015 at an average
dayrate of just over $30,000.
This time charter will result in an increase in the "term" and
active fleet vessel counts for the first quarter of 2015 and fiscal
2015 of 0.3 and 0.6 vessels, respectively. These additional
contracted days will cause the Company's forward contract coverage
for its current and projected fleet of new generation OSVs
(including stacked vessels) for fiscal 2015 to increase by
1.0%. The Company expects to generate revenues related to the
O&M contract between $1.5 million and
$1.7 million for the first quarter of 2015 and $17.5 million and $18.5 million for fiscal 2015,
including O&M contract revenue from the HOS Black Powder
for the fourth quarter of 2015, after its anticipated sale to the
U.S. Navy on the assumed closing date of September 30, 2015. Operating expenses from
the O&M contract and time charter are projected to increase the
Company's previous guidance range by $1.5
million and $15.0 million for
the first quarter of 2015 and the full-year 2015,
respectively. Assuming the fourth vessel is purchased in 2015
and all four O&M renewal options are exercised, the Company
expects O&M revenues and operating expenses for fiscal 2016 to
be in the range of $27.0 million to $28.0
million and $17.5 million to $18.5
million, respectively, and should increase annually
thereafter due to a 5.7% contractual escalation provision
associated with the annual renewal options. In future
releases, the revenues earned from the O&M contact will be
reported as "Non-vessel revenues," on a separate line-item that has
historically included revenue earned from the Company's shore-based
port facility, management of third-party non-owned vessels,
including OSVs, MPSVs, tugs and tank barges, and other non-vessel
equipment rentals. In recognition of the purchase option for
the HOS Black Powder, the Company will account for that
vessel as an "Asset held for sale." This accounting treatment
will require the Company to suspend depreciation and amortization
for the vessel until the purchase option is exercised, which is
expected to occur on or before September
30, 2015. Therefore, the final terms of the agreements
mentioned above will not impact the Company's forward guidance
previously provided for depreciation and amortization or for
general and administrative expenses. The cash proceeds from
the vessel sales are projected to result in an increase in interest
income of $0.4 million and
$0.4 million in fiscal years 2015 and
2016, respectively. The Company's annual effective tax rate
for fiscal 2015 is now expected to be 37.0% and should remain
within the prior guidance range of 36.0% to 38.0%, while cash
income taxes for fiscal 2015 are expected to increase $0.4 million.
The Company has posted an electronic version of the updated
forward guidance page of its data tables, which are downloadable in
Microsoft Excel™ format, on the "Investors" homepage of the
Hornbeck Offshore website for the convenience of analysts and
investors.
Hornbeck Offshore Services, Inc. is a leading provider of
technologically advanced, new generation offshore support vessels
primarily in the Gulf of Mexico
and Latin America. Hornbeck
Offshore currently owns a fleet of 65 vessels primarily serving the
energy industry and has eight additional high-spec Upstream vessels
under construction for delivery through 2016.
