Deep Down Stays in Red, 2015 Outlook Uncertain
Deep Down, an oilfield services company specializing in deepwater and ultra-deepwater oil production distribution system support services, reported a net loss of $5.8 million, or $0.38 loss per diluted share, compared to a net loss of $0.6 million, or $0.05 loss per diluted share for 2013.
This loss included the full impairment of the company’s goodwill, previously recorded on Deep Down’s balance sheet at $4.9 million. This impairment was due to the reduction in oil prices, and the impact it had on the energy market.
Revenues for 2014 were $28.6 million, and were relatively flat when compared to revenues of $29.6 million for 2013. The $1.0 million decrease is primarily the result of customer delays in certain projects caused by the recent drop in oil prices.
Gross profit as a percentage of revenues for 2014 was a slightly improved 30 percent, compared to 2013’s 29 percent.
Modified EBITDA in 2014 was equal to 2013 except for a one-time adjustment in 2013 for the purchase of a carousel fabricated for a customer that had been accounted for on a percentage-of-completion basis. The carousel was in the final stages of completion, and Deep Down was required to book the purchase at our cost, effecting a $1.4 million adjustment to net income.
Ronald E. Smith, Chief Executive Officer, stated: “The significant drop in oil prices resulted in delays of several of our customers’ projects, many of which are now beginning to pick up again as the industry readjusts to the new environment. While we are disappointed in the financial results for 2014, we are optimistic about the new opportunities being presented by lower oil prices. Our after-market business is receiving increased attention from operators, several of whom have already engaged us to assist them weather this turbulent period.
“The outlook for 2015 remains uncertain; however, production projects for deepwater and ultra-deepwater continue to be very active despite the lower oil prices. Our current backlog is approximately $31 million and continues to grow. However, in light of the uncertainties in our market, we have commenced a cost containment and cost reduction program, which will enable us to better align ourselves with the changing market without limiting our ability to continue serving our customers. We remain cautiously optimistic for the future, especially in light of our diverse service offerings.”