Trico Marine Services, Inc. today announced its financial results for the second quarter of 2009 of revenues of $180 million, adjusted EBITDA of $31 million and adjusted net income of $0.33 per diluted share. The increases over first quarter of 2009 were due to substantial growth and improvement in Trico's subsea service businesses.
Chairman and Chief Executive Officer, Joseph S. Compofelice, commented: "The strength of our second quarter results is the result of the transition to a subsea service company and reflect not only our progress but the fundamental growth in the subsea sector. As a result of strong backlogs, each of DeepOcean and CTC Marine delivered substantial revenue, earnings and cash flow improvement in China, Mexico and Brazil with less dependence on their historical home market in the North Sea. Utilization of our subsea fleet in the quarter was very high and we expect similar utilization in the third quarter. Our strengthened results are led by a combination of 80% of our business being in the subsea service segments and all of our consolidated business coming from international markets."
"At the same time," Mr. Compofelice continued, "we have liquidity challenges to meet. We will continue to be proactive in reducing our debt and capital expenditure commitments to improve our liquidity for the remainder of 2009 and 2010. We have completed OSV asset sales in the first half of 2009 and expect further sales in the second half, with proceeds used to reduce debt."
Summary results compared to Q1 2009
Total revenues for the second quarter of 2009 were $180 million, compared to $122 million for the first quarter of 2009 and adjusted EBITDA was $31 million on operating income of $15 million. The substantial increase from the first quarter of 2009 was primarily due to increased utilization and rates in both of our subsea segments. In addition, operating costs declined in all segments.
In Trico's Subsea Services segment, principally DeepOcean, revenues increased by $26 million and adjusted EBITDA increased by $17 million over the first quarter due to virtually full utilization of all of its vessels and equipment at rates which, on average, were 16% higher than the previous quarter due to overall increases in the breadth of service offerings.
In Trico's Subsea Trenching and Protection segment, CTC Marine, revenues increased by $42 million and adjusted EBITDA increased by $11 million over the first quarter due to almost 100% utilization at average rate increases of 40% driven by service mix.
Each of DeepOcean and CTC Marine are virtually booked for the third quarter 2009.
For the Towing and Supply segment, day rates and utilization continue to reflect the weakness in the North Sea and U.S. Gulf of Mexico spot markets. During the quarter, Trico sold one North Sea class PSV and five Gulf class OSVs for approximately $30 million. In addition, Trico has targeted additional vessels for sale, as Trico continues to seek ways to reduce its exposure to the spot market Towing and Supply sector.
Since the end of the prior quarter and through the date of this release, Trico has, through a series of transactions, continued to delever as follows:
• Completed the exchange of its 6.5% convertible notes in exchange for new 8.125% convertible notes, effectively reducing the face amount of principal by $50 million and eliminating potentially $72 million in "make-whole" exposure payments relating to early conversions;
• Used $15 million of proceeds from asset sales to pay down debt; and
• Terminated the obligation to fund the construction of a new vessel, the Deep Cygnus, when financing terms were not favorable to Trico - reducing the Trico's capital expenditure obligation by an additional $42 million.
The Trico's liquidity position has changed from the end of the first quarter due to two main reasons: 1) cash decreased primarily due to the pay down of debt partially offset by asset sales and 2) deteriorating performance by Trico's towing and supply business. In the short term, Trico has a principal payment of approximately $100 million due in January 2010. As a result of the changes in its liquidity position, Trico needs to refinance the underlying debt in order to satisfy this obligation. Trico is also working with its lead bank to address potential debt covenant issues later in 2009. All options, including further asset sales, refinancings and debt restructurings are being pursued.
At June 30, 2009, Trico had $35 million in cash and $708 million in total debt, a reduction of over $50 million in total debt from the end of the prior quarter.
At June 30, 2009, taking into account the cancellation of its funding obligation related to the Deep Cygnus, Trico's cash and credit availability to fund capital expenditures was $123 million.
Looking forward, based on recent contract awards and tender activity in its subsea segments, Trico anticipates third quarter results to be consistent with activity levels in the second quarter of 2009. Recent contract awards include:
• Being awarded a two year contract commencing in August 2009 with Petrobras, totaling over $15 million in anticipated revenues and
significantly increasing Trico's revenues in Brazil;
• Extending a contract for pipeline ploughing related work in China, raising the value from $12 million to $18 million; and
• Extending a contract through October 2009 for construction and cable installation in China, an overall $6 million increase.
In addition, Trico secured several cable lay and burial contracts in Europe for wind power projects and was awarded a pipeline trenching contract from Shell utilizing CTC's newest asset, the world's largest rock trencher, RT-1, performing its inaugural scope of work.
Trico's backlog remains healthy at approximately $750 million of termed out or long-term contracts primarily in its subsea segments. In the second quarter of 2009, approximately 90% of its business was with major or national oil companies and 99% of Trico's business was outside of U.S. waters. On a consolidated basis, revenues for the second quarter had the following geographic mix: 45% in the North Sea, of which approximately half are subject to long-term contracts, 18% in China, where Trico currently has four subsea service spreads in the South China Sea, 12% in Mexico and Brazil and 22% in West Africa, the Mediterranean and Australia.