Forward-Looking Statements
This Press Release contains "forward-looking statements," as
contemplated by the Private Securities Litigation Reform Act of
1995, in which the Company discusses statements about the Company's
plans and intentions with regard to the use of proceeds from the
sale of the three vessels, the expected sale and proceeds of the
fourth vessel and the future performance of the related operation
and maintenance agreements and its expectations regarding its
performance in the future. Forward-looking statements are all
statements other than historical facts, such as statements
regarding assumptions, expectations, beliefs and projections about
future events or conditions. The accuracy of the Company's
assumptions, expectations, beliefs and projections depends on
events or conditions that change over time and are thus susceptible
to change based on actual experience, new developments and known
and unknown risks. The Company gives no assurance that the
forward-looking statements will prove to be correct and does not
undertake any duty to update them. The Company's actual future
results might differ from the forward-looking statements made in
this Press Release for a variety of reasons, including the
inability of the Company to complete the sale to the U.S. Navy of
the fourth vessel or the government's cancellation or non-renewal
of the operations and maintenance contracts for those vessels;
significant and sustained additional declines in oil and natural
gas prices; a sustained weakening of demand for the Company's
services; unplanned customer suspensions, cancellations, rate
reductions or non-renewals of vessel charters or failures to
finalize commitments to charter vessels; further reductions in
capital spending budgets by customers; the inability to accurately
predict vessel utilization levels and dayrates; fewer than
anticipated deepwater and ultra-deepwater drilling units operating
in the GoM or other regions that the Company operates in; the
effect of inconsistency by the United
States government in the pace of issuing drilling permits
and plan approvals in the GoM or other drilling regions; the
Company's inability to successfully complete the remainder of its
current vessel newbuild and conversion programs on-time and
on-budget, which involves the construction, conversion and
integration of highly complex vessels and systems; the inability to
successfully market the vessels that the Company owns, is
constructing, converting or might acquire; an oil spill or other
significant event in the United
States or another offshore drilling region that could have a
broad impact on deepwater and other offshore energy exploration and
production activities, such as the suspension of activities or
significant regulatory responses; the imposition of laws or
regulations that result in reduced exploration and production
activities or that increase the Company's operating costs or
operating requirements; environmental litigation that impacts
customer plans or projects; disputes with customers; bureaucratic,
administrative or operating barriers that delay vessels chartered
in foreign markets from going on-hire or result in contractual
penalties or deductions imposed by foreign customers; industry
risks; the impact stemming from the reduction of Petrobras'
announced plans for or administrative barriers to exploration and
production activities in Brazil;
less than expected growth in Mexican offshore activities;
unanticipated difficulty in effectively competing in or operating
in international markets; less than anticipated subsea
infrastructure and field development demand in the GoM and other
markets; the level of fleet additions by the Company and its
competitors that could result in over capacity in the markets in
which the Company competes; economic and political risks;
weather-related risks; the shortage of or the inability to attract
and retain qualified personnel, including vessel personnel for
active and newly constructed vessels; regulatory risks; the repeal
or administrative weakening of the Jones Act or changes in the
interpretation of the Jones Act related to the U.S. citizenship
qualification; drydocking delays and cost overruns and related
risks; vessel accidents, pollution incidents, or other events
resulting in lost revenue, fines, penalties or other expenses that
are unrecoverable from insurance policies or other third parties;
unexpected litigation and insurance expenses; fluctuations in
foreign currency valuations compared to the U.S. dollar and risks
associated with expanded foreign operations, such as non-compliance
with or the unanticipated effect of tax laws, customs laws,
immigration laws, or other legislation that result in higher than
anticipated tax rates or other costs or the inability to repatriate
foreign-sourced earnings and profits. In addition, the Company's
future results may be impacted by adverse economic conditions, such
as inflation, deflation, or lack of liquidity in the capital
markets, that may negatively affect it or parties with whom it does
business resulting in their non-payment or inability to perform
obligations owed to the Company, such as the failure of customers
to fulfill their contractual obligations. Should one or more
of the foregoing risks or uncertainties materialize in a way that
negatively impacts the Company, or should the Company's underlying
assumptions prove incorrect, the Company's actual results may vary
materially from those anticipated in its forward-looking
statements, and its business, financial condition and results of
operations could be materially and adversely affected. Additional
factors that you should consider are set forth in detail in the
"Risk Factors" section of the Company's most recent Annual Report
on Form 10-K as well as other filings the Company has made and will
make with the Securities and Exchange Commission, which can be
found on the Company's website www.hornbeckoffshore.com.
Contacts:
Todd Hornbeck, CEO
Jim Harp, CFO
Hornbeck Offshore Services
985-727-6802
Ken Dennard, Managing Partner
Dennard-Lascar / 713-529-6600
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SOURCE Hornbeck Offshore Services, Inc.