Torch
Offshore: Annual Results and Midnight Express update
Posted: 15 April 2004
Torch Offshore, Inc announced its fourth quarter and twelve month
2003 financial results, as summarized below.
Fourth Quarter Results
Revenues for the quarter ended December 31, 2003 were $19.4
million, a decrease of 20.9 per cent compared to revenues of $24.5
million for the fourth quarter of 2002.
Gross profit (revenues less cost of sales) for the fourth quarter
of 2003 was $0.2 million or 1.2 per cent of revenues compared to
gross profit for the fourth quarter of 2002 which was $5.9 million,
or 24.0 per cent of revenues.
The fourth quarter 2003 net loss was $6.8 million, or $0.54 per
diluted share, compared to net income in the fourth quarter of 2002
which was $0.5 million, or $0.04 per diluted share.
Fourth quarter 2003 net results were adversely impacted by a $1.6
million (non-cash) ($1.0 million after tax effect, or $0.08 per
diluted share) SFAS No. 144 asset impairment charge related to the
Midnight Carrier, $2.6 million ($1.7 million after tax effect, or
$0.13 per diluted share) of charges relating to claims and settlements
for work completed in prior periods and a $1.3 million ($0.11 per
diluted share) deferred tax asset valuation allowance.
Annual Results
For the year ended December 31, 2003, revenues decreased 3.6 per
cent to $65.6 million generating a gross profit of $6.4 million
or 9.7 per cent of revenues, compared to 2002 revenues of $68.0
million that produced a gross profit of $14.6 million, or 21.5 per
cent of revenues. Included in cost of sales in 2003 was $2.1 million
($1.3 million after tax effect, or $0.11 per diluted share) of costs
related to the termination of the Midnight Hunter charter.
The net loss for the twelve months ended December 31, 2003 totaled
$9.2 million, or $0.73 per diluted share, compared to net income
in the twelve months ended December 31, 2002 which was $0.4 million,
or $0.03 per diluted share.
Net results for the year ended December 31, 2003 were adversely
impacted by a $1.6 million (non-cash) ($1.0 million after tax effect,
or $0.08 per diluted share) SFAS No. 144 asset impairment charge
related to the Midnight Carrier, $3.0 million ($1.9 million after
tax effect, or $0.15 per diluted share) of charges relating to claims
and settlements for work completed in prior periods, a $0.5 million
($0.3 million after tax effect, or $0.03 per diluted share) charge
related to costs to establish and commence bidding operations in
Mexico and a $1.3 million ($0.11 per diluted share) deferred tax
asset valuation allowance.
Our independent auditors, Ernst & Young LLP, concluded, as
required by generally accepted auditing standards, that their auditors'
report on the Company's 2003 financial statements, included in our
annual report on Form 10-K, should include an explanatory paragraph
regarding our ability to continue as a going concern, and accordingly,
they included such a paragraph in their report.
Therefore, the Company's management has developed a financial plan,
that is fully described in the Company's Form 10-K filed with the
SEC. Among other measures, our plan includes pursuing means of raising
additional capital.
Raising additional capital during 2004 and 2005 is a requirement
for the Company to continue to conduct operations, meet its obligations
and support the operations of the Midnight Express.
Because certain transactions included in our business plan are
not yet complete, there are inherent uncertainties associated with
such transactions.
Lyle G. Stockstill, Torch Offshore, Inc. Chairman and Chief Executive
Officer, commented, "Overall in 2003, market conditions remained
relatively weak as drilling activity in the Gulf of Mexico continued
at depressed levels.
These levels of capital expenditures by the oil and natural gas
companies drove market prices to lower levels, and as a result,
adversely impacted our gross profit margins and utilization levels.
Because of these market conditions, an adverse arbitration ruling
related to the Midnight Hunter termination, and other events with
a direct impact on our earnings, we experienced a significant loss
in 2003."
Stockstill added, "We have disclosed our financial plan for
2004 in our annual report and are confident that it will provide
sufficient financial resources.
The Midnight Express was a large undertaking for a company of our
size and this has put a burden on our current financial resources.
However, we believe the payoff in this investment is on the short-term
horizon as we expect the vessel to enter our active fleet in the
second half of 2004."
Recent Developments
The Company is beginning contract negotiations with Mariner Energy
for the first pipelay project for the Midnight Express which is
expected to take place in the fourth quarter of 2004 following the
vessel conversion completion.
Although the specifics of the project have yet to be finalized,
the work will take place in the Gulf of Mexico in water depths ranging
up to 4,000 feet and will entail several of the challenging intricacies
of deepwater pipelay, including pipe-in-pipe and a midline termination
skid installation, the type of work the Midnight Express was designed
and targeted to complete.
Further details will be provided at a later time once they are
finalised.
Stockstill said, "As with the Midnight Wrangler and Midnight
Hunter, the Midnight Express has found a welcome market upon its
introduction to our active fleet. We are quite excited about the
opportunity to utilize the Midnight Express on this project for
Mariner Energy and we thank them for the opportunity. The Midnight
Express is a dynamic vessel that has the ability to revitalize our
Company - and this work for Mariner Energy is only the first step
for this vessel and our future in the deep waters of the world."
For more information see www.torchinc.com
Posted by Richard Price,
Editor Pipeline Magazine
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