SEACOR Marine Holdings Inc. — Q1 2022 Form 10-Q
Business context and reporting period
For the three months ended March 31, 2022. SEACOR Marine provides offshore marine support and transportation services to energy and wind-sector customers. It and its joint ventures operated 82 vessels: 60 owned or leased-in, 20 joint-ventured, and two managed for others.
Financial and operating performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $45.6 million | $36.5 million |
| Operating loss | $17.1 million | $16.6 million |
| Continuing-operations loss | $14.8 million | $16.9 million |
| Net income (loss) | $(14.8) million | $6.0 million |
| Operating cash flow | $0.4 million | $(3.4) million |
| Cash, cash equivalents and restricted cash at period end | $39.9 million | $71.8 million |
- Time-charter utilization improved to 70% from 55%; average day rates were essentially flat at $11,312 versus $11,323.
- Operating expenses rose to $39.5 million from $26.3 million. Direct vessel profit fell to $6.1 million from $10.2 million, as higher operating costs outweighed revenue growth.
- Q1 2022 included a $3.1 million gain on asset sales and a $0.9 million impairment of an FSV held for sale. Q1 2021 net income included $22.9 million from discontinued operations, principally the Windcat Workboats sale gain.
- Interest expense was $6.6 million, down from $8.0 million. Equity earnings from partly owned companies increased to $5.7 million from $4.1 million.
- At March 31, total debt principal was $393.6 million; debt carrying value, net of discounts and issuance costs, was $359.0 million. Total liabilities were $469.6 million and equity was $433.0 million. The largest scheduled principal maturity is $252.2 million in 2023.
- Current assets were $104.2 million and current liabilities $91.5 million. Cash and restricted cash fell $1.3 million during the quarter. Capital expenditures were less than $0.1 million.
Material changes versus the prior period
Revenue increased about 25%, primarily reflecting higher utilization, vessel repositioning, and fleet additions following the OSV Partners merger. Operating costs increased substantially, including personnel, repairs, and drydocking. The operating loss was slightly larger, while the continuing-operations loss narrowed; the reported swing from prior-year net income to a loss mainly reflects the prior-year Windcat disposal and discontinued-operations income. Cash generation from operations improved, but the prior-year investing cash inflow included Windcat sale proceeds of $38.7 million.
Outlook, commentary, risks and contingencies
- Management cited higher oil and gas prices, improving utilization and day rates, and increased customer charter inquiries. It provided no quantified earnings or revenue guidance. It expects increased activity to require upfront spending to prepare and position vessels.
- The primary credit facility requires at least $35.0 million of cash, including restricted cash; covenant-test cash was $39.9 million at quarter-end. The company was compliant but was in advanced discussions with lenders to lower the minimum-cash covenant and increase flexibility. If unsuccessful, it may need other liquidity sources, including asset sales or capital-market activity.
- Management believes available cash, operating cash flow, financing availability, and market access should cover short- to medium-term needs, but warns that market conditions could constrain financing access. Only $1.2 million of subsidiary-facility borrowing capacity was available.
- Key operating risks include volatile energy markets, vessel oversupply, customer activity and rates, reactivation and maintenance costs, COVID-19 effects, and potential impacts from the Russia/Ukraine conflict. Five of 60 owned or leased-in in-service vessels were cold-stacked.
- The SEACOR Power capsizing in April 2021 caused multiple fatalities and the constructive total loss of the vessel. Investigations and civil claims remain ongoing; the company says the amount and timing of potential costs and liabilities are uncertain, and salvage costs are expected to be covered by insurance.
- A Brazilian tax assessment carries a potential levy of approximately R$18.9 million, stated as about $4.0 million at the March 31 exchange rate; administrative proceedings are pending. The UK MNRPF is investigating issues that could result in additional employer liabilities. The company also had $1.1 million of unfunded vessel-equipment commitments and indefinitely deferred $9.4 million of previously reported orders.
Important facts for investors to verify
- Whether lenders agree to amend the $35.0 million minimum-cash covenant, and the company’s liquidity headroom as activity-related spending rises.
- The timing and refinancing or repayment plan for the $252.2 million 2023 debt maturity.
- Whether utilization and day rates continue improving and translate into stronger direct vessel profit after reactivation, repair, and drydocking costs.
- Developments, insurance recoveries, and potential liabilities from the SEACOR Power incident, along with outcomes of the Brazilian tax and MNRPF matters.
- Whether asset impairments, deferred vessel orders, or additional capital requirements change as market conditions evolve.