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This article is part of our Rising Star Portfolios Series.
It's been over a year since an explosion rocked the Gulf of Mexico and started one of the biggest oil spills in the history of humans. Since then, activity in the Gulf has ceased and recently restarted again. It seems there is just too much oil out there to completely eliminate drilling for it.
This is good news for GulfMark Offshore (NYSE: GLF ) as it provides the necessary marine transportation services to the E&Ps doing the exploring. GulfMark's first-quarter earnings were released this morning before the market opened, and while the company saw a net loss of $0.05 per share on revenues of just over $81 million, things look like they are shaping up instead of shipping out.
In the North Sea segment, dayrates were actually up about 4%, though revenue in the region fell 7% from the fourth quarter due to lower utilization, meaning there were fewer vessels being used. While seasonality was partly to blame for the decrease, additional maintenance and drydocking fees added to the drop.
A new day
Activity is picking back up in the Gulf and CEO Bruce Streeter is "encouraged by the issuance of offshore drilling permits in the U.S. Gulf of Mexico, which should restart deepwater activity." However, activity is still extremely limited, which resulted in an 11% drop in revenue from the fourth quarter. Early on in the fourth quarter, the company benefited from work related to cleanup activity, but starting late in the fourth quarter and on into the first, this utilization dropped, which left the vessels with not much work to do. With activity now showing signs of picking back up, management is starting to see some light at the end of the tunnel. With companies like ATP Oil & Gas (Nasdaq: ATPG ) and BHP Billiton (NYSE: BHP ) already obtaining permits to start work again in the Gulf, expect this trend to continue.
Southeast Asia saw the smallest percentage decline of the three segments, with a 3% drop in revenue. Rates stayed low, but utilization was up approximately five percentage points to 83%, which supports the trend of growing activity in the area. While it may be the smallest of the three segments, Asia continues to grow and add significantly to GulfMark's global operations.
The future looks bright
It's clear that the company was expecting a tough quarter thanks to seasonal weakness coupled with extremely limited Gulf activity. The upside, though, is that management pulled no surprises; even better, they were able to prepare accordingly. Operating and drydocking expenses were higher than normal this quarter, but that was due more to the company preparing for future activity based on the quickly growing order book of jackups, semisubmersibles, and drillships as well as oil and gas discoveries in frontier areas.
Call me crazy, but when a company has insider ownership north of 11.5%, I tend to give management a little more rope in how they're running the business. This is what we've got with GulfMark Offshore, and I like where this ship is headed. Remember to also follow me on Twitter where you can get my latest thoughts and ideas on all things investing.