SEACOR Marine Holdings Inc. (NYSE:SMHI) is a leading provider of marine and support transportation services to offshore energy facilities worldwide. With a diverse fleet of vessels and a strong industry presence, the company has navigated the challenges of the offshore energy services market, positioning itself for long-term growth.
Business Overview and History Incorporated in 1989, SEACOR Marine has a rich history of serving the offshore energy industry. The company was founded as a spin-off from SEACOR Holdings Inc., a diversified transportation and logistics company, and has since established itself as a prominent player in the offshore support vessel (OSV) market.
Initially focusing on providing vessel support services to the offshore oil and gas industry in the U.S. Gulf of Mexico, SEACOR Marine has significantly expanded its operations globally over the years. The company now has a presence in key offshore markets around the world, including Africa, Europe, the Middle East, Asia, and Latin America.
A major milestone in SEACOR Marine’s history was the acquisition of the Stirling group of companies in 2001. This strategic move significantly expanded the company’s fleet and geographic footprint, allowing it to provide a wider range of vessel support services to its growing customer base of major oil and gas companies.
During the late 2000s and early 2010s, SEACOR Marine faced challenges as the offshore oil and gas industry experienced a downturn, leading to reduced demand and lower utilization rates for its vessel fleet. In response, the company implemented cost-cutting measures, cold-stacked underutilized vessels, and focused on maintaining strong customer relationships. SEACOR Marine also diversified its service offerings, venturing into areas such as offshore wind farm support and expanding its ship management services.
Throughout the 2010s, SEACOR Marine continued to grow its global footprint by establishing joint ventures and strategic partnerships in key markets. The company also invested in its fleet, upgrading and modernizing its vessels to meet the evolving needs of its customers.
As of September 30, 2024, SEACOR Marine operated a fleet of 55 support vessels, of which 54 were owned or leased-in, and one was managed on behalf of an unaffiliated third party. The company’s primary customers include major integrated national and international oil companies, independent oil and natural gas exploration and production companies, oil field service and construction companies, as well as offshore wind farm operators and offshore wind farm installation and maintenance companies.
Financial Performance and Ratios SEACOR Marine’s financial performance has been impacted by the volatility in the offshore energy market, as well as the ongoing challenges posed by the COVID-19 pandemic. In the fiscal year ended December 31, 2023, the company reported total revenue of $279.51 million, a decrease from $217.32 million in the prior year.
The company’s net income for the fiscal year 2023 was a loss of $9.31 million, compared to a loss of $71.65 million in 2022. This improvement in net income was primarily driven by a reduction in impairment charges and gains on asset dispositions.
For the most recent quarter (Q3 2024), SEACOR Marine reported revenue of $68.92 million, representing a year-over-year decrease of 10.4%. The net loss for the quarter was $16.35 million. The decrease in revenue was primarily due to reduced utilization and day rates in the U.S. region, partially offset by higher day rates in the Africa/Europe region. The net loss increased compared to the prior year quarter due to higher operating costs.
Operating cash flow (OCF) for the fiscal year 2023 was $8.95 million, while free cash flow (FCF) was negative at -$1.66 million. For Q3 2024, OCF was $626,000, and FCF was $416,000.
Liquidity SEACOR Marine’s liquidity position remains stable, with cash and cash equivalents totaling $35.60 million and restricted cash of $2.26 million as of September 30, 2024. The company’s current ratio, a measure of short-term liquidity, was 1.63 as of the same date, indicating a strong ability to meet its short-term obligations. The quick ratio stood at 1.59.
The company’s debt-to-equity ratio, a measure of financial leverage, stood at 0.92 as of September 30, 2024, suggesting a relatively balanced capital structure. SEACOR Marine’s return on assets (ROA) and return on equity (ROE) for the fiscal year 2023 were -1.19% and -2.48%, respectively, reflecting the challenges faced in the industry.
SEACOR Marine has several credit facilities in place: – 2023 SMFH Credit Facility: $109.80 million outstanding, bearing interest at a fixed rate of 11.75% per annum – Sea-Cat Crewzer III Term Loan Facility: $11.75 million outstanding – SEACOR Delta Shipyard Financing: $61.98 million outstanding – SEACOR Alpine Credit Facility: $22.66 million outstanding
Operational Highlights and Segmental Performance SEACOR Marine’s operations are organized into four geographic segments: the United States (primarily the Gulf of Mexico), Africa and Europe, the Middle East and Asia, and Latin America (primarily Mexico and Guyana).
In the United States, the company’s time charter statistics showed a decrease in utilization and average day rates during the fiscal year 2023 compared to the prior year. This was primarily due to reduced customer exploration and drilling activity levels, as well as an oversupply of vessels in the market. The segment’s direct vessel profit (DVP) decreased from $9.64 million in 2022 to $11.43 million in 2023.
