SEC Filings

10-K
HORNBECK OFFSHORE SERVICES INC /LA filed this Form 10-K on 02/28/2018
Entire Document
 

In recognition of these weak market conditions, we stacked OSVs and MPSVs on various dates commencing on October 1, 2014. As of December 31, 2017, we had 42 OSVs stacked. As of February 7, 2018, we had 44 OSVs stacked. These 44 stacked vessels represent 63% of our fleetwide vessel headcount, and 45% of our total OSV and MPSV deadweight tonnage. We may consider stacking additional vessels or reactivating vessels as market conditions warrant. By stacking vessels, we have significantly reduced our on-going cash outlays and lowered our risk profile; however, we also have fewer revenue-producing units in service that can contribute to our results and produce cash flows to cover our fixed costs and commitments. While we may choose to stack additional vessels should market conditions warrant, our current expectation is to retain our active fleet in the market to accept contracts at the best available terms even if such contracts are below our breakeven cash cost of operations.
There have been six auctions completed since energy reform began in Mexico in 2013, including two deepwater and two shallow water tenders. So far, these auctions have yielded 58 contracts with forecasted investment over their lifetime of $134.3 billion. The next deepwater lease auctions are scheduled for March and July 2018, respectively. However, questions remain on the timing of the incremental activity expected in the Mexican deepwater GoM as a result of these auctions. As a result of leases awarded during the initial shallow water lease round in 2016, two operators announced major discoveries in mid-July 2017. We have observed a dispute over resource ownership between the country of Mexico and the new international companies that have experienced recent drilling success in fields adjacent to PEMEX-owned fields. This dispute may slow down drilling plans until the ownership issue is resolved. We consider Mexico to be a long-term market for our services, especially in light of energy reforms expected to be carried out there. We continue to explore opportunities to place additional vessels into Mexico to support PEMEX in its ongoing shallow water activity and non-PEMEX customers in support of future shelf and deepwater activity there.
In Brazil, Petrobras has moved towards an "all Brazilian flag" vessel fleet, which has limited opportunities in Brazil for foreign-flagged vessels, except where highly specialized services are required. In January 2016, we placed one of our newbuild HOSMAX 310 class OSVs into Brazilian registry and have imported that vessel into Brazil. In October 2016, Brazil enacted new legislation that will allow international oil companies to participate as operators of pre-salt offshore developments, reversing a policy that had reserved such properties to Petrobras, exclusively. By doing so, the Brazilian government has created the possibility that foreign operators might spur additional exploration and development activity that has been dampened by low oil prices and Petrobras' difficulties. Recently, the Brazilian National Petroleum Agency announced that a fourth round of auctions for the pre-salt areas will be held in June 2018. The outcome of this bidding process is viewed positively for growing the participation of international oil companies in the Brazilian offshore sector, which is one of our core markets.
Our Vessels
All of our current vessels are qualified under the Jones Act to engage in U.S. coastwise trade, except for nine foreign-flagged new generation OSVs and two foreign-flagged MPSVs. As of December 31, 2017, our 20 active new generation OSVs, eight MPSVs and four managed OSVs were operating in domestic and international areas as noted in the following table: 
Operating Areas
 
Domestic
 
GoM
22

Other U.S. coastlines(1)
6

 
28

Foreign
 
Brazil
1

Mexico
1

Other Latin America
2

 
4

Total Active Vessels(2)
32

 
 
(1) 
Comprised of two owned vessels and four managed vessels that are currently supporting the military.
(2) 
Excluded from this table are 42 OSVs that were stacked as of December 31, 2017.
OSV Newbuild Program #5. Our fifth OSV newbuild program consists of four 300 class OSVs, five 310 class OSVs, ten 320 class OSVs, three 310 class MPSVs and two 400 class MPSVs. As of February 7, 2018, we had delivered and placed in service 22 vessels under such newbuild program. Delivery of the two remaining vessels under this 24-vessel domestic newbuild program is expected to occur during the second and third quarters of 2019. With the addition of the two MPSVs, we expect to own ten MPSVs as of December 31, 2019. These MPSV additions result in a

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