Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. HORNBECK OFFSHORE SERVICES INC /LA (1131227) 10-Q published on Jul 29, 2020 at 12:38 pm
Reporting Period: Mar 30, 2020
During the three months ended March 31, 2020, the Company determined that it observed indicators of impairment related to its vessels. This was due to the rapid decline in the price of oil, which resulted from COVID-19 closures combined with a significant increase in production and the oil price war initiated by Saudi Arabia and Russia. The Company completed an undiscounted cash flow calculation on its vessels as of March 31, 2020. For the purpose of calculating the undiscounted cash flows, the Company grouped its vessels into two asset groupings, OSVs and MPSVs. The Company calculated the undiscounted cash flows using a probability weighted forecast for each of its asset groups over their respective remaining useful lives. Included in the cash flow projections were assumptions related to the current mix of active and stacked vessels, the estimated timing of stacked vessels returning to active status along with projected dayrates, operating expenses, direct overhead expenses and deferred drydocking expenditures related to each of the groupings. The Company views vessel stackings as a temporary status and a prudent business strategy. Stacking vessels does not imply that it has ceased marketing such vessels or never intends to reactivate such vessels when market conditions improve. After reviewing the results of this calculation, the Company determined that each of its asset groups has sufficient
On February 29, 2020, the Company made a cash payment of $50 million out of its restricted cash to fully satisfy CIT’s share of the existing obligations under the Senior Credit Agreement. As a result, the Company recorded a $4.2 million loss on extinguishment of debt ($3.3 million or $0.09 per diluted share after-tax) due to the write-off of deferred issuance costs and redemption premium. On March 31, 2020, the Company's restricted cash balance under the senior credit facility was $14.5 million. The Company classifies cash as restricted when there are legal or contractual restrictions on its withdrawal or usage. On May 22, 2020, with proceeds from the DIP Credit Agreement, the remaining $50 million in principal amount of the senior credit facility was paid in full.
On May 19, 2020, we sought voluntary relief under chapter 11 of the United States Bankruptcy Code, or the Chapter 11 Cases in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division and filed a proposed joint prepackaged plan of reorganization, or the Plan. On June 19, 2020, after a confirmation hearing, the Bankruptcy Court entered a confirmation order approving the Plan. The Plan will become effective after the conditions to its effectiveness have been satisfied. The effect of the Plan is to de-lever our balance sheet through a conversion into equity or warrants or both of (i) a portion of the $350 million in first-lien term loans that mature in June 2023; (ii) $121 million in second-lien term loans that mature in February 2025; (iii) $224 million outstanding under our 2020 senior notes indenture, and; (iv) $450 million outstanding under our 2021 senior notes indenture. The holders of first-lien term loans will also receive their pro rata portion of the
new second-lien term loans issued upon emergence as part of the Exit Financings. All pre-petition equity interests in the Company will be canceled, released, and extinguished on the effective date of the Plan, and will thereafter be of no further force or effect. See Note 2 of our consolidated financial statements included herein for further discussion.
Vessel revenues decreased $2.1 million, or 4.6%, to $43.2 million for the three months ended March 31, 2020 compared to $45.3 million for the same period in 2019. The decrease in vessel revenues primarily resulted from soft market conditions for our OSVs partially offset by improved market conditions for our MPSVs. Revenues from our MPSV fleet increased $2.4 million, or 23.5%, for the three months ended March 31, 2020 compared to the prior-year period. Average new generation OSV dayrates were $18,203 for the first three months of 2020 compared to $18,156 for the same period in 2019. Our new generation OSV utilization was 28.0% for the first three months of 2020 compared to 32.5% for the same period in 2019. Our new generation OSVs incurred 158 days of aggregate downtime for regulatory drydockings and were stacked for an aggregate of 3,111 days during the first three months of 2020. Excluding stacked vessel days, our new generation OSV effective utilization was 58.0% and 72.1% during the three months ended March 31, 2020 and 2019, respectively. Domestic vessel revenues increased $1.3 million from the year-ago period primarily due to revenue earned from one MPSV operating domestically during the three months ended March 31, 2020 compared to such vessel being stacked in the prior-year period. Foreign vessel revenues decreased $3.4 million. The decrease in foreign revenues is attributable to an average of 3.8 fewer vessels working in foreign locations during the current-year period. Foreign vessel revenues for the first three months of 2020 comprised 34.2% of our total vessel revenues compared to 40.1% for the year-ago period.
This Quarterly Report on Form 10-Q contains “forward-looking statements,” as contemplated by the Private Securities Litigation Reform Act of 1995, in which the Company discusses factors it believes may affect 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. You can generally identify forward-looking statements by the appearance in such a statement of words like “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “remain,” “should,” “will,” “would," or other comparable words or the negative of such words. 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 Quarterly Report on Form 10-Q for a variety of reasons, including our ability to obtain the Bankruptcy Court’s approval with respect to post-confirmation motions or other requests made to the Bankruptcy Court in the Chapter 11 Cases; any delays in consummation of the Chapter 11 Cases; risks that our assumptions and analyses in the Plan are incorrect; our ability to comply with the covenants under our DIP Credit Agreement; the effects of the Chapter 11 Cases on our business and the interests of various constituents; the actions and decisions of creditors, regulators and other third parties that have an interest in the Chapter 11 Cases; restrictions imposed on us by the Bankruptcy Court; impacts from changes in oil and natural gas prices in the U.S. and worldwide; continued weakness in demand and/or pricing for the Company’s services; unplanned customer suspensions, cancellations, rate reductions or non-renewals of vessel charters, or vessel management contracts, or failures to finalize commitments to charter or manage vessels; continued weakness in capital spending by customers on offshore exploration and development; the inability to accurately predict vessel utilization levels and dayrates; sustained weakness in the number of deepwater and ultra-deepwater drilling units operating in the GoM or other regions where the Company operates; the impact on the foregoing as a result of the COVID-19 pandemic and the recent oil price war initiated by Russia and Saudi Arabia; the Company’s inability to successfully complete the final two vessels of its current vessel newbuild program on-budget, including any failure or refusal by the issuer of performance bonds to honor the bond contract or to cover cost overruns that may result at a completion shipyard; the inability to successfully market the vessels that the Company owns, is constructing or might acquire; any cancellation or non-renewal by the government of the management, operations and maintenance contracts for non-owned vessels; 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 operating or court-imposed barriers that prevent or delay vessels in foreign markets from going or remaining on-hire; administrative, judicial or political barriers to exploration and production activities in Mexico, Brazil or other foreign locations; disruption in the timing and/or extent of Mexican offshore activities or changes in law or governmental policy in Mexico that restricts or slows the pace of further development of its offshore oilfields; changes in law or governmental policy or judicial action in Mexico affecting the Company's Mexican registration of vessels; administrative or other legal changes in Mexican cabotage laws; other legal or administrative changes in Mexico that adversely impact planned or expected offshore energy development; unanticipated difficulty in effectively competing in or operating in international markets; less than anticipated subsea infrastructure and field development demand in the Greater GoM Operating Region and other markets affecting the Company's MPSVs; sustained vessel over capacity for existing demand levels in the markets in which the Company competes; economic and