The Africa and Europe segment experienced an increase in time charter statistics and DVP, driven by the repositioning of vessels between geographic regions and improved market conditions. The segment’s DVP increased from $30.12 million in 2022 to $34.96 million in 2023.
In the Middle East and Asia, SEACOR Marine’s time charter statistics and DVP were mixed, with an increase in day rates but a decrease in utilization. The segment’s DVP declined from $25.67 million in 2022 to $12.34 million in 2023, primarily due to the timing of certain drydocking and repair expenditures.
The Latin America segment, which includes operations in Mexico and Guyana, saw a decrease in time charter statistics and DVP, mainly due to reduced fleet utilization. The segment’s DVP declined from $24.62 million in 2022 to $15.15 million in 2023.
SEACOR Marine’s operations are divided into the following product segments:
Bareboat Charter: Under this segment, SEACOR Marine provides a vessel to a customer and the customer assumes responsibility for all operating expenses and risks of operation. Bareboat charter revenues were $1.10 million in the nine months ended September 30, 2024, relatively flat compared to the prior year period.
Other Marine Services: This segment includes revenues from services such as vessel management, marine engineering, and other ancillary activities. Other marine services revenues declined to $12.23 million in the current year period, down from $20.45 million in the prior year, primarily due to lower business interruption insurance revenues and reduced mobilization fees and management fees.
Direct vessel profit (DVP), which the company uses as a measure of segment profitability, was $51.03 million in the nine months ended September 30, 2024, down from $90.05 million in the prior year period. The decrease in DVP was driven by lower utilization, particularly in the U.S. Gulf of Mexico region, as well as higher direct operating expenses across all regions.
Guidance and Outlook SEACOR Marine has not provided formal guidance for the upcoming fiscal year. However, the company’s management has expressed cautious optimism about the future, citing the potential for improved market conditions as oil and gas prices have stabilized and the offshore wind industry continues to grow.
The company’s diversified fleet and global presence are expected to be key strengths in navigating the evolving offshore energy services landscape. SEACOR Marine’s focus on maintaining a strong financial position, optimizing its fleet, and pursuing strategic opportunities will be crucial in driving long-term value for its shareholders.
Increasing activity levels and a stable supply of offshore support vessels could support higher utilization and day rates, potentially improving SEACOR Marine’s financial performance going forward. The company’s strategy of cold-stacking vessels during periods of weak utilization helps manage daily operating costs, which could contribute to improved profitability as market conditions recover.
Risks and Challenges SEACOR Marine, like other companies in the offshore energy services industry, faces several risks and challenges. The volatility of oil and gas prices, which can significantly impact the demand for the company’s services, is a primary concern. Additionally, the industry’s capital-intensive nature and the potential for oversupply of vessels in the market pose ongoing challenges.
The COVID-19 pandemic has also had a significant impact on the offshore energy services industry, leading to reduced customer activity and disruptions to global supply chains. SEACOR Marine has taken steps to mitigate these challenges, but the long-term effects of the pandemic remain uncertain.
Geopolitical tensions and regulatory changes in the various regions where the company operates can also introduce risk and uncertainty to its business. SEACOR Marine’s ability to adapt to these changes and maintain its competitive edge will be crucial to its long-term success.
The offshore oil and gas market remains volatile, with oil prices reaching a multi-year high in 2022 before decreasing to pre-conflict levels. This volatility has impacted SEACOR Marine’s results and continues to be a significant factor in the company’s performance.
Conclusion SEACOR Marine Holdings Inc. (NYSE:SMHI) is a well-established player in the offshore energy services industry, with a diversified fleet and a global footprint. The company has navigated the challenges of the market, including the volatility of oil and gas prices and the impact of the COVID-19 pandemic, by focusing on operational efficiency, financial discipline, and strategic positioning.
While SEACOR Marine’s recent financial performance has been impacted by the industry’s challenges, the company’s strong liquidity position, conservative capital structure, and ongoing efforts to optimize its fleet and operations position it well for the future. The company’s ability to adapt to changing market conditions, as evidenced by its flexible approach to vessel deployment and cost management, will be crucial in navigating the ongoing volatility in the offshore energy sector.
As the offshore energy and renewable energy markets continue to evolve, SEACOR Marine’s ability to capitalize on new opportunities, particularly in the growing offshore wind sector, will be a key driver of its long-term success. The company’s diverse geographic presence and range of services provide a solid foundation for growth as global energy demand continues to increase and the transition to cleaner energy sources accelerates.
Investors should closely monitor SEACOR Marine’s utilization rates and day rates across its various segments, as improvements in these metrics could signal a recovery in the offshore energy services market and potentially lead to improved financial performance for the company. Additionally, the company’s success in managing its debt and maintaining adequate liquidity will be crucial factors in its ability to weather market volatility and position itself for future growth opportunities.